Summary
- The S&P kissed its 200-day then reversed bringing most risk markets down with it. Now, analysts are “retrofitting” their fundamental view to downside price action. Nice skate save on Friday
- Go no further than local bond markets to confirm the risk-off end of week move. Developed yields in x/Mexico, the Euro periphery and EM out. Even the French sovereign spread out 7 bps. Surveillez cet endroit!
- U.S. credit stable on the week but weaker at the end of the week
- Dollar stronger with major Latins giving back some YTD gains. The Dixie only 1.1 percent or a chip shot away from taking out its December 14th high at 97.71, which could put the kibosh on the EM rally
- Aussie stocks led the weak or week
- Iron ore jumped to its highest levels since 2014 on Vale concerns. We flagged Iron Ore early as an indicator and signal the old China economy is about to kick in
- Natural gas ugly and should be higher given seasonals.
Commentary: On February 3rd we posted,
Thus we expect the market to trade through the .618 Fibo at 2713 and kiss or temporarily pierce the 200-day moving average at 2740, getting the bulls Super Bowl lathered up, before reversing and setting on a new trajectory to test the December low. – GMM, Feb 3rd
Check.
We believe the index is on its way but certainly not in a straight line. Some are betting on a 1990’s melt-up as Fed will have to ease. That’s possible if the Fed begins easing with the S&P at 1000. Never have seen such nonsense, however.
The initial conditions in the 1990s couldn’t be more different than they are today. The mid-’90s was the beginning of globalization, cheap labor from China, India, and Eastern Europe. Peak America.
Now the reverse is true. The post-War order, i.e., globalization, is fading fast, and one, and the major reason we are cautious here, even as a long-term investor, and will steer clear of stocks until they get much cheaper. We are confident they will.
We don’t like the XLF (financials ETF) chart. Ugly Doji daily candle to end the week (see chart below) clinging to its 20-day. Watch this schpace (go lower)!
Natural gas is freakishly low here at this time of year. Yes, shale supply HELL. We think it deserves a stab down at these levels, however, but on a tight leash (which is a danger in itself as Nattie can easily, and often does, move 10% in one day). Be warned we have lost a ton of money in the “widow maker.”
China back online this week, Mnuchin and Lighthizer to China for negotiations, mo earnings, CPI, and government funding deadline on Friday.
Senate Appropriations Chairman Richard Shelby (R-Ala.) acknowledged on Sunday that negotiations had stalled, and he put the odds of getting a deal at 50-50. – Politico, Feb 10th
It will get done. They are not that foolish.
Happy hunting this week, folks.
Ugly Doji On Friday Clinging To 20-day. Going Lower
Nattie Down 48 Percent Since Novie In Midst of Polar Vortex
Reality Clashes With Presidential Spin
EM Should Start To Give Some/More Back With Stronger $
Returns For Week, February, and Year-to-Date
Global Macro Monitor 
16 Responses to If this is Socialism, call me Comrade
Wow. This post almost made me want to go back in time and restore the Soviet Union where I spent first 38 years of my life. Call yourself comrades or anything you want but don’t give me more socialism. Using stock market return as yardstick to prove that policies work and that one president is better than other is plain wrong. Can you say that Bush 41 was a better president than Clinton because stock market grew more? Was Comrade Brezhnev a good communist ruler because the quality of life did improve under his rule. And you know what, I bet the fastest economic growth the Soviet Union and Russia for that matter have ever experienced was under Comrade Stalin. Was he good? He started at a very low point and used all the wrong ideas and methods. But if we only judged by economic growth we should have said that he was the best. If we used the healthcare as measure, Comrade Castro would have been the winner. Not considering the starting point and ways the success was achieved is just wrong. For a fuller picture you should have the unemployment chart included as well.
As far as Joe the Plumber is concerned, does he even have a 401K? Even if he had one, he might have spent it because he does not have a job. But if he has the savings account he got zero and will be getting zero for a long time. He was robbed for you to enjoy the stock market gains. Here is where we need to start talking socialism. Exact same thing was happening in the Soviet Union. The actual prosperity, including big Swiss bank accounts, was only among the party elite, their families and close friends.