Global Macro Monitor

Tough day for America, tough day for Boston, tough day for the markets.   Our hearts and prayers go out to those involved and their families in this senseless tragedy.

The ugly selling in commodities finally hit stocks.  The breakout now looks like a fake out and 1538 looms for the S&P500,  the bottom of the range it had traded for weeks before breaking to new highs.

The gold ETF experienced its worst day and two days in its history.   The VIX was up over 43 percent today,  it’s 5th biggest daily increase in its history.

This feels like its coming out of China.   Can’t be certain, but you know how we feel about their economic model.

Let’s wait for the quality of the bounce.   Those who haven’t bought past sell-offs have found themselves panicking and chasing the market higher if they waited to long.   This one feels a little more serious and were not that anxious to buy it yet.

Did some work over the weekend, which we will post later.  Looking at stock market cap to GDP and corporate profits to GDP it’s difficult to rationalize a major move higher from current levels unless nominal GDP really accelerates (= change in monetary policy)  and/or corporate profits continue to take record share of GDP.

That, of course, assumes a rational market and no bubbles.     Bubbles?  Never!

(click here if chart is not observable)