It’s interesting that all it took was a decent jobs report – as far as such a report can be believed – to reverse the bubble heads from Nvidia joy to “RUH ROH!!” fear.
The fear is that the Fed is not going to cut in December because the (delayed) jobs report shows an economy not as bad as thought (that’s quite debatable here on Planet Reality). But here is the thing, at the first sign of real market trouble * the Fed is likely to spray the inflation out its rear orifice through QE, now that QT has been terminated.
Frankly, I don’t think that the year-end rally play is cooked because as we’ve been noting, it would be preferable to get more bearishness in the mix than simply having SPX hold its 50 day average and boom again on the likes of Nvidia. I am not going to get into the TA of it right now. I think we’ve covered that enough. We’re looking at SPX next short-term support at 6400-6500 or in an extreme, the pattern top at 6130.
Nor am I going to give an eventual win to the bulls. Screw you. Earn my trust and I’ll trade this mess. However, I got shaken out of my SPXS position on the Nvidia news and was away from my office until now. I am in no mood to speculate bullish just yet. I am in a mood to maybe re-short something. Or just hold cash. Yes, that works.
Moving on to the internals, Risk-off indicator #2 (Consumer Staples/Discretionary) is bouncing hard, following Risk-off indicator #1 (Healthcare/Broad). That could indicate more short-term pain to come.
On the other hand, SOX > NDX > SPX leadership is not broken, and another reason I’ll not give up on a year-end rally after a correction clears the pipes. Meanwhile, these ratios could remain under pressure in the shorter-term.
Bottom Line
It is good to have been defensive now (speaking personally, cash, short euro, hedged gold stocks, long some Healthcare, and potentially short a U.S. index or two) in preparation for a rally to come or, for all we know, a bear market to come. I’m still leaning interim rally, but we shall see.
* Because after all, our financialized economy really is largely the stock market, isn’t it?
– as far as such a report can be believed.
Welcome to the Post-Factual World data coming out of the BLS. If our Dear Leader has learned anything during the shutdown, it’s that data is Everything, and playing with it is Priceless. Private sources do their best to see through the fog, but it would be naive to believe that the official government data is now what it used to be. Just one more institutional framework that has collapsed, and nobody (or most anybody) heard the ground shaking beneath their feet.
The Players have caught onto this as well. There’s a spanner at the poker table, and you can join the game with all your chips. Now, more than ever, these cards are not showing what they seem to be, IMO. It adds a new dimension to the already risky world to the uninformed trader.
We’re not in Kansas, anymore. That’s for sure.
Well said, Michael. Personally, I think we are at the bottom. The pits. Society is going to clean itself after this disgrace. Peak Trump has come and gone.
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He has literally turned us, our country, into a TV show. His AG, FBI chief, SecDef, WH spokesperson, even the Comey prosecutor. All TV show characters. I think that is because Trump’s brain operates at a reality TeeVee level. It’s how he sees the world.
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I have made a conscious effort to talk Trump way less this term than 1.0. It helps my work. But you brought it out. Even the staunchest MAGA must be like “WTF?” now. Right? One would think.