Looks Like We’re Back To The “Dirty Harry” Market Once Again

It’s been an amazing turn of events when one looks over the past few weeks in regards to the “markets.” On Christmas Eve the entirety of Wall Street had suddenly come to conclusion that, “All was lost!” Now, only weeks later, all that doom and gloom has been replaced with, “Happy days are here again!” It’s been a case study for mass psychosis if ever I’ve seen one.

The reason for the title above is that I’ve used it more than once (and it’s been shown correct just as many times) to describe where we might be in relation to what is being told-and-sold across most of the mainstream business/financial media. In other words, riverboat gambling and its consequences has now become the modus operandi for financial commentary and investing prowess.

If you are one of the few that has remained doubtful that the capital markets have become nothing more than a “casino?” You now know why that expression was used to express such. i.e., 2018 “in the black” was supposed to be a “sure thing.” Hint: it wasn’t.

To the bewilderment of patrons, along with their croupier of choice, they watched in horror as their winning “ball” rolled out of the “black” only to land in the “Red.”

The only thing adding more insult to the injury was this happened just when it appeared the spin was all but over and the celebratory rounds of libations (aka bonuses) ordered – only to then stand and watch as all their “chips” were suddenly swept off the table. i.e., and out of one’s 401K balance.

So now it’s the same cohort of casino “Market wizards” shouting out to anyone left that will listen (and that still has any remaining funds) that it’s time to get back in there and BTFD (buy the f’n dip)!

Well, then, there’s only one remaining question one needs to ask, “Do you feel lucky?”

If you were one that answered that question last time I asked it back in July of 2018 with a resounding “Yes!” Then you did quite well, until – October. (on a side note, I thought it was going to be a Yuan induced roiling, but the Chinese politburo seems to have thrown anything-and-everything at making sure that is the one area that doesn’t show weakness. And the reasoning behind that conclusion I’ve stated many times prior. Hint: SDR, IMF’s “Special Drawing Rights” and all it implies geopolitically)

But after that? Then, not only did you lose your winnings back to July, but you lost all of 2018 all the way back to March of 2017. e.g., 3 months of wins wiped clean followed with an additional 16+months of prior winnings, again, wiped clean as in – wiped from one’s account balance. All in less than 60 trading days.

Again, for this point can not be made too many times: all after it was assured by the croupiers across “bubble-vision” that 2018 in-the-black was a “sure thing.”

Still think the term “casino” isn’t fitting?

So now here we are just three week into the new year from what was deemed by many as a “near death experience,” this same group is now touting that 2018 was a “one off,” and that the “Powell Put” is now known and will be respected. i.e., The Fed’s got your back – again. BTFD – again!

Well, maybe they do, and then again, maybe they don’t. For the answer to that question is still confusing at best and down right alchemic at worst. i.e., everyone is saying it’s now possible – but yet there is still no proof, only words of fancy incantations. Hint: “we could or would ‘pause'” is something very different than “we paused.”

Said differently: “Looks and feels like gold” doesn’t make it such, hence the alchemic reference.

But that’s not the way this most recent “market” upswing is being portrayed. It’s now being marketed as “Everyone’s a winner – just pick your lottery ticket ETF of choice, sit back, and watch the winnings roll in in 2019.” i.e., “buy, Buy, BUY!”

Again, may be, and maybe not. So in the immortal words of Harry Callahan you now, once again, need to ask, “Do I feel lucky?” Because that’s what you’re asking in reality. For if you still think the so-called “smart crowd” has any idea? Hint: they, along with the Fed itself stated ad nauseam that both interest rate hikes, along with the balance sheet normalization process, was all “known knowns” beginning in January 2018. And the “balance sheet” process would be basically unnoticeable. i.e., running in background.

Then all those “known knowns” suddenly blindsided them – all of them – in October as they were all busy tabulating their winnings for end of year. Need I say more?

As we sit here today there are a few other “known knowns” that have the potential to unleash a myriad of unknowns across all sectors of business and politics that very few can imagine, never-mind contemplate their severity.

The Federal Reserve meets for its January conclave. At this moment no interest rate adjustment (such as hike) is seen forthcoming. However, that is not what the “markets” are truly concerned about.

The only thing (and by that I mean, just that) the “markets” want confirmation of is that the Balance Sheet Normalization Process (QT) has either been already paused or, is being paused via an actual date or amount. Period.

The Fed (and all its various players) have been out, one after another, touting a rake hike pause is basically “in the cards.” When it comes to the question surrounding QT they have all been superficially sympathetic, with most responses revolving around one form of “of course we could, possibly, might, maybe, _______(fill in the blank)”

But there has been no, “We shall, we have or, we did” as of yet. I am of the opinion that’s the only form of verbiage the “market” is going to accept as proof they actually did something. All other forms of word counting will be inconsequential.

The other of the “known knowns” into unknown territory is that of the political, both here in the U.S., as well as abroad in places such as France, Italy, U.K., China and more.

Here in the U.S. the President made what by many was seen as, at the least, a reasonable start for further negotiations. The opposing party sent their refusal or, no before the proposal had even been fully heard.

No matter what side of the political aisle one sits, one thing is unquestionable: One side has made it abundantly clear they have no intention of negotiating, regardless of what is being reported. The act of sending a reply of no – before the address was even finished – tells you all one needs to know. It’s not called political skullduggery for nothing.

So now we await the fall-out. What happens now that the “markets” have to accept that a shutdown in the U.S. may indeed be closer to the beginning rather, then the end? Add to that what happens as European countries squabble over not only throwing away the idea of an E.U., but rather the idea of their entire home political members as well?

Then, of course, there’s China. What happens to their entire politburo model should the effects of the current stalemate in tariffs not end soon?

So far Hong Kong home prices are floundering, factories are announcing major lay-offs. The PBoC has had to inject massive amounts of liquidity into its financial system just stabilize already growing nervousness.

Then, suddenly, the Chinese politburo announced the other day that it would actively inject money (e.g., buy) into its own stock market and purchase shares of companies as a way to both stabilize and boost investor confidence. A once absolute “never would” assertion. (Makes one wonder why now if everything is/was so great, hmmm? But I digress.)

In the U.S. the “markets” are closed for an observed holiday (e.g., MLK Day) Yet, the Asia, along with European markets will be open and we may get a quick look at what everyone thinks of all this recent U.S. news and how it may, or may not, effect their markets.

We also could basically see no movement except for what I call a “screaming sideways” rendition of bouncing, or pinging higher and lower in-and-around this area, until the Fed renders its verdict of deliberations at the end of month.

Regardless, until then, anyone contemplating if this is another “great opportunity” to once again “BTFD,” there’s really one one way to answer. Again…

“Do I feel lucky?”

© 2019 Mark St.Cyr

Evaluating the Re-evaluation

It’s as simple as this: You (or we) are now here. To wit:


(Source)

Here’s my original call and outlook. (link here)

As one can see we are now precisely within the area I marked out prior which now should bear out the biggest clues. i.e., If my original prognostications are still valid, then we should begin to see some very significant weakening soon, as in very soon.

As always, we shall see.

© 2019 Mark St.Cyr

Mr. Cook’s Dilemma

If one wanted a true “picture” as they say in Silicon Valley of just how “different this time” it is for the once most beloved stock in the world. Here is something I believe is currently keeping Mr. Cook up at night. To wit:

(Source)

There are two things of note to the above side-by-side. The first is when it comes to all the nascent calls of “The bottom is in Buy, Buy, Buy!”

This most recent “historic” bounce off the lows is not as spectacular when put into context of where we were just 3 months ago when the same “buy, buy, buy” hawkers were touting such a sell off was all but impossible, let alone improbable.

With that said, what is even more instructive is when it comes to this bounce the once “most valuable company” whose CEO decided it it was they that controlled the narrative, not Wall Street, has not only not partaken in-kind in this rally, but has barely budged off its lows.

Again, because it’s a very important point, not only is the stock lagging in this most recent BTFD (buy the f’n dip) mania. But rather – it seems it’s fallen and it can’t get up even with a near face-ripping-rally going on in the back drop.

Remember when it used to be said (like just a few months ago by the same “buy, buy, buy” hawkers) that “as goes Apple™ so goes the market?”

Let me just say to that, they had better hope it is – different this time. For if Apple is still the directional leader?

Need I say more?

© 2019 Mark St.Cyr

Time To Re-evaluate?

In an earlier observation I said “If the S&P 500™ traveled above the 2600 area I would then re-evaluate,” whether or not I still thought the current bounce was either, just that, “a bounce” before a possible resumption of the downward progression. Or, as is now being touted incessantly across the mainstream business/financial media – “The worst is over, buy, buy, buy!” So here’s my thoughts…

My thoughts of it all just being a bounce (a far more powerful one than I thought possible originally, I will admit) has not yet changed, for as it has been progressing it’s looking more to my technical eye to be just that.

Here’s what I’m now watching for further clues. To wit:

(Source)

Again, although we are above the 2600 level it still fits the bounce interpretation. It could actually run even higher (i.e., High 2700’s) and still fit in technically, however, I think looking for some type of running-out-of-steam within that area actually fits more closely into the “looking for clues” genre that are noteworthy. I notated the above chart with “anywhere in here” zone.

Should the run stop somewhere in there and suddenly fall back with some sort of followthrough back towards the lower levels is what I’m focusing on as to continue holding my original view.

As always, we shall see.

© 2019 Mark St.Cyr

We Now Await The Real Fed Test: Earnings Season

As we sit here today both the “markets” as well as the mainstream business/financial punditry have all but concluded: the Federal Reserve is aware of its mistakes, willing to pause, and more importantly, had these assumption verified in public by its current Chair.

I believe this is wishful thinking at best and intellectual malfeasance at worst.

When it comes to the latest “market” gyrations since the December meeting of the Fed’s FOMC (Federal Open Market Committee) one thing is clear: the Fed is not in control – the slavish QE (quantitative easing) addicted HFT (high frequency trading) headline reading algorithmic parasitical creation of the Fed et al. collectively known as the “capital markets” are the ones in charge. For if one thinks the worst is over. I believe January may lead to reality check few are prepared for.

2018 was supposedly the year the Federal Reserve could earnestly begin the process of “balance sheet normalization” known as QT. Again, supposedly, this process was told/sold upon the lines of “running in the background.” i.e., if they didn’t tell you it was transpiring (and has said as much) the “markets” would barely notice, if at all.

This reasoning was trumpeted via the Fed consistently making the arguments that it was not the cause for asset inflation, but more along the lines of correlation.

In December Mr. Powell was abruptly notified that the Fed’s interpretation and assessment wasn’t just wrong – but dead wrong.

The proof was made manifest when Mr. Powell’s collectively interpreted monetary faux pas stating the QT process was on “autopilot” during the December presser.

In a pure instantaneous effect of causation, not correlation, the markets knee-jerked lower, never looking back selling everything that wasn’t nailed down. Until? Hint: “autopilot” suddenly was clarified to mean: auto-pause. So far the verbal jujitsu has worked.

Again, as I imply – so far.

To say that the Chair has back-peddled on his once hawkish tones would be an understatement. It may be that the entire committee itself is not only saying one thing and doing another, but more alarmingly, having what was supposedly recorded (i.e., printed release of meeting minutes) having the appearance of being altered, after the fact, to reflect an entirely opposite interpretation from what may have been discussed.

That’s a very, very, very (did I say very?) worrisome revelation, if true.

In a recent interview former Dallas Fed adviser Danielle DiMartino Booth appeared on FBN: AM™ and made the following observations, along with reiterating much the same via her own social feed. To wit:

In regards to the minutes release…

“It was fairly apparent given yesterday’s minutes release that they were definitely massaged, modified, call it what you will, after the fact.”

In regards to assessing the Chair…

“What’s hard for investors though is, ‘What is he going to say today?’” she said. “He was hawkish in October. He was dovish in November. He was hawkish in December. And he was dovish in January.”

“I am flummoxed by this man I once had faith in,”

@DiMartinoBooth 1/10/19

I understand her frustration, however, I feel the ones that will be far more “flummoxed” in the not-so-distant future will be both the Chair himself, along with the entire inhabitants of the Eccles Building.

Currently the “market” is not delivering any such vagueness for interpretation. It wants the entire QT process to not only pause, but pause now and never be restarted. And if not? Hint: Equity winter goes from spastic temperature reversals to glacial status with every passing meeting.

This latest observance of BTFD (buy the f’n dip) is another in the long line of the Fed, along with the majority of the mainstream financial/business media believing they’ve successfully navigated another “market” tantrum and that they now “Got this!” i.e., Mr. Powell’s “rookie mistakes” of using the wrong descriptors publicly. (wrong as in, dare say the truth and upset the “markets.”)

And yet, when it comes to saying what’s on his mind, there seems to be no concern for self-editing when it comes to the area of politics.

Actually, there is a bit of self-editing, but the manner and actual edit itself is far more instructive than the Chair himself may understand. For should the “markets” suddenly test Mr. Powell’s interpretation of exactly what they want and when? His political commentary is also going to find itself suddenly being tested. And I don’t think either he, nor the entirety of the Fed itself, truly understands just where it now sits. Let me explain…

Before I start let me be very clear: this is not about how I feel politically. What I’m addressing is the very nature, along with the possible interpretations and ramifications that need to be clearly understood by anyone at the upper levels of business or politics. Diplo-speak is a necessary discipline. i.e., you both do, or do not say anything without knowing full-well what you want inferred. Period, full stop.

This past week Mr. Powell was the featured speaker for a sit-down styled interview at the Economic Club™ in Washington, D.C. This event has been reported on by various media outlets, and from what I’ve discerned, that reporting has been misleading at best and void of any true journalistic integrity at worst. i.e., it’s a love fest, as long as the Chair says what they want to hear.

When it came to the current gyrations within the “markets” a few questions were put forth, then the moderator steered it into the political inserting the President’s recent calling out of the Fed. and if the Chair would ever meet with him. Mr. Powell’s response was something I would call “too cute by half.” i.e., he wouldn’t state yes or no. He kept intentionally avoiding it only to finally answer with a non-answer under the guise of (paraphrasing) “No Fed Chair has ever refused.”

The disdain for the man that appointed him to his current position was made abundantly clear. And it’s not the first time he’s done it. There is no other way to interpret this, for the entirety of the crowd and moderator allowed the inference to stand via the laughter in response. i.e., If these current gyrations are making it uncomfortable for the President? Even better.

My conjecture of course, but don’t take my words for it. Watch it for yourself. There is no ambiguity.

When it comes to meeting Congress? All praise, couldn’t overstate how much he enjoyed meeting and discussing monetary policy with them. So, Congress? OK. President? – who f’n cares. Well for the time being we have to assume, right?

The issue now is that if the Fed has concluded that the recent BTFD moment is something easily sustainable, rather than the equivalent of an “Indian summer” that fooled many a novice thinking winter had negated its usual process. Both the Fed and its Chair may find its the political side of the equation that will also be tested in just as much, if not more, harshness than what the “market” has in store.

Hint: Remember congress: “Get to work?” I think it will be Mr. Powell that will be reminded not all too subtlety what congress thinks about Chair’s should the “markets” begin to falter, again.

The recent bounce via almost any technical analysis in regards to charts, momentum indicators, volumes and more shows this may not have been anything more than a front-running earnings positioning move. i.e., it’s all ephemeral positioning for earnings exposure. And will disapear just as fast, if not faster than it appeared should earnings reports begin confirming what everyone is now under the assumption will be: mediocre to abysmal.

The Fed is set to meet at the end of the month. Mr. Powell has changed his conference schedule so that there will now be one after every meeting instead of last year’s one one – one off.

That means every meeting has to be considered “live” regardless, along with Mr. Powell now has twice the opportunities to say the wrong thing (or not say the only thing that matters) at the wrong time.

Should the initial earnings season start on a bad footing these “markets” are going to react first, and find out what Mr. Powell and Co. have voted for and think going forward – last. Remember, the balance sheet is still currently on “auto-pilot” meaning (theoretically) there’s less money available for Wall Street to BTFD every day that goes by.

A pause in interest rates and no pause in balance sheet scheduling is going to be received about as gladly as the mysterious brown paper bag found on ones stoop. The “markets” have made it clear what it is demanding and it is assuming Mr. Powell knows this explicitly.

Just like Mr. Powell has made it clear on his current feelings when it comes to the political – the “markets” have made it clear what they want -and expect- via the monetary policy settings going forward.

It will now be the Fed that is tested for whether or not it has interpreted correctly. For test these markets shall. One should consider December as the “market” issuing a “pop quiz” for understanding and comprehension.

Consider January when “finals” take place. Where only yes and no answers are allowed. No space will be left for “explain your reasoning here” pontifications, along with only two grades possible.

Pass or Fail.

© 2019 Mark St.Cyr