The collision of global markets and social mood

Friday, January 20, 2017

Friday -- Inaguration

S&P E-mini Futures:
More chop.

News:
It's all about today's inauguration.

Given the bizarre antics of CNN broadcasting what has amounted to an instruction manual for death and destruction lately (if . . . hint, hint . . . the President-elect were to be killed for some reason . . . hint. hint . . . Obama could appoint the next president!!), a smooth inauguration could itself be a bullish event.

FX:
DXY (US dollar index) met its previous swing point to the tick -- 101.73. Would like to see that level exceeded to break the decline. DX futures missed it by one tick.

USD is strong across the board today, even as Yellen walked back her recent hawkish comments with dovish ones last night, as expected.

Bit by bit, the markets are defying the Fed.

Treasuries:
Amazing how swing points get the market to show its cards. As last Friday's swing points were broken yesterday, volume came into treasuries. Now a more complicated picture has been technically confirmed (though not a certainty of course).

Energy:
WTI crude ripping higher. NG cratering.

Metals:
Gold and silver red. Platinum and palladium green. Copper red. That's mixed.

S&P Outlook:
The market is in the middle of its 2017 range. Obviously it can go either way. Still seeing the edges as better places to do business. 2300 and 2240-2250.

Personal bias is higher if everything goes smoothly today and Trump sounds presidential.

Any off-topic ad-lib in his address or any violence could see things gets weird.

Still leaning toward weakness to occur after a new high.

Obamacare repeal, border-tax & overall tax reform, NAFTA renegotiation, and immigration are not the sort of things that will get resolved smoothly, even with the same party holding the presidency and both houses of Congress.

It will be up to other things, viewed favorably, to propel the market higher, and it's not certain what they are.

Earnings? Valuations? Guidance? Business optimism? Fed policy? Massive infrastructure spending? A business president?

All are possible. All have potential conflicts.

So once again, it seems we're back to technicals.

And they're looking tired.


Thursday, January 19, 2017

Thursday -- Skyscrapers, Helicopters & $25 Billion Snap

S&P E-mini Futures:
More sideways chop.

News:
When all else fails, rent a helicopter.

Such is the competitive world of advertising . . . and high-profile IPO listings.

"Snap Inc, Snapchat's parent company, is eyeing a spring debut that may peg its value as high as $25 billion, sources have told Reuters. It would be the biggest U.S. tech IPO since [the] Facebook in 2012."

(I added the brackets, because, as you know, it always will be the Facebook here.)

. . . $25 billion . . .

If it's anything like the Facebook's IPO, Snap might disappear after 10 seconds.

After all, we're looking kinda toppy.


Of course, China topped the list. 83.6% of new skyscrapers were built in Asia.

Edward R. Dewey coined the Skyscraper Indicator back in the 1940s to describe the euphoric surge in social mood that he felt was the impulse behind the "race to the sky."

Coupled with yesterday's Incredible plans unveiled for world's first 'floating city' in the middle of the Pacific Oceanwe now have a clustered troika of social mood indications that suggest we should take the next market high very seriously.

FX:
Yesterday's USD action messed with a lot of the latest narratives, namely that the dollar is toast and that treasuries and gold are set to rally into infinity. Things have calmed down, and Yellen may walk it all back, but the charts are doing the talking once again.

Bitcoin up slightly in US but ripping in China, up over 6%.

Treasuries:
Those topping tails finally spoke. Friday's were swing points were broken across the curve. The treasury rally therefore looks "not impulsive" thus, corrective.

Yes, there is little volume. But structure may have just spoken louder.

Energy:
WTI crude choppy rally. NG down.

Metals:
Down across the board but for palladium.

S&P Outlook:
No such deep retracement yet, as mentioned yesterday. Just more pre-Trump chop. Yellen will speak again today, this evening, after the close. Tomorrow could be interesting.

Only two levels matter to me at this point: 2300 and 2240-2250. Not much else.

Would look to sell higher and buy lower.

Wednesday, January 18, 2017

Wednesday -- Citi Sleeps, Liquidity, CPI, USD, Choppy Trade

S&P E-Mini Futures:
Slightly energized by pre-market earnings news.

News:
Mixed red in Europe, only FTSE and DAX higher. Perhaps on the heels of City optimism regarding PM May's announcement of a UK Parliamentary Brexit vote and the fact that Deutsche Bank might hold back bonuses on up to 90% of its workforce.

Goldman reported stellar earnings but Citigroup missed on revs.

The latest social mood indication that there's too much central bank liquidity in the world:


Yellen speaks at 3pm ET.

CPI headline: Core CPI jumped 2.1% the fastest since 2011. Slight dent in futures.

FX:
Broad USD strength, after slightly exceeding the 1:1 Fib level yesterday. Still a crowded trade, but still hearing it's toast, too.

What is a crowded trade is the $10 trillion USD short that keeps the Bank of International Settlements up at night, probably because they know that there's little the Fed can do if Emerging Markets continue to show stress amid a global shortage of physical dollars.  If this dollar short begins to get covered en masse, it's a problem. Crowded trade or not.

Perhaps the crowd is frontrunning this knowledge.

Bitcoin down over 4% after ripping 6% yesterday.

Treasuries:
Prices starting to confirm all those topping tails we've been seeing. Eyes on Friday's minor swing points.

Energy:
WTI crude and NG down rather well.

Metals:
Gold and silver trying to buck a red day in metals.

S&P Outlook:
Choppy mess. Looking closely, one finds several deep intraday Fib retracements. These can have a nasty way of appearing on a daily level at some point. And yes, a deep retracement would likely test the volume shelf at the 2050 area, for starters.

The picture brightens if 2272.08 can be exceeded. But even then, a stop is warranted. Yesterday's 2262.81 low being important to hold.

Tuesday, January 17, 2017

Monday -- USD Trumped, Italy Downgrade, More China Vol, Social Mood

S&P E-Mini Futures:
Recovering sharp overnight losses.

News:
Never thought the Big News overnight would be Donald shooting down the US dollar, but should have expected it given his Make It In America rhetoric. Can't have a strong dollar if you want companies to build stuff here and sell it abroad.

Glad he slammed the boarder-tax adjustment, though. Turning out to be a complicated mess, and Trump said he wants something far simpler.

The main point is that the honeymoon may be over, and that even with a Republican House & Senate, it may be a bumpy ride from here on.

Interesting that DBRS quietly cut Italy's credit rating rating after the markets closed on Friday, ahead of the long weekend.

China's second largest equities market, the Shenzhen Composite, fell as much as 6.6% Friday after trading lower for several days. Again, something seems to be brewing.

Maybe it's because people are starting to see the reality that China may soon use Taiwan as a guinea pig to illustrate how serious they are about their One-China policy. With ever-increasing war-drum rhetoric, the fate of Taiwan could soon be seen in an ugly way.

Another huge problem for the Facebook (and Google too):


Sounds like all that "traffic" is as fake as Fake News. Another thing that large media buyers can't be caught dead with in their media plan.

Note: Dug a bit deeper into India's so-called cash ban and found that, thus far, it is a ban on Rupee notes worth $7 and $15. So while not an outright ban, it's still a big pain, and it still displaces the poor and vulnerable in the name of combating the underground economy. Sounds like Modi went about it backwards. There are even signs that he may have put his BJP political party in jeopardy ahead of this year's legislative elections. If so, he could have a tough road to the 2019 general elections.

The spin from Davos. If you're not a globalist you're a protectionist. Zzzzz

Social Mood:
Mixed mood continues.

The bull case (people tend to be more concerned about their appearance in bull markets):


The bear case (people don't want to appear at all in bear markets):


FX:
Another day of strength for CHF and JPY thus another Risk Off signal.

USD down hard on Trump's "too strong" comments, yet it bounced off the previously mentioned 1:1 Fib extension at 100.43, hitting 100.45. Important area currently.

Treasuries:
Yet more topping tails.

Energy:
WTI crude likes weak dollar prospects, up over 1%, even as the latest OPEC agreement teeters.

NG not so much into the weak dollar, cold weather,  or much else.

Metals:
Base copper sitting out the precious rally.

S&P Outlook:
Thinking today's decline may be a buying opportunity if 2254.25 holds, judging by how futures have recovered.

Using ES 2257.50 as the stop, however. ES 2248.50 is the corresponding level to 2254.25 on the cash S&P, and don't really want to risk it that far down. So this morning's recovery area in E-minis it is.

Friday, January 13, 2017

Friday -- PPI, India's US-backed Cash Ban, Mexico Revolution Potential

S&P E-mini Futures:
Volatility surrounding the hot inflation numbers released this morning. Green.

News:
US wholesale inflation increased 1.6% for the year in December. Seen as hot. Big vol knocking markets all around currently.

Downside surprise on retail sales.

Elsewhere, the globalization backlash might be hurting China, potentially something they are powerless to control.

Per Bloomberg, China's trade surplus fell for the first time since 2011. On an annual basis, 2016 exports fell 7.7% and imports down 5.5%. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009.

This is why I'm a bull on India and Mexico.

But there will be setbacks.

First, India. Thought there was something fishy about Modi's ban on cash. There is.

It's a test case on behalf of Washington (Obama), USAID, and BTCA (Better Than Cash Alliance), a well-funded, well-organized group of over 35 countries and wealthy individuals such as Bill Gates and Michael Dell who are pushing for a global cashless society, or as they call it, "financial inclusion through digital payments."

They thought they'd use India as a test case because it has over a billion poor and vulnerable people who would have no say in the matter, and who are getting catastrophically screwed.

Look up cashlesscatalyst.org if you'd like to see how people like this hide in plain sight.

"Financial inclusion" is the same model as Obamacare. Inclusion by force. No choice. You're mandated to include yourself.

In this case, suddenly cash is made illegal. If you're poor, without a bank account, and you need to buy food that day, you and your family are screwed.

But that's OK. It's India. There are too many people in the world anyway (Gates is also concerned about overpopulation).

I'm a bull on India. India will overcome this nonsense, and the cashless dream will fail just like all Utopian fantasies do. But it will be a bumpy ride.

China, rallies notwithstanding, will eventually be a victim of its own greed. Mexico will take China's place as the US' low cost manufacturer and main trading partner IF it can avoid being takeover by drug cartels.

Right now it's not looking good.

Started hearing chatter yesterday about a possible devaluation of the Mexican peso. No news, just chatter. But it got me digging. The country is close to a breakdown after the government recently hiked gas prices by 20% overnight. People are rioting, as they should. And the drug cartels are using it as chance to curry favor with them by creating a black market of stolen gasoline and reselling it far below the government price. It's costing Pemex, the government-owned petrol monopoly, over $1 billion per year.

Mexico devalued the peso back in 1994 (just after my first-ever road trip to Baja) when the currency was then at its weakest ever against the dollar, after the outgoing administration embarked on expansionary fiscal and monetary policy prior to elections. The country had tried unsuccessfully to intervene in the currency markets to prop up the peso but quickly burned through its reserves (the peso was pegged to the dollar then; it is not now). Contrary to previous denials that it would devalue, the central bank devalued anyway, 15%. Due to capital flight, the peso eventually lost over 50%.

Mexico's central bank has just concluded two currency interventions this week. So, here we are again.

Will Mexico devalue? Who knows.

Why a country would devalue its currency during record weakness is beyond me, but so are a lot of things in this mad world.

The better question might be: Can it?

I doubt it, unless the government is hell bent on yielding completely to the cartels. A devaluation now would destroy the country.

What if the drug cartels have corrupted the government so badly that they force Mexico's destruction via devaluation? That would instantly make their products cheaper and the dollars and euros received would be worth much more. An excellent way to fund further black markets in just about anything.

One thing I've learned from living among Latin-style socialism is how important poor people are to the ruling class power structure. Latin-style socialism requires poor people: people to be used as pawns bought with benefits and subsidies. Politicians offer perks with one hand and write laws of enslavement (financial inclusion) with the other, all with the people unaware.

The Constitution of Puerto Rico explicitly says that foreign bondholders will be paid before essential services, while politicians skillfully use it to cultivate fears of a humanitarian crisis.

Devaluing the Mexican peso would surely create millions more poor people, but it would sever the "benevolent hand" of the government in the people's eyes, making the country ripe for revolution.

The cartels win, Mexico loses.

But, if Mexico wises up and aggressively pursues manufacturing and global trade, and is skillful enough to negotiate an exemption to the proposed Trump "border tax" in return for financing a border wall, Mexico wins.

And so does the Mexican peso.

FX:
Generally USD supportive thus far.

Bitcoin up over 1%.

Treasuries:
Hanging below the highs. Topping tails sustained. Especially after the hot inflation data.

Energy:
WTI crude down for the moment, but seeing possible corrective structure from recent highs which would suggest higher rally highs. NG up for the moment.

Metals:
Red. Notice how hot inflation data is not yet helping precious metals. It's because it pressures treasury prices and supports yields, curbing the appetite for metals.

S&P Outlook:
Haven't seen a market this messy in a long time. Acts poorly going up and going down. When this happens, I expand my working area, preferring deeper retracements to working closer to the middle. I miss more trades, but that's the point. No need to get chopped when one's conviction level is not high.

Yesterday got to 2254.25, close but not to the 2250 volume shelf. If the low holds, it projects to 2302.73.

The 2250 volume shelf and the 2238.83 gap remain, and will make great targets even if new highs are achieved.

Thursday, January 12, 2017

Thursday -- Fed Speak & The Three-Mile-High Smog-Eating Skyscraper

S&P E-mini Futures:
Down from yesterday's strong close.

News:
Competing social mood cues are still in force.

Such mixed mood is probably the result of the illusion of centrally managed markets by global central bankers, and why they are doomed to failure.

Bull just beginning:


Bull close to ending:



Just plain bull:

Take a good look at that chart. There is divergence all over it. See it?

Here are my mark ups. Green for positive divergence. Red for negative divergence.


Stocks are about to get the seven-year itch.

Meanwhile, four Fed Speakers are scheduled today, ostensibly to make sure it doesn't happen.

FX:
Heard it yet again, from the same celebrity trader, for the third time in two years, that the US dollar is toast!

I too am concerned at this time, but the dollar has yet to break a swing point, major or minor. The first minor one being 100.73 on the DXY (100.63 on DX futures). Currently the dollar is catching a nice bid above these levels.

There is a 1:1 Fib extension target at DXY 100.43. That could be a target. But the major swing point is DXY 99.43 (DX 99.49). That would start to get my attention.

I am on record here that if the dollar does fail, if it is actually forming a large multi-decade falling wedge, the target would be "below 70."

Meanwhile, back to today, CHF and JPY are ripping. Possible Risk Off warning.

Treasuries:
Three days worth of topping tails as prices attempt to rally from their respective triangles. Not very consoling to those thinking prices bottomed.

Hearing a ton of people going against over three decades of price history proclaiming that rising bond prices mean falling stock prices.

Bond prices bottomed in 1981 and have been in an uptrend along with stocks -- with few exceptions -- ever since. Suddenly stocks will tank from higher bond prices?

In our newfangled credit-based economy, rising yields will tank the market. Bill Gross says 2.60% on the 10-yr will to do it. Jeff Gundlach says 3.00% is the level.

Regardless who is right, they're both saying the same thing.

Energy:
WTI crude and NG are ripping. 49.95 held but WTI will need more volume.

Metals:
Gold is leaking open interest as it rallies. Silver is red thus far today. Copper & the P's are up strongly.

S&P Outlook:
2264.06 was broken yesterday and it didn't matter. The market turned and ripped.

Confidence in the wave count targeting higher prices is elevated, but it could be a messy run.

Gaps at 2257.83 and 2238.83 and the volume shelf at the 2250 are still viable targets.

Wednesday, January 11, 2017

Wednesday -- Capitalism Vs Central Banking, Ring Of Fire, Uranium

S&P E-mini Futures:
Chop chop lower.

News:
World Economic Forum -- "Capitalism needs urgent reform."

It sure does.

End central banking. End fractional-reserve banking. End "bail-ins" of depositors (now legally "junior bondholders"). End market speculation by banks.

Meanwhile the world awaits Trump's 11am press conference. I wish him every success but feel he's inheriting a noose around his neck.

Continue to think the Ring Of Fire is trying to tell us something:

Source: USGS
So might Bitcoin. Down over 11% currently. Supposedly on China launching a manipulation investigation of Bitcoin exchanges. Stay tuned in case it's animal spirits on the retreat. Yields and German bunds are ratcheting higher as Italian and Spanish yields are calm.

The "Russian" news gets weirder and weirder. All of it fake. BS.

Wondered why uranium stocks went nuts yesterday. "Uranium surged the most in more than three weeks as Kazakhstan said it will reduce production by 10 percent this year after prices slumped in 2016 amid a global inventory glut," per Bloomberg.

Or was it this story?


"No major commodity had a worse 2016 than uranium. In fact, the element used to make nuclear fuel has had a pretty dismal decade."

That's a huge socionomic buy signal.

Love it.

FX:
Non-correlations abound. Worst hit is EUR. USD higher on light volume.

Treasuries:
Conforming to the triangle thesis thus far.

Energy:
WTI crude choppy bounce. 49.95 needs to hold.

NG's rally still well above recent sharp lows yet giving back some.

Metals:
Gold higher, the others red.

S&P Outlook:
2264.06 held. A higher volume shelf around 2280 got tested . . . and failed.

Still thinking something like this:


Gaps at 2257.83 and 2238.83 and the volume shelf at the 2250 are still viable targets.