Last week at this time we were scratching our heads about how a market can elevate in the face of such tragedy. Arthur Laffer probably put it best when he said on the surface money/markets have little to do with morality. But eventually, morality will catch up to the markets. Markets had a similar sentiment when it came to the hurricanes. Initially, markets were resilient when the hurricanes hit.
But they have a cumulative effect. We found that out on Friday with the bad jobs number. The 33k number lost was attributed to the storms. How could it not? Florida experienced the biggest evacuation of a U.S. population in history. It was probably worse than expected for nefarious reasons the media won’t tell you. How many weeks and months have I come here telling the consumer doesn’t like opening the wallet in the face of social unrest? There were two major issues weighing on people in September. First was the fear of a war with North Korea, the media might blow it off but they never stop the echo chamber. Then, of course, we had the NFL problem which gets more complicated from one week to the next. The NFL is losing ratings, viewers, sponsors and eventually fans. I have a very good read on the mood of the people. They are fed up with this kind of thing and it’s like an iceberg. What we are seeing with the NFL thus far is the tip of the iceberg and if things don’t change what we don’t see below the surface is going to be revealed. It’s not going to be good for business.
Today is October 9 and an anniversary to the bottom of the Internet bear. The first half of this week is also the ten-year anniversary to the top of the financial crisis in 2007. Coming closer to home we have now entered the 233-day window for the Trump rally. This one gets a little complicated because there were two bottoms last November. A lot of the market bottomed on November 4 which was the Friday before the election. It puts us right here. Does that mean there is going to be a turn? Let me put it to you this way. Risk, as we know, has been historically high just based on the VIX but we’ve seen other indicators. In 2007 when the market topped it felt like there was only one way for the market to go and that was up. Yet in an instant, it all changed. I remember the 5-minute Emini chart which traced out a lightning bolt within a couple of bars. If memory serves me correctly the NQ dropped something like 40 points in less than 15 minutes. The only difference between this situation and the one in 2007 is the mood. In 2007 it was euphoria, right now I don’t think we have euphoria. This market can be classified as complacency. If we need euphoria, this week will not be the top. But we are living in a different world from 07. This is a market partially driven by geopolitics and if we learned anything from Las Vegas as far as markets are concerned, anything can happen when we least expect it.
But we don’t necessarily need euphoria to get a turn, do we? Back in June markets sold off for a short time based on a report from Goldman Sachs that FAANG stocks were as solid as the bond market, implying they had become safe havens. You remember what happened, they crashed on a 1-minute chart. Right now, markets have recovered from just about every attempt lower by the bears to the point it feels like it can only go up. That’s what makes me concerned. We’ve reached the point in this season that if something is going to happen, it’s going to happen soon or not at all. If for whatever reason we get through October then we are already dealing with the holiday season and sorry to tell the bears, if the market isn’t dropping by Santa Claus time, it’s not happening this year.
As far as Donald Trump is concerned, I saw his good friend Robert Kiyosaki interviewed on Infowars last week. He has his opinions about the market but he echoed something I’ve been saying for a long time. Trump has long bragged about his rally. Does he think the market is going to stay up his entire term? There comes a point where the market is going to turn and he is going to be blamed. In this case, they’ll hit him much harder than any other President. Friday’s jobs number could be the down payment of that.
Technically speaking, the only major area of concern right here is the Transports which got hit last week and you can see from a couple of larger and smaller trend lines it seems to have stopped in the right place and is breaking near-term lines.
In other areas, Gold has a very interesting symmetry at this low and has the best chance to move higher in the month since it peaked. In early action on Monday morning, the Greenback is playing along going the other way. In other words, this could be a turning point for precious metals and currencies. Oil got hit as well to end the week on a good square out. The troubling part for bulls is it came after as spike higher on Thursday. It’s the kind of event that might make bulls think twice about trying it again. If it was short covering bears might think twice about letting go so soon. Whatever the case in early trading this polarity point is being tested.
We’ve done all the cycle work, this is not a business of predictions. It’s a business of managing risk. If something is going to happen, this is the best week for it to happen. If it does happen, it’s happening at the right time and you should take it seriously. If it doesn’t happen, we are really working on the mother of all bubbles.