The collision of global markets and social mood

Thursday, May 25, 2017

Thursday -- The Hint Inside The Fed Minutes

S&P E-mini Futures:
Modestly higher, off its best levels

Huge breakout last night around 10pm,  possibly as a certain paragraph in the Fed minutes was finally realized:

"...asset valuation pressures in some markets were notable... vulnerabilities appeared to have increased for asset valuation pressures.. a sharp decline in such valuations could pose risks to financial stability..."

Other than a great example of the Fed speaking out of both sides of its mouth, this seems to be a big hint: "we're ready to step on the gas again."

In today's world, it seems any risk to "financial stability" is cause for the Fed to save the day, the realization of which might have been the delayed interpretation of the machines last night.

Or maybe its today's New Moon.

More than half of the breakout was taken back in the ensuing hours. Asia ended green, yet Europe has had a shaky start and remains mostly red.

Bitcoin was up another 9% yesterday, and is up yet another 10% today thus far, above 2700. So for now, this behavior seems like runaway social mood at play. Unless China is about to implode.

Got a text from a friend yesterday who has never traded anything in his life. Has now tripled his money in Ethereum. Adamant it's not a bubble, and was not amused when I suggested that he sell enough to take his principal out.

He can pay for lunch next time.

Speaking of China, an epic mood cue has appeared.

The 5 ‘Handsome Girls’ Trying to Be China’s Biggest Boy Band

Maybe we won't get a bubble gum pop band to mark the top this time, a la Hanson. But maybe there's one in China, and it's marking a major mood shift.

According to socionomics, "in bear markets, sexual stereotypes fall from favor and society embraces a greater variety of gender roles and identities."

Girl boy bands fit the bill, and might suggest to approach the Shanghai Composite with caution.

USD still hanging in there. CAD had a strong day yesterday but is giving back some, along with several other majors.

Volume continues to explode as price rallies, keeping the pressure on for the larger rally pattern. But caution will creep in once the pattern matures, as it would likely suggest a sharp decline.

WTI crude rolling over from recent rally. NG holding and adding to gains.

Modest gains here across the board.

S&P Outlook:
Love this chart by John Hussman at Hussman Funds which show that over valuation is far more widespread this time vs 2000 and 2007.

You can fool P/E ratios, but you can't fool revenues.

Source: John Hussman, Hussman Funds
In Elliott terms, that five-wave advance from 2009 is a beauty and probably very close to concluding.

Five waves have yet to form in the actual price of the S&P, but for now the trend remains up and dips are likely buying opportunities as long as levels and risk are respected.

For instance, if the S&P is in a high level consolidation or a triangle, 2300 could get tested easily. It would likely be scary, but it would likely be a good buy.

Likewise, prices could grind higher and form the final subwaves of a larger third wave. My strategy then would be to sell the completed pattern for a fourth-wave pullback. That could be up around 2500.

In between, it's not much other than scalping the E-mini to stay sharp and earn some lunch money.

I've held SSO against SQQQ for a while and the delta of SSO has helped vs SQQQ, but looking for leg out soon.

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