What Does A Narrowing Trade Deficit Mean?

Hint: not what you're being led to believe.

NEW YORK (MarketWatch) — U.S. stocks rose Friday morning following an unexpected narrowing in the U.S. trade deficit for October on surging exports. The gains came as the U.S. trade deficit for October unexpectedly narrowed as exports surged to their highest levels in more than two years and the trade gap with China fell.

The US trade deficit unexpectedly narrowed because, amid all the fawning bullishness in the press, we unexpectedly bought less stuff from China. Because we're not spending as much as we were. Because consumers are retrenching. Because there is no real recovery.

Don't take my word for it. This chart of the Baltic Dry Index says it much better. Whatever shallow recovery there was ended a year ago.



The moment I saw that we were over 1235.05 on the S&P cash with just 450 ticks and flat advancers/decliners, I bought the SH. Watch the VIX today. If the market can drift higher, we'll likely close below the 2 standard deviation band currently sitting at 17.13 which would be the set up for a VIX buy signal.