2018/03/20 Commentary: Trump Tribulation

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Commentary: Tuesday, March 20, 2018

Trump Tribulation

There is one problem with the possible meeting of the minds on trade tariffs at the G20 meeting: it didn’t happen! While there might be further news later this week, for now the situation seems to be that Messrs. Mnuchin and Ross are sticking with the US ‘looking out for its own economic interests’ party line. That leaves the EU in particular (which does not have the temporary steel and aluminum tariffs exemptions enjoyed by Canada and Mexico) ready, willing and able to impose retaliatory tariffs. Regardless of the potential economic and market implications, the political context means that European leaders cannot just let the US impose sanctions on their industries (and workers) and NOT respond. The likelihood of a response from countries affected by the pending US tariffs has been played down by some in the Trump administration. This is folly. Commerce Secretary Ross is an experienced businessman who should know better. Yet there is a problem with another Trump advisor.

And as we have noted since shortly after the March 1^st tariffs announcement, it seems Professor Navarro is an over-educated fool. Right after the original steel and aluminum tariffs announcement Navarro appeared on Sunday news shows, expressing confidence other countries would not retaliate… because the US has such a large economy(??). What in the world does that have to do with likely retaliation of trading partners?

It demonstrates a breathtaking lack of understanding of realpolitik. Based on what we have seen in the wake of the G20 not resolving the US push for those steel and aluminum tariffs, things might get fairly dicey again after a period of upbeat calm into Wednesday’s FOMC rate hike, projection revisions and press conference. We shall see. Yet there is more to bother the equities and US dollar and potentially bolster the govvies in the recent activity within the Trump administration beyond the very prominent tariffs issue.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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2018/03/08 Commentary: Trump Trade Trauma?

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Commentary: Thursday, March 8, 2018

Trump Trade Trauma?

Well, in fact, much like our view in last Tuesday evening’s Commentary: Powell Testimony… Shocker??! post, not really. Even as radical as the market reactions were to last Thursday’s premature Trump pronouncement on major steel and aluminum tariffs were, they did not create trend changing market activity. It was all within the Evolutionary Trend View (ETV) of bullish equities, bearish govvies and a still likely bearish US dollar. Even within that it must be allowed that the reactions were very sharp on the consideration that the US might just upset the entire world trading order. And part of that was the degree to which the President’s blurting out his intentions due to a typical Trump fit of pique was indeed ‘premature’. Not even the advisors who supported the overall tariffs decision were prepared for it to be shoved out there a week ago. While not the ‘total disarray’ that the mainstream press is trying to portray, it was a shock to even the White House staff that would need to turn it into a workable program.

The press is rife this week with stories on White House staff that had worked hard on more targeted actions challenging China on intellectual property (IP) theft being ambushed by the metals tariffs pronouncement. Allegedly that turned the past week into a ‘finals week’ of sorts, which included some all-nighters to cobble together positions that made sense. And it is also obvious the original Trump across-the-board 25% steel and 10% aluminum threat made no sense. Especially regarding allies and NAFTA trading partners Canada and Mexico, with whom the US is trying to complete a major NAFTA revision: how could the US expect to impose those sorts of sanctions right away (see the graph)?

Before we continue with the discussion of why the equities ultimately recovered very well from the key lower support, it is important to allow there have been many other expected and unexpected influences this week. There are four central bank rate decisions including this morning’s still accommodative ECB press conference, temporary equities pressure from US NEC Director Cohn’s Tuesday afternoon resignation, the early week shift to a less draconian US tariffs position, and now some rapprochement with North Korea…  

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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2018/02/27 Commentary: Powell Testimony… Shocker??!

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Commentary: Tuesday, February 27, 2018

Powell Testimony… Shocker??!

Well, in fact, not really. Some folks, who might have been convinced by others at the Fed it was going to remain very ‘gradualist’ in its approach to raising the federal funds rate this year, might have been shocked. And the specific grounds for that was probably the key term new Federal Reserve Chairman Powell used in the penultimate paragraph of his prepared remarks (our mark-up) at his inaugural semi-annual testimony appearance in front of House of Representatives Financial Services Committee: “overheated.” Keep in mind that his prepared remarks are a very highly compressed five page derivative of last Friday’s 63-page Federal Reserve System Monetary Policy Report to Congress. As such, Powell’s testimony opening statement had to summarize reams of analysis and graphs from that far more extensive full report. Yet he still felt it important to mention that US economic strength was verging on a phase where overheating might at least be possible.

As usual there were some who had become so comfortable with the notion that the Fed was (and would remain) so constrained by the lack of inflation that it would be forced to continue only very cautious rate rises. And going back into the period from early 2015 through mid-2016 we had that view as well. All of the Fed’s hawkish talk in that phase was little more than a self-serving (as we put it) ‘normalcy bias’ rather than a return to real normalcy. But things changed into the November 2016 election and beyond.

As we have already reviewed all of that at length in quite a few posts, suffice to say for now the overall confluence of factors (especially the regulatory regime and tax policy) has reinvigorated American business in ways not seen since before the 2008-2009 Crisis. And where this all comes together is in the renewed sustained improvement in Velocity of the US Monetary Base. We both noted that, and provided an early link out to the long term (96 year) chart in our February 11^th Weekend: The ‘Demand-Pull’ Bond Bear post. It is now important enough that we have included it below in this post.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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2018/02/24 Weekend: Consolidation Consternation

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Weekend: Saturday, February 24, 2018

Consolidation Consternation

As noted since early last week, the directional moves were lapsing into consolidation phases. And with those come a degree of consternation. While it might seem that the less directional trends might leave a more subdued psychology, the memory of the more aggressive trends leave many market participants on edge. That is often due to the degree to which there is concern over not missing the next major price move in spite of the current lower volatility.

Yet as noted in our February 16^th Commentary: Clearly More So 1998 Than 1987 post, “…especially after a particularly significant accelerated trend, markets are more likely to go into a consolidation phase across ‘time’. While there are rare cases where a subsequent large trend extension comes directly in the wake of only a very slight pause, for the most part looking for the next ‘big move’ directly in the wake of the end of a recent major parabolic price swing (essentially the case in US equities) is misguided.”

This raises a good question about the end of week new recent high obvious on the March Bund future chart (enlarged version of the opening graphic.)  Yet there is a reasonable answer for how this can still be part of a reactive consolidation of the previous extended down trend. The fact is some consolidations ‘countertrend’, recapturing some of the ground from the extended trend. As all of our experienced readers know, the question is whether that creates any definitive sign the ‘reaction’ has actually turned into a ‘reversal’. While we will review the other consolidation phases as well, at least so far they are more so still classical sideways consolidations.

But the Bund is of particular interest due to the recent new trading high creating a feeling of a potential upward trend reversal. Yet in the context of the broader Evolutionary Trend View (ETV), there are significant technical trend obstacles to any reversal of the overall down trend. And the Bund is also especially interesting as the most resilient of the govvies, only playing catch up with downside leader US T-note on its late-January violation of the major 160.50-.00 support. And therein lies the tale of the trend that must be closely monitored as things unfold from here… with some very interesting ETV grounds to doubt any reversal into a bullish trend.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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2018/02/16 Commentary: Clearly More So 1998 Than 1987

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Commentary: Friday, February 16, 2018

Clearly More So 1998 Than 1987  

As noted in all of our recent analysis, the fundamental backdrop was just not consistent with any orderly push higher in US interest rates triggering a sharp reversal of the US equities major bull trend. Of course, that still meant after the US 10-year T-note yield swung above its 2.62% four-year high back on January 19^th (incidentally the same day as our Commentary: Showdown at Govvies Graveyard post), the higher interest rates might disrupt the US equities’ runaway upside (parabolic rally) psychology. Even though that took until yields pushed still higher (2.70%) into January 29^th, the potential for a sharp reaction was always there after the US equities bull move became such a straight up affair.

And react it did, with a vengeance. Yet the acceleration into the extended January rally also raised the commensurate lowest ‘idealized’ up channel support. That was based on the higher (topping line that sets the trend vector) and lower (projected parallel) major channel support line obvious from before the depths of the sharp selloff, as shown in the opening 2-year front month S&P 500 weekly chart . And as reviewed at some length in last weekend’s The ‘Demand-Pull’ Bond Bear post, a trend reversal would have required a DOWN Break (i.e. weekly Close) last week not only below that 2,575 channel support, but also below the 2,545 weekly MA-41.    

And as explained in last week Wednesday’s emailed note, “…even though we believe the US equities remain bullish, we would be cautious until the key lower levels are at least neared, or possibly fully retested.” That was based on “…markets which trade rapidly into a key area and reverse outside of Regular Trading Hours (RTH) tend to want to revisit those key levels in subsequent RTH trading…” and can still be good as long as those key levels are held. Which is why we remained bullish on last week’s Thursday-Friday drop, especially once it recovered strongly from midday Friday lows. Yet there is a critical secondary consideration which must always be fulfilled in those cases…

Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. As this is a market-specific ALERT, outside of expanded discussion of the S&P 500 future the Market Observations remain the same as our last Weekend: The ‘Demand-Pull’ Bond Bear post that were updated (lower section available to all Gold and Platinum subscribers) after Tuesday’s US Close, and there is no Extended Trend Assessment.

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