I've written extensively about the critical importance of the market's "narrative," the financial and monetary forces that drive the action.
So naturally, the minute I spotted it, I wrote to let everyone know about a change waiting in the wings, a new narrative waiting to take the place of the "Trump growth" mindset that's moved stocks since November 2016.
This is going to have strong ramifications for every dollar you invest and trade from here right on out to at least the end of 2018, and very likely beyond.
So I put together a chart, as simple as it is striking, to show how this "collision" and change are unfolding right now.
Let's take a look...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
As a reminder, the market narrative is the overarching concept that is one of the most important things driving the markets. Since the U.S. presidential election, that narrative has been the Trump growth agenda, which is based on three legs, or pillars, if you will: lower taxes, less regulation, and more infrastructure spending.
With the new tax reform bill signed into law, one of those legs is firmly in place. The reduction in regulations is ongoing, but enough changes have been made (largely through executive order) to say two out of three are largely in place. The infrastructure plan was re-introduced and will take some tweaking.
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But outside the bursting of the volatility bubble (which seems to be largely resolved - it wasn't that big of a market in dollar terms), the main short-term market movers have been the new narrative - the "Fed Great Unwind" that will be the foundation of tightening monetary policy and will be accompanied by rising interest rates.
Here's a reminder of that narrative transition in visual form.
As you can see, I expect the narrative to change over time until "The Great Unwind" is all that matters to the market.
For now, we're in this "in-between" state. Let's look at the two key mileposts that will tell us which narrative is exerting the most influence.
We indeed are in a "blended narrative," where both of those mileposts are showing up - and we can see that in one chart.
Stay tuned for more volatility. I sure will be ready to jump on fast-paced profit recommendations for my 10-Minute Millionaire readers. The markets are sure to get skittish every time news breaks that traders imagine will compel the Fed to raise rates faster. On the other hand, it's going to recover about as quickly, as traders and investors remember that earnings are strong, the full benefits of tax reform have yet to be priced in, and the global economy is booming.
Lather, rinse, and repeat.
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About the Author
D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.