Hi Again,

 We have not had a period of interest rate growth for a long time as there was no need for it as the rate of inflation has been low for about 35 years but now inflation is running at 5% or 7%. Now if the Feds do not increase rates, inflation can easily turn in to hyperinflation as we saw from late 1960s to the mid-1980s. Most market analysts have not being exposed to such changes or else they have forgotten what happened in the past. When Bernanke raised rates, all countries had problems as money flowed in to the US; even the Governor of the Central Bank of India lectured Bernanke in public. Europe and Japan have negative interest rates so when US rates go up, people all over the world flock to the US. We never learn from history.

Chinese President Xi Jinping took to the virtual stage at Davos to address Fed Chair Jerome Powell — please don’t lift interest rates. “If major economies slam on the brakes or take a U-turn in their monetary policies, there would be serious negative spillovers. They would present challenges to global economic and financial stability, and developing countries would bear the brunt of it,” said Xi, according to a transcript of his remarks on Monday. Of the major central banks, the Fed is expected to be the most aggressive, with financial markets now pricing in four rate hikes, and also expecting the central bank to start reducing the size of its nearly $9 trillion balance sheet. Yields on the benchmark 10-year Treasury TMUBMUSD10Y, 1.862% on Tuesday reached the highest level since Jan. 2020. Traditionally, Fed officials brush off concerns about how their policies impact other economies, saying they can only set policy for the U.S. economy. Xi has reason to be nervous about Fed tightening. China’s economy continues to slow, falling to 4% year-on-year in the fourth quarter from 4.9%. On Monday, the People’s Bank of China cut two policy rates by 10 basis points.(Steve Goldstein, Market Watch, 1/18/22)

Did you hear about Peloton (PTON)? Over the past 2 years during the covid crisis, many analysts would come on TV and say that people will never go back to the gym and all people will rely on PTON. That did not make sense to me. Investing in home gym equipment has never been a good thing and we know that pandemics do not last forever. I wanted to short sell PTON but I did not do it. On 12/21/20, PTON hit an all-time high of $162; and ever since then, it has been on the decline. Even a few days ago, around 1/15/22, some analysts were buying PTON stating that it has bottomed out. On 1/20/22, trading was halted twice as PTON announced that they are going to stop production as there is no demand for their products. The price of PTON was at $24. That is a 85% decline from the top! Now analysts are stating that if PTON gets delisted, it will be difficult to sell the stock. Net Income has been negative from day one! Remember dot-com stocks and 1999? These things happen in a bubble. When Feds increase interest rates, all companies with terrible financials will find it difficult to survive.  The latest news coming out of Wall Street shows that Amazon is interested in buying PTON. Lately Amazon has been buying companies that are not too good for their bottom line so they can add PTON as well.

What are the technical analysts say about the market?

Carolyn Boroden aka Fibonacci Queen is a technical analyst specializing in Fibonacci analysis. Her unique form of price and time analysis is quickly proving to be one of the most promising trading techniques using Fibonacci available today. Ms. Boroden's first book, Fibonacci Trading: How to Master the Time and Price Advantage, was published by McGraw-Hill in early 2008. Her services can be found on carolynboroden.academy and elliottwavetrader.net.  m 1/11/22, Carolyn stated the following:

·       The market will go down further

·       A major decline is in store

·       She correctly predicted the Nov./Dec. 2021 performance

·       New floor for Nasdaq around 15,000 (went down to 13,986 and now it is at 14,647)

·       If tech stocks go up, it is an opportunity to sell

·       Keep tech company stocks with solid profits and growth

·       The future looks ugly for Nasdaq.

Mark Sebastian is the founder of OptionPit.com and the CIO of Karman Line Capital.  Mark is a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. The Author of the  popular trading manual "The Option Traders Hedge fund."  Sebastian hosts his own CBOETV show 'Track The Trade and is a  frequent guest on CNBC, Fox Business News, Bloomberg, First Business News.  He has been published nationally on Yahoo Finance and Barron's, quoted in the The Economist, The Wall Street Journal, Reuters, CNBC, & Bloomberg.  Mark has spoken for The Options Industry Council, the CBOE, the ISE, The CME,  and is a co-host on the Option Block and Volatility Views podcasts. This is what Mark stated on 1/21/22:

·       What happened on 1/21, was a “VIX swelling” (long term impact) and not a “VIX spike”. VIX is the “fear gauge’ or the volatility index.

·       Even when S&P went up, VIX did the same. This is a bad omen

·       The market is becoming irrational

After FB (former Facebook) went down by 25%, I bought a little bit, hoping to buy if it goes even lower. Then the price more or less stabilized. Soon after that when SNAP dropped in the same manner I was thinking of doing the same but I did not do it. Big mistake! Next day it was up by more than 50%!

Have a great month! 

Fernando