Global Macro Monitor

The S&P got whacked again today and is now about 1 percent below its first peak of January 26, 2018, in this very long topping process.  In other words, stocks have gone nowhere for the past 18 months.

We believe a bear market began in January 2018 with the massive volatility spike and the S&P500 has been banging around with lots of volatility making three marginal new highs before peaking at the intraday high of 3027.98 and closing high of 3025.86.   That is how bull markets top.  It’s a process as you can see in the second chart.

We believe that the top is in for some time and we did call the very peak on the very day, by the way.  We are also very proud of the fact we didn’t raise our target of 3025 when it was hit on July 26th.  We try not to allow the price action to drive our narrative nor do we retrofit the fundamentals to market moves.

That is trap the central banks are caught up in.  It is not surprising, however, as the global economy has morphed into one big asset market over the years.

Bretton Woods Order Collapsing

The post-Bretton Woods order is collapsing, especially the economic relationship between China and the United States, which has been a big driver of global growth, corporate profits, and margins for the past 20 years.

The markets are holding on to the belief that one tweet can return us to the good old days.  Good luck with that one.

The politics in both countries are just not that easy.  Sure, the market is gullible and shorts could get slaughtered in the short-term by a tweet from President Trump — a self-proclaimed economic nationalist, by the way, which we believe the market truly hasn’t internalized or fully understands —  but come on, man, this is getting old.  The trade war feels like it has now crossed the Rubicon.

If Hong Kong blows, forget about it.

Key Levels

The levels to watch now to the downside are today’s low at 2822.12; the 200-day moving average at 2790.39, and the key .618 Fibo at 2767.69.  The market has sold hard over the past week and a bounce may be in store quite possibly at those levels.  In fact, in overnight trading that is exactly the level futures did find a bottom at 2775.75 after the Treasury labeled China a currency manipulator and then bounced big when the PBOC set the RMB official rate stronger than expected.

Then watch 2728.21, the June low, which is must hold.

To the upside, the first Fibo at 2867.17 and the 100-day at 2900.80.   We will sell any strength and head for safe harbors or get shorter.

Be careful out there, folks.

The Long Top

Bear Markets 200 days Prior To Top

It feels like the rivets are really starting to pop on the global international order as we have been warning over and over and over.  The markets smell it.

If China moves on Hong Kong, things can really go sideways quickly and in an unpredictable linear fashion.

Haas fully understands it and nails it in his tweet this morning.

dot…dot…dot…

Trump Laughs As A Supporter Calls For Immigrants To Be Shot

Just connecting the dots.  It doesn’t take a genius, folks.

Stop politicizing mass shooters you say?  My arse we will.

Here are some countries who politicize against mass shootings and one that doesn’t with the caveat if the data are correct.  It passes the smell test.

https://twitter.com/keithedwards/status/1157740352838742016?s=21

This is a must view, folks.  If you don’t have Netflix, grab some friends and subscribe for one month so you can watch this.  Stunning.

Everything you wanted to know about Cambridge Analytica but were afraid to ask.

After a nice morning bounce from yesterday’s Fed sell-off, the market got slapped in the face with some real fundamental news with President Trump’s tweet threatening to raise tariffs.   Not a done deal yet but can’t see President Xi scrambling to make concessions to make Trump look like a winner as Mexico did, or as Trump said Mexico did.

In fact, the Chinese may look to the Mexico example as another instance of Trump not following through on his threats, which makes negotiations even more unstable. In other words, America is likely viewed by China as a Paper Tiger.  Does Trump now have to prove them wrong?  HTF did we ever get here?   Pass the Kafka, please.

An escalation of the trade war with additional tariffs will do real damage to the global economy.   Nobody wins a trade war.

Hey, but Trump is standing up to China, right?  How idiotic.

Can you imagine if Trump was president during the 1962 Cuban Missile Crisis?  None of us would be here to imagine.

Key Levels

The S&P closed at 2953.56, just through the bottom of the “breakout zone” of 2954-2964, which brings the 50-day moving average in play at 2926.06.  A break of today’s low at 2945.23 cinches a beeline move to the 50-day, where algos will likely set their bear trap and try and bounce the market.  We expect a feeble bounce at best, which should be spanked.

The S&P must then hold the 2867-2889 level, which is huge support coinciding with the first Fibo and 200-day moving average, respectively.   We think that is where the index is heading over the next week probably after some strum und drang after tomorrow’s employment report.

To the upside, the S&P must first takeout 2964, the top of the “break-out zone” and then eyes on the 20-day at 2996.78.  Not achievable, in our opinion,  unless Trump tweets “April Fools” tonight.

Looks like a lot August holidays are going to be ruined with this new round of escalation in the trade war.

Big sellers.

If true….

https://twitter.com/1984to1776/status/1156260010994864139?s=21