It was a fine intraday shorting opportunity on the YM. Like most days those of us keeping our nose to the grindstone work to eke out some points. Check this out (chart below), it doesn’t get much nicer than this. The pivot in question is 233 min (Fibonacci) high to high to 21987 and the 987 is the vibration (Fibonacci). Additionally, this is 54 minutes up from a 955 low and 33 minutes from the prior high. In case you were wondering, my recent article in the June issue of Modern Trader described the Kairos moment. This is one of them, but that’s not why this is here.
The crash leg you see to the extreme right came because of breaking news Mueller impaneled a grand jury which is now accelerating the intrigue in Washington to a whole new level. The fact it recovered is entirely beside the point; the fact this happened at all is serious enough.
I’m not going to beat around the bush. The risk for a not so black swan anymore is now off the charts. You read the news, I know most of my readers are very informed. All I’m going to say from this point forward risk for a significant event either domestic or geopolitical that will impact financial markets is higher right now than at anytime we’ve been trading the markets. That goes for you old-timers who were around in the 1970s. I’d call it a black swan but there is so much transparency with all the leaks going on that nothing should surprise us. I’ve also made it abundantly clear that major long-term cycles start to mature in about three weeks.
What are we watching this week? Markets did deteriorate again last week. I’m watching Transports, which just bounced off the 200-day moving average as well as the FANG stocks. They are the heavily weighted tech names that held the market up earlier in the year. Most important is Apple (AAPL) and Amazon (AMZN). AAPL pushed above its June 9 high. It’s important to watch this carefully because it was a quick drop and it is possible for a short squeeze right at that line. We’ve seen a mild squeeze in AMZN but is now back below that same line. Then again, Facebook (FB) peaked at 175 at 175 days up from its November low. The point being these stocks are now at risk for tops being in place. The SOX is also at a make or break point. Biotech and drug names are also becoming questionable.
We are where we were in the second quarter. As you know, the market recovered and gave us new highs again. My question is how many times can it successfully go to the well? August traditionally is the quietest time of the year for the market on a par with Christmas week. September has been known as the month that can be the graveyard for the markets. So, it’s not like we are heading into the seeker-friendly time of the year.
If we put aside all the grand jury business, we are still dealing with a Congress that left for the August recess without completing health care reform. Pundits are scratching their heads about that and now concerned we won’t even get tax reform this year. The market is not going to like that. Congress left last week having completed no significant legislation for the year. I remember Congressional leaders telling us to be patient. They told us not to expect massive legislation in the first 100 days but use it as a barometer for what could be accomplished this year. Now they are beyond 180 days and nothing has been accomplished.
Elsewhere, the Greenback and EUR-USD finally changed direction. That’s important because the CAC was in serious danger of breaking down for good and that could’ve led to a quick contagion. The calculations on these turns are just mediocre so it remains to be seen how much they can sustain. These turns failed at 144 days and Monday is day 153 off the top. That means if they rally all week they will have a collision course with 161 days next week where it’s possible they can invert and continue the trends they’ve been at all year. It’s hypothesis and speculation at this point but something I will be watching closely.
Here's something that should concern everyone. Twitter announced earnings, said there was slow user growth, the crowd didn’t like it. The bottom line is the stock got hammered by gapping down over 8% on Thursday. On Friday Eric Trump tweeted a link from Drudge about the good jobs number. He posted a screenshot that said, “This Tweet is not available because it includes potentially sensitive content.”
This is a manifestation of the political divide in our country that is harmful to business. I can make an argument this has been happening since the Ferguson riots. We’ve covered the Starbucks consumer report many times here. But there is a socionomic aspect to all this. As you know the VIX just hit historic complacency numbers. We are in a situation where a publicly traded company gets hammered one day and the very next day it censors the son of the President of the United States for reporting good economic news. Imagine, Twitter is doing so well they don’t need customers who are rooting for the President’s growth agenda after being hammered for slow user growth. They routinely censor conservative accounts, enough to the point a competitor called Gab is getting off the ground.
So, it is my contention there are many reasons the market could roll over. Certain businesses have decided a certain demographic’s money is no longer any good. Now political expediency is more important than loyalty to stockholders. Is it politics, complacency or a manifestation of both? Either way it’s a witch’s brew for a storm. We’ve never seen that in this country. By the way, Stockman says the President may be removed by February. He said this in a speech last Friday in Vancouver. For my part, I saw the same thing as Stockman concerning the dysfunctional Congress but I won’t go so far as to agree with this one.
In early trading Monday markets were mostly flat but the CAC stayed up as a manifestation of the currency reversal.