#25. Chrysus on Wall Street.
The Golden God's Prophecy.
There is something unnerving about how casual the lack of true reporting there tends to be about gold price surges. I mean you hear about it, maybe you read about it, but the detail and analysis that you need to truly understand what it means is often lacking. The price of 'God's money' holds significance for the broader financial markets, and with its price appreciating by 50% over the past two years while hitting several new highs in the process, it is trying to tell us something.
Do You Smell What The Rock Is Cooking?
It’s not just the faint whiff of overpriced stocks—it's the kind of unpleasant aroma that fills the air right before a major event. Imagine this. It’s 2000 again. The turn of a new dawn. A new millennium. The Rock is the face of the WWF (as it was back then). Meanwhile, the shiny rock was at rock bottom, having opened the millenium at 20 year lows. The stock market, however, was roaring. The tech bubble driving asset prices through the roof.
More recently, Gold was stuck in a 15% range from 2013 to 2018. At the same time, the indices grew at a reasonable rate. It was fairly normal market dynamics. Then, the market smelled something. Something broke in 2018. Nowadays it goes under-reported because of Covid, but something broke in 2018 and gold surged. By the time Covid even became a rumour, gold had already appreciated 20%.
Something had broken.
We Have Rocked You
Fast forward six years and a record amount of money pumped into the system to save the economy during the pandemic, the Fed jumped into action, by raising interest rates back in 2022. Since last year, those rates paused and the narrative has shifted to cuts, despite inflation still over 2% and showing signs of a resurgence.
But the market didn’t dry up. AI exploded with the introduction of ChatGPT and all of a sudden, a new narrative was born. AI stocks such as Nvidia, Advanced Micros, Taiwan Semi and Microsoft led the boom, advancing triple digit % on their 2022 lows. The narrative was set. The market responded.
Earnings reports became theatrical, with some even having an AI count - to tally how often AI was mentioned in a company's earnings call. And so for the past two years we have been blessed with a bull market led by a handful of companies.
Jesse Livermore, one of the greatest traders that ever lived, had provided hints over 100 years ago on how to identify the end of a bull market. He noted that market leaders that led the bull market, had began selling off and whilst the market made new highs, they did not. This is happening right now.
We are also seeing low to mid cap stocks advancing, in some cases 10%-20% plus in single days. We’ll get to this.
What does it all mean though?
The big players are leaving the party, mid-caps are breaking out, and the Fed? Well, they're about to commit the classic blunder of cutting rates into high - and some could argue rising - inflation. This is what we call late-cycle euphoria.
Right now, the market looks gloriously fun. But that fun, it's just about hanging on, and when it snaps, oh boy it won’t be pretty. Just like in the housing market pre-2008, no one wants to admit that the music is about to stop. It’s a dangerous cocktail: irrational exuberance mixed with our frenemy FOMO, stirred up nicely by the Fed with easy money. And just like those parties, when it’s over, the hangover is one to remember.
Smart money - who make it their business to be five steps ahead of everyone else- are rotating out. They’ve been quietly selling into the strength, leaving retail investors and those late to the party holding the bag. But these stocks aren’t just taking a nap, they’re showing you that the leadership that drove this bull market is done.
If history’s taught us anything, it’s that when the generals of a bull market start to retreat, the soldiers - the mid-caps, the small-caps - won’t be far behind. The market’s momentum depends on these leaders, and when they stop pulling, the entire market stumbles. Imagine Jordan walking off the court at halftime. You know the game’s already over.
Closing Time
I understand that these posts during these periods go down as crazy or cope and I get it. If you’re just glancing at the daily price action, you are seeing a different picture. After all, mid-cap stocks look fire, right? We’re talking 10%-20%+ daily gains in some of these names.
I mean Upstart [UPST] pulled a 90% 3 day swing last month off an earning’s call. The excitement is palpable, the market is flying and eveyone and their dog wants in on it. But here’s the catch: this is the part of the cycle where the market becomes a pure momentum game. Everyone’s chasing the next big thing without any regard for fundamentals.
The price action is not rational. It’s speculative. It’s classic late-stage euphoria. This is the moment in the movie when the guy at the blackjack table starts doubling down on every hand. Sure, the wins are thrilling, but we know how it ends.
Mid-caps tend to be more volatile, and that’s why you’re seeing these explosive moves. But make no mistake, these stocks are highly sensitive to the market’s whims. Once the broader market takes a hit, the mid-caps get crushed, often far worse than the established large caps. If the big boys can’t hold the line, what do you think will happen to these smaller players? They’re flying high now, but their wings are made of wax, and the sun’s getting close.
Market Breadth
Something most investors don’t pay enough attention to is market breadth. It’s really just a fancy term for how many stocks are actually rising with the overall market.
Breadth was the canary in the coal mine back in 2000. At the height of the dot-com bubble, just a few big names were soaring while the rest of the market was already in correction mode. Weak breadth is the classic hallmark of a market that’s on its last legs.
Right now, 30% of the S&P500 is down YTD. Less than 3% appreciated 50% or higher.
The S&P 500 might still be flirting with all-time highs, and might even get a new all time high before New Years rolls round but dig a little deeper and you’ll see that the number of stocks participating in that rally is shrinking fast. The party is not over, but it’s approaching the end.
We Didn’t Start the Fire
Now, let’s talk about our dear friends at the Fed. Here’s where things get really interesting. After jacking up rates from near-zero in 2022 to over 5%, they’ve been holding steady. But now, despite inflation still above their own 2% target and showing signs of potentially rising, the Fed has hinted at cutting rates. You heard me. Cutting rates while inflation is still a problem. Just because it came down from near double digits, doesn’t mean it’s no longer a problem.
To be frank, this is straight-up reckless from the Fed and they know it. The only reason they’d consider cutting rates now is because they know the economy and the market are under stress. But the reality is that cutting rates won’t fix what’s coming. Just like in 2018. Just lke in 2020. All this does is delay the inevitable and make the eventual crash worse. The Fed, after the catastrophe of 2008, has overstepped their role by faciliating booms and propping up bust cycles rather than letting the market efficiently handle it.
Cutting rates into a high and rising inflation environment is pouring gasoline on a fire. Sure, it might keep the market going for a bit longer, but it’s building up even more speculative excess. The market’s already operating on unstable ground, and adding more liquidity at this point will just inflate the bubble further.
This is why Gold is surging. This is why Gold found momentum to break though a 40 year resistance line. This is why Gold is hitting new highs at the same time equities are. This is the warning.
The stage is set for serious volatility. You’re going to see huge price swings, and most investors aren’t ready for the kind of whiplash that’s coming. The VIX, like what happened a few weeks ago, is going to bea trader’s dream. Buckle up, it’s going to be a wild ride.
Like a Rolling Stone: Golden Hour
So, what’s next?
In the short term, at least until the election probably, low-mid cap stocks will likely advance further. They will keep running, and maybe even a few large-caps will bounce back. But that’s the trap. Gold may be heading for a supercycle akin to the 2000s.
Chrysus has spoken. The message delivered. The masses are deaf.