Friday, June 10 2022

Over the next six months, the US Federal Reserve will suck more than $1 trillion in liquid assets from the markets.

It’s not a maybe, and it’s not alarmist.

It’s a fact that it will happen – and the biggest Fed-led cash drain in 40 years has already begun!

Do you think I’m kidding?

This comes straight from the US Federal Reserve: “Committee intends to cut Federal Reserve securities” starting June 1.

There is no need to speculate. The Fed will drain $30 billion of Treasuries per month for the next three months, then increase that drain to $60 billion per month, that is, by September!

On top of that, the central bank will also reduce its holdings of mortgage-backed securities by $17.5 billion, then raise it in September to $35 billion a month in cash wipes.

That’s over $1 trillion in assets unaccounted for and out of the economy in six months!

The results could be catastrophic

In the first 12 days of May, the S&P 500 fell almost 9%.

Over the next week, May 12-17, the index jumped 4% — in just five days!

But then, in the space of just three days, from May 17 to 20, the index fell again and lost almost 5%.

And last week we saw a heartbreaking relief rally that sent the S&P up almost 7% to finally snap a long weekly losing streak for the index.

S&P 500 1 week May 26, 2022

The Dow followed closely and the Nasdaq did even better.

Basically, this action indicates that something is wrong.

While I’m a fan of the argument that a new, technology-powered, around-the-clock trading paradigm has changed the very nature of trading and investing, it’s not natural for markets to go up and down with such violent movements.

This is a clear sign that fear and uncertainty have taken over.

The next leg could also be very painful.

On to the graphics!

Starting with the tech-heavy Nasdaq, provided we can’t breach the current cap at 12,050 (blue line), which the index is currently testing, the next breakdown drops back down to just under 11,025 (black line) , which could equate to a loss of around 8.5%.

NASDAQ 2 year with lower trend lines

From there, it’s even worse, with a real risk that the Nasdaq finds a floor between 10,500 and 10,250 (red zone). That would be a drop of nearly 15% from current levels!

Looking at the S&P 500, we can see the same thing. The index is currently trying (but so far failing) to break through its ceiling and hold above 4,100 (blue line). If the index fails to clear this key technical level, the next step down is around 3,900. That would be a drop of around 5%.

S&P 500 2 year with lower trend lines

Again, it escalates from there, with a high probability that if the first outage I mentioned occurs, the second outage at around 3,750 (red zone) will also occur. This is a drop of nearly 9% from current levels!

And remember, more rate hikes, more quantitative tightening (QT) and more crippling inflation are also in the forecast.

With that in mind, let’s look at the Dow Jones Industrial Average. Again, we are seeing the index test but not breaking its current high at around 32,600 (black line), indicating that the next leg down will almost certainly be a drop to 31,250 for a 4% loss. .

2 year DOW with lower trend lines

But again, from here, given the aforementioned headwinds, the true bottom could be around 30,000. That would represent an 8% loss from current levels.


If you thought 2022’s descent into bear market territory over the past six months was rocky, you ain’t seen nothing yet!

Just wait for the QT mentioned above to start holding up.

For many, the decline in stocks will be catastrophic, calamitous and downright wealth-destroying.

For others, it will be a chance to prove their mettle and have one hell of a business year.

How can I be so confident?

Because I see it happening with my own eyes every day.

I admit it hasn’t been easy by any stretch of the imagination, but the community of traders we’ve created has proven beyond a reasonable doubt that even in a tumultuous bear market, people like you and me can preserve their wealth and even grow it significantly – all of this when most people are in panic mode.

I’m not going to gloat and read about all the great double and triple digit returns our trading community has had this year…

But I will say that the only big difference between the bare trades loyal and traders getting crushed in the market is the ability to admit that everyone even the smartest and most knowledgeable traders sometimes needs a little help.

We can beat the bear together.

to your wealth,

Sean McCloskey
Editor, Energy and capital

follow basic@TheRL_McCloskey on Twitter

After spending 10 years in the consumer technology reporting and educational publishing industries, Sean has since devoted himself to one of his original passions: identifying and capitalizing on the most lucrative opportunities market has to offer. As the former editor of several investment newsletters, he has covered virtually every market sector, from energy and technology to gold and cannabis. Over the years, Sean has provided his followers with the opportunity for many triple-digit wins, and today he continues his mission to provide followers with the best chance at big wins on Wall Street and beyond. beyond as an editor for Energy and Capital..


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