{"id":159045,"date":"2019-11-04T09:30:04","date_gmt":"2019-11-04T14:30:04","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=159045"},"modified":"2019-11-04T09:01:31","modified_gmt":"2019-11-04T14:01:31","slug":"warning-credit-delinquencies-to-skyrocket-in-q4","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/11\/warning-credit-delinquencies-to-skyrocket-in-q4\/","title":{"rendered":"Warning: Credit Delinquencies To Skyrocket In Q4"},"content":{"rendered":"
November 4, 2019<\/div>
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By TheTechnicalTraders.com<\/u><\/a><\/strong><\/p>\n

Farm delinquencies skyrocket +24% year over year as global trade issues and the ability to service credit continues to be a problem.\u00a0 This is a tell-tale sign that the US Fed decreased the Prime Rate recently as a result of broader credit issues related to higher interest rates for corporate and other borrowers.\u00a0 The last thing the Fed wants is another collapse on the lending markets similar to 2008-09.<\/p>\n

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(source: zerohedge.com)<\/p>\n

Low growth continues to plague the global economy as this extended run in the US stock market continues to mature.\u00a0 There are many questions all traders are asking \u2013 will it continue higher or have we reached a new peak in price activity?\u00a0 Many economists believe we are ending an expansion period related to the revaluation of the global markets after the 2008-09 credit market collapse.\u00a0 The typical price cycle of approximately 6~7 years has extended beyond traditional bounds and many analysts are wondering how it may end?<\/p>\n

If an economic cycle has truly come to an end, we should expect to see some change in economic activity levels, consumer confidence and mortgage\/housing activities.\u00a0 The end of an economic cycle is usually aligned with some moderate level of economic contraction and a slowing of economic activity.\u00a0 The one thing that may continue throughout this end of the mature economic cycle is the \u201ccapital shift\u201d where capital rushes away from risk and into the US stock market as long as the reversion event stays at bay. (source: zerohedge.com)<\/p>\n

Consumer Confidence levels have fallen recently to new lows.\u00a0 This is a very clear sign that consumers expect the economy to contract a bit based on continued trade-related issues and the overall maturity of the economic cycle.<\/p>

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Most of the \u201crest of the world\u201d has continued to binge on credit\/debt since the 2008-09 credit crisis.\u00a0 This is a very clear sign that the US Fed and global central banks have pumped trillions of dollars out into the consumer, corporate and global markets over the past 8+ years.\u00a0 The question for all of us is when and if this debt becomes a liability \u2013 when does this credit become un-serviceable?<\/p>\n

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China and Asia were some of the biggest consumers of US credit\/debt since 2008-09.\u00a0 This graph highlights the incredible 10,667% increase in debt in China since the 2008-09 levels \u2013 from approx 300 million to 3.2 billion in 8-9 short years.\u00a0 It appears the global economic rally was really the \u201cbinge on credit\u201d rally.<\/p>\n

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US Mortgage debt has climbed to near all-time highs recently as well.\u00a0 This is a sign that the US housing market has rallied to levels that are very close to the peak levels in 2007-08 \u2013 just before the crash.\u00a0 It may also be a sign that cracks may soon start to appear in the housing markets across the US as delinquencies and foreclosures may continue to skyrocket.\u00a0 People need to be able to service this debt\/liability effectively in order to maintain their assets.<\/p>\n

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We believe the path of least resistance in the US stock market is higher \u2013 at least until price breaks below the current price trend channel.\u00a0 The continued capital shift where foreign investors continue to pour capital into the US stock market will likely continue until some event shakes the confidence of these foreign investors.<\/p>\n

You can see from our Monthly chart of the ES, below, we have highlighted the longer-term economic maturity trend which typically lasts about 6~7 years.\u00a0 The rotation in 2015-16 was very mild as the US Fed continued a type of quantitative easing process by buying bonds and keeping interest rates historically low.\u00a0 Because the US stock market actually failed to experience any real price rotation near this 2015~2016 cycle date \u2013 we believe the current cycle highs are extremely extended and related to the credit binge that has taken place over the past 8+ years.<\/p>\n

Our cycle research suggests we may have already past a cycle peak event and may be operating on borrowed time right now.\u00a0 This suggests that any further upside price activity in the US stock market may be a function of the overall strength of the US stock market compared to the weakening economic activity throughout the world.\u00a0 In other words, the capital shift process is still feeding large amounts of capital into the US stock market as foreign investors flee risk and uncertainty.\u00a0 If and when this ends, the US stock market will likely begin a price reversion process that may result in a very deep price correction.<\/p>\n

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This last Monthly ES chart provides a closer look at the technical indicator data that we believe highlights the overall weakness that is building up in the US stock market.\u00a0 Even though we\u2019ve recently pushed to new all-time highs, our technical indicators are suggesting that price is actually weakening in the upside price trend and could break lower at any moment.<\/p>\n

The Direction Movement index, Momentum, and MACD of Momentum are all highlighting a weakening price trend that appears to be setting up for a broader downside price move eventually.\u00a0 Traders need to be very aware of the risks in this extended upside price trend and to prepare for the potential of a new credit crisis event related to the current credit levels that are far more extended than in 2008-09.\u00a0 If something breaks in the credit markets now, there appears to be nearly 5x to 10x the amount of credit extended throughout the global than there was 8 short years ago.<\/p>\n

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November will be the month of breakouts and breakdowns and should spark some trades. I feel the safe havens like bonds and metals will be turning a corner<\/strong><\/a> and starting to firm up and head higher but they may not start a big rally for several weeks or months.<\/p>\n

October was a boring month for most major asset classes completing their consolidation phase. Natural gas was the big mover in October and subscribers and I took full advantage of the bottom and breakout for a 15-22% gain and its till on fire and trading higher by another 3% this week already.<\/p>\n

If you like to catch assets starting new trends and trade 1x, 2x and 3x ETF\u2019s the be sure to join my\u00a0premium trade alert service called the Wealth Building Newsletter<\/strong>.<\/p>\n

Happy Trading
\nChris Vermeulen<\/p>\n

TheTechnicalTraders.com<\/u><\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By TheTechnicalTraders.com Farm delinquencies skyrocket +24% year over year as global trade issues and the ability to service credit continues to be a problem.\u00a0 This is a tell-tale sign that the US Fed decreased the Prime Rate recently as a result of broader credit issues related to higher interest rates for corporate and other borrowers.\u00a0 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-159045","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/159045","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=159045"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/159045\/revisions"}],"predecessor-version":[{"id":159072,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/159045\/revisions\/159072"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=159045"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=159045"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=159045"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}