2018 Market Outlook - Reality Dawns At The End Of The Artificial Liquidity Rainbow

This 2018 market outlook is building on recent articles I’ve published as they lay the foundation to the technical discussion I’ll be outlining below. Hence I won’t be repeating them here, but I may make occasional reference to them. If you haven’t read them I highly encourage you to have a read for the additional context & background. Specifically: 2017 Market Lessons, Yearly Charts, The Debt Beneath, and Welcome to Gap Land.

In this analysis I’m outlining upside market upside targets I see from a technical perspective as well as select examples of signs I’m watching that would signal a change from the current uninterrupted trend in market prices. Additionally I’ll be looking at some specific price risk zones should the trend change. It is my intent to follow-up on this analysis on a regular basis here in the public section of the site throughout the year.

I’m approaching 2018 with eyes wide open in regards to the market conditions we find ourselves in. From my perspective global markets are engaged in the largest asset bubble in our lifetimes (the artificial liquidity bubble) the eventual unwind of which during the next recession will unfortunately hurt a majority of people. Again.

Consider the context:

8 years after the financial crisis we remain in an environment that is entirely dependent on artificial liquidity, be it via central bank liquidity driven low rates and/or QE or now US fiscal stimulus in the form of tax cuts. And while a reduction in central bank stimulus is anticipated for 2018 the $1.5 trillion US tax cut is the next active artificial boost to hit markets. You can view it perhaps this way: When the US ended QE3 Europe and Japan took over the stimulus baton, and now that Europe is reducing stimulus the US again is taking the lead, this time with fiscal stimulus.

It is a bizarre dance that excels in one aspect in particular: It never ends. Consider: German unemployment is at all time lows, and European PMIs are at their highest in over 7 years:

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