The collision of global markets and social mood

Thursday, January 5, 2017

Thursday -- Monsoon, Not So Random Headlines, Bitcoin Plunges Over 20%

S&P E-mini Futures:
Price overlap. Caution.

One thing I'm studying lately is the Monsoon Trade Route of the Indian Ocean, an idea I picked up from Raoul Pal. As if to say "keep digging" this blurb just ran by me:

"Ethiopia has one of the fastest growing economies in the world, and this new electric railway—mostly financed and constructed by the Chinese government and Chinese firms—with connect the landlocked country to the ocean. It should cut travel times between Addis Ababa and Djibouti from three days to a mere 12 hours."

Notice China is building a new railway in Ethiopia that could be a game-changing catalyst for Monsoon trade.

This is what we (USA) should be doing: making partnerships with infrastructure instead of fighting endless wars. One path makes friends, the other makes enemies.

Elsewhere, random headlines from Reuters that may not be so random:

Jobless claims fall to near 43-year low (the illusion of full employment)

World stocks hit 1-1/2 year high after strong China data (illusion that China will save the world)

Four in custody after Chicago beating broadcast on social media (steady progress of social media toward anti-social media, as forecast by socionomics)

Bitcoin plunges by a fifth (the illusion that prices rise to the sky)

Dollar Posts Biggest Drop Since Trump's Win (the illusion that the Trump rally will go on forever)

Regarding Bitcoin's 20%+ 1987-style plunge -- it can and will happen to equities again.

Animal spirits are leaving the herd.

Mixed tone. CHF and JPY stronger yet again (caution). EUR stronger too, along with AUD and CAD (risk on).

Prices higher on lighter volume.

WTI crude choppy bounce from Tuesday's implosion. NG still not off the mat, but trying.

Gold and silver up on lighter volume. Platinum and palladium higher. Copper red.

S&P Outlook:
As someone who was looking for another wave higher from last week's low I must admit the current price action is a bit disturbing.

That said, perhaps it should be, for it is assumed to be a fifth wave, and should thus show weakness. But there is a lot to be on-guard about.

For two days in a row, opening prices have driven the gains with huge tick explosions -- a sign of short covering.

Volume contracted yesterday versus the day before, even though yesterday, being a "wave 3," should have proved itself with more strength.

Breadth as seen by A/Ds is there, but seems like not much else.

Last night, futures overlapped "wave i of 5" -- another sign of weakness, unless an ending diagonal is in play.

Under no circumstances should price get below 2245.13 on the cash S&P (shown as "ii" above) without a new high or, as mentioned yesterday, "something else" may be occurring.

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