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A “Not To Scare The Children, But” Update

As is usually the case I have been bombarded with questions from friends and colleagues about my thoughts on the current gyrations in the “markets.” This is in direct contrast to the flip-side of my usual, as in: when the “markets” are vaulting higher and my phone doesn’t ring – I know it’s them.

So with that said, I felt it was appropriate to update what I said way back in February. Here’s a bit starting with the chart I used, again, back in February. To wit:

Will it play out this way? Hint: No one knows. However, with that said here’s the underlying premise coupled with a probable conclusion.

As you look at the above chart remember this…

Everyone, especially the so-called smartest of the smart paraded on media argued the above “cliff dive” was all but assured to not be in the cards. And there it is, and now sits in the #1 position of history as the most points lost – ever – in a single day, coupled with, these same people said that based on what they perceived as “all baked in” any and all QT (quantitative tightening) worries, i.e., “The market knows, it’s prepared, the economy is strong, not an issue, blah, blah, blah.” Or, my now personal favorite, “If you’re holding cash, you’re going to feel pretty stupid” That came from none other than Ray Dalio as he appeared with the fawning mainstream business/financial media press at Davos. Or said differently: If you’re not all in on stocks, you’re stupid.

Then the above happened, and now, it appears he’s changed his mind.

Funny how that happens as soon as The Fed. went from lip service of reducing the balance sheet, to full implementation as Janet walks out the door, is it not?

Then again, what do I know. Just ask the “experts.”

“So where are we today and how much have my first inclinations changed with the most recent action,” you may ask? Good question, for that’s what the most repeated theme of questions asked were like. Here’s the short answer of which I repeated many times:

“Why would I think or change anything? Were you not listening when you asked me last time? Are the ‘markets’ not doing the exact things like I said they might?”

Now some may take a bit of offense in the above thinking “Oh, that’s so rude!” However, I make statements like this not because I think I’m some form of market genius or holier-than-thou aficionado. I usually respond like this to others (to clarify: others I know well and that also know me as well) because, what happens more often than not is that they seek others’ insights not for insight per se. But rather, to help themselves bolster an already formed conclusion they want desperately to be correct. i.e., Some want the world to full of lollipops and rainbows therefore, they’ll only ask people whose viewpoint is lollipop and rainbow centric. Even though the world is anything but.

So here’s an updated view using a “picture” as they say in Silicon Valley. And as I used in the prior title: “I don’t want to scare the children, but…” Again, to wit:

(Source)

As one can see the only thing that has changed is that I’ve now simplified it.

Remember, this inclination for where we may be heading was made way back in mid February. Also, this viewpoint was derided across the entire mainstream business/financial media with proclamations that anything that could derail this “market” was already “known and baked in.” (See Ray Dalio quote above for clues.)

The issue now to be resolved is this:

Exactly’s whose “known and baked in” inclination will prevail?

Theirs? i.e. All the paraded and glorified next-in-rotation fund-manager cabal and their so-called brethren of “smart crowd” aficionados.

Or, mine?

As always, we shall see.

© 2018 Mark St.Cyr

F.T.W.S.I.J.D.G.I.G.T.

(For those who say I just don’t get it…get this)

Remember all the hoopla made across the mainstream business/finacial media just a few days ago? For those that don’t here’s just a couple. To wit:

When it came to the Fed. and its Chair during his speech:

“Powell sees the global slowdown and knows that it could hurt us,” Cramer said in a tweet storm as the prepared remarks from the Fed chief were being debated on CNBC’s “Fast Money Halftime Report”by host Scott Wapner and a panel of traders.

“Powell is concerned and knows when he does one he has to wait — very big change in view,” Cramer said. Powell “took himself off the table as a reason for a longer” market meltdown, Cramer added.

When it came to the “truce” at the G-20 as of yesterday evening:

“If you want to understand what’s working in this market, you need to think like a Chinese bureaucrat — not like a portfolio manager — a Chinese bureaucrat who’s trying to make President Trump happy,” Cramer said Monday on “Mad Money.”

From my article Sunday: “When The Wrong Conclusions Can Spell Disastrous Resolutions”

It is here where the true problem now arrises:

Did they blink? Or, just wink?

The resulting “market” reaction as displayed on Thursday and Friday seems to show it was nothing more that a “wink” as to maybe allow some form of front-running narrative to take hold of and help prop the markets up from a bad month-end scenario while also helping the mood going into the G-20. 

From My Article Saturday: “So The Question Is…”

And that question appears to be answered as I’m currently typing this, again to wit:

(Source)

And for those wondering, the answer is yes. As of this writing nearly all of the so-called “off to the races” surge via the “blinked” as well as G-20 calls has been wiped out. 

It’s quite possible all of it (if not more) may be gone before day’s end.

But what do I know.

© 2018 Mark St.Cyr

When The Wrong Conclusions Can Spell Disastrous Resolutions

If one perused the mainstream business/financial media sources for headlines on the concluding G-20 summit looking for details, one thing is pretty hard to miss: there really aren’t many.

All you’ll find is something akin to “a cease fire” followed with some rumination about how both sides (U.S./China) seemed to work out some form of detente on continued open-ended political issues.

As far as trade? Well, it seems we are still in the exact same space we were before the meeting. In other words: nothing’s really changed.

As a matter of fact, if one wants to throw up an analogy of precisely where we are using one of the supposed agreements such as China’s assertion of a U.S. respecting of its claim on Taiwan. e.g., One-China Policy. It would seem a fitting description for what is taking place would be “round one” has concluded in a scheduled 10 round match. i.e. both have only gone to their respective corners to await the next “bell.”

Or said differently: they both still want a piece of each-other – literally. 

This so-called “truce” on tariffs seems to look an awful lot like what we see (and will continue to see) when a U.S. warship navigates its way through what both sides differ on for interpretation as “international waters” via the Taiwan Strait. i.e., full of fraught and danger where the slightest miscalculation or unintended misstep that has even the slightest intonation of something akin to a “bell” could have immediate global consequences.

One of the curious aspects of this so-called “truce” is just how little proclamations of something along the lines of “A great deal!” we’re hearing. Actually, the silence is deafening, which should be screaming warnings to anyone trying to pay attention. For if there was really something to celebrate, even if it was only superficial in nature. Is there any doubt the U.S. administration would be hell-bent on declaring it?

Yes, there are some reports that the President has said a few things aboard AF-One after, but again, there has been very little other than that.

Same goes for China. Yes, a few statements, but very little substance.

What has also caught my attention is that it appeared as if there was some self-imposed moratorium on what would be said, until it was learned what China would report first.

Again, China’s first reporting was rather sparse on details and even more so on outlook. The U.S. seemed even more so with no incessant “Great, greatest, greatest ever…” being the clues for such a conclusion.

This G-20 dinner had all the appearances of some pre-divorce party where everyone’s happy to finally get the chance to openly air their dirty laundry face-to-face. But instead of receiving a check for the dinner bill they’re handed a statement for initial claims or pay-outs that will now be needed to finalize it all. See the movie “War of the Roses” for possible further insight.

Then we have the conclusions of “The Fed. blinked!” when it comes to the recent market surge that took place before the weekend.

When it comes to this conclusion, as I iterated prior, just because pundits were trampling over their own mothers as to get to any keyboard, microphone or camera to pontificate precisely the Fed’s meaning and intent via the Chair’s latest speech doesn’t mean they’re conclusions are correct. Maybe, they too are misplaced.

I am fully aware of the analysis that’s been touted when it comes to “this phrase vs that phrase” type argument. And yes, I agree many of them have merit.

However, with that said, here’s why my reasoning when it comes to whether they “blinked” or not. I still remain firmly in the “did not” camp.

If one remembers (or cares to might be a better question) back in January the “markets” supposedly knew everything they needed to know about Fed. interest rate intention and had priced it in.

Then we had an outgoing and new incoming Chair resolution happen in February. Again, everything about all of it was supposedly known and “priced in.”

That is, everything except what I’ve stated is the only thing that mattered: The reduction of the Balance Sheet.

The reason why I’m making this assertion, and why it matters more than anything else is that, when the “markets” could no longer guess or infer that that Fed. may not be as committed to it as they stated they were. And had actual proof that it was happening the result was what we now call the “February Scare.”

My conjecture, of course, but let me add a bit more to help bolster my case.

I have been consistent in my contention that the reason for the out-of-the-blue market reaction that happened in February was in direct correlation to the “market” getting its first true confirmation that indeed QT (quantitative tightening) had begun.

This was a “wait till you see the white’s of their eyes” moment, or set up for the “markets.” After all – they (Fed.) hemmed-and-hawed for years but never really pulled the trigger. (hint: remember “reinvestment?”) So why alter one’s strategy until confirmation. February did just that.

If one looks at any chart of the “markets” from that point on it’s clear to see the market mood remained lackluster as the new Chair reiterated for months that the “unwind” was on schedule and being followed as was laid out.

Then in-and-around late spring there were noticeable reports emerging (such as this one) that the Fed. may actually be changing its mind on its QT schedule.

Then, just like magic, the markets were, once again, off-to-the-races.

That is until everything that was supposedly “baked in” via fantasy-land type rationales i.e., interest rate hikes are good, trade wars are good, tariffs are good, et cetera, et cetera, met the cold reality that the Fed. seemed undaunted in allowing the unwind process to go into hyper-drive at a now $50Billion per month for the foreseeable future.

And yes, stuff like “hikes, trade war, and tariffs” were actually given as “nothing to fear” rationale across many business/financial media broadcast set. All with straight-faces. For as was always the go-to touchstone of their brilliance: “Just look at these markets!” was all the proof that was needed.

That is – until October. Now it seems all that “nothing to fear” suddenly became “all hope is lost!” That is – unless the Fed. blinks.

It is here where the true problem now arrises:

Did they blink? Or, just wink?

The resulting “market” reaction as displayed on Thursday and Friday seems to show it was nothing more that a “wink” as to maybe allow some form of front-running narrative to take hold of and help prop the markets up from a bad month-end scenario while also helping the mood going into the G-20. 

Did the Fed. (as in Mr. Powell’s latest speech) do this intentionally to placate the markets or, was this just a hopeful front-running fueled pursuit put on by Wall Street using the old “a dove flapped its wings – which means buy everything!” narrative to get shorts to cover and close out from red to green?

Count me firmly in the Wall Street shenanigans camp, rather than anything substantive out of the Mr. Powell.

With such a muted response for follow through on Friday after Thursday’s so-called “all clear!” given by many across the media, along with such a restrained response via an administration that is one of the most ardent self-promoters for arguing “winning!” at the-drop-of-a-hat. And even that is not a requisite. I’m concluding that the preponderance of evidence still requires the caution levels to be set at 11.

If we suddenly rocket up from here into year end so be it. However, just some sudden pop back to about 2800 is far short of anything I would describe as “all clear.” All that would represent is a getting back to the top end of what I call the “manic – depressive zone.” i.e., between 2600 and 2800 respectively.

The issue now is that if the markets can only get back to that area (i.e., 2800) and proceed no further. Once again the focus will revert back to all the “unresolved” issues and we may deflate back, once again, sinking towards the lower end (i.e. 2600). Then of course the question , once again, arises:

Does it hold, once again? For December is also known for something else…

It’s the month where winter officially begins.

© 2018 Mark St.Cyr


So The Question is…

Almost as soon as the “markets” closed I received an inquiry from a colleague asking me my thoughts and if they changed from my previous thoughts now that the “markets” resolved higher.

My answer was: “Absolutely not, as a matter of fact, I’m even more committed to my stance than previous.” Here’s why:

The “markets” closed basically well within a hare’s breath of the level I pointed out the other day. e.g., 2750 (actual my charts says 2759.99)

What did not happen, as I said should be what happens if the “all clear” signal from the Fed. was to be taken as every pundit across the media is convinced. i.e., “The Fed. blinked!” We didn’t rocket any higher making up any further prior lost ground.

All we did was basically vacillate all day with a few minor moves back-and-forth till the end of the trading day when everything month-end needs to be settled. Again, the “market” action was nothing more than what one would expect in any normal month-end close. i.e., nothing extraordinary or out of the usual.

As I stated both on my show, as well as in writings, we are still in what I call the “manic- depressive zone” of a market. And in fact we are only 75% back from the depressive side (2600) to the manic side (2800.) Again, that’s it.

What is the event to determine what comes next is on deck called the G-20. Should this meeting do anything other than be resolved in some sort of positive manner the area that I indicated that will be the first tell that we may be heading lower is still valid. We’ll see on Monday.

Here’s an updated and simplified version of the same chart I’ve been showing for the past few days. To wit:

(Source)

We should know by Monday morning if this first signal is still valid, may be even by Sunday evening U.S. time as Asia opens.

Here’s what I still believe…

We are either going higher in a manner that would make a Saturn V rocket envious. Or – we’re going lower in a fashion that would make a professional cliff diver think twice. Which way is still up for grabs, but what is almost as sure of bet that one can make it this:

We ain’t staying here.

© 2018 Mark St.Cyr

A ‘Where Are We Now’ Update

As I stated prior the reason why I’ve been updating my observances of the “markets” is because I believe we are quite possibly on the precipice of what could turn into a very extreme situation, not only rivaling anything we’ve seen this year, but since the original ’08 crisis. 

So with that said here are two charts I showed the other day and what and why I was watching. To wit:

Now here’s an amalgamation of those same two as of Thursday night after the markets have closed, again, to wit:

(Source)

Let me explain just a bit for those who may be looking at it and think “that’s not the same.” It is and it isn’t. What I’ve done is this, this morning I recreated them and added some different objects or drawings onto what I had done prior and watched to see how the market would play out and would it follow within anything I composed. The result price action actually astonished me.

You don’t need to be a “technician” or “chartist” to understand what I’m going to say next, all you need to understand is when it comes to this type of stuff that I do. Here’s what I’m noticing…

As I stated the other day, this entire move that everyone has been knocking over their own mothers as to get to a microphone, keyboard or camera and tout “The Fed Blinked, that’s it!” I believe have made the wrong conclusion for the wrong reasons, and that the move yesterday was nothing more than another exercise in month-end window-dressing using an obvious catalyst. e.g., The Chair’s speech.

Again, as I hypothesized, if their conclusions were correct then we should still be on some sort of rocket-ride, or at the least,  we should be at worst what is called “unchanged.” But we’re not. In actuality the markets closed red, as in down.

This subtle distinction and now factual outcome calls caution into the forefront far more than some “We going higher” type of scenario.

The latter chart shows a few very key issues that need to be paid attention to. Here’s a short list:

  • The shape of that improvised channel on the lower chart is actually following the exact path of the first smaller one I posted on the top chart. The only difference is that I enlarged it to become more of an improvised mean reversion type with an inner segment. Again that segmenting is directly on top of the smaller one I drew in the above, which is why its so interesting from a technical observation.
  • The next is the area above and the line beneath called “no man’s land.” This I adjusted just a bit as I zoomed in to make it exactly 5 points higher – and five points lower encompassing the 2750 level. The reasoning was simple: Markets love big round numbers into months-end and this is considered just that. Also 5 points above or below are where usual resting stop orders are located. If this was just a melt up to get to that level using the attraction of these stops via hunt-and-seek programs, then stopping within and then either flatlining, or reversing, would be one more arrow in the quiver to the “it’s not all clear – it’s something else and it aint good.” And that’s preceicly what happened.
  • The last is this – as I type this – the futures or overnight session these markets are showing no signs of trying to levitate from their session lows. That is what I’ll call “another arrow…”

“So what does all this mean?” you may be asking. Good question and it’s this:

As of tonight (being Thursday in the U.S.) there seems to be more evidence to the contrary of what has been touted across the mainstream business/financial media and caution should be the order-of-the-day going into the weekend. I myself would put that caution level at 11.

Can it all turn around and we’re at new never before seen in human history highs before year end and maybe even by Monday should everything go just swimmingly at the G-20?

Absolutely. However, with that said I’ll just point out as we sit here currently the preponderance of evidence already displayed is beginning to make every one who touted “The Fed. blinked!” wrong. As in – dead wrong.

As always, we shall see. But not trying to do just that is not an option for anyone trying to stay ahead or prepared. And in business today, that’s just not an option for anyone who takes their business or profession serious.

The stakes are that high. And that’s not hyperbole.

© 2018 Mark St.Cyr

Thoughts On Twitter

I received an inquiry for my thoughts on Twitter™. As usual this comes with a recommendation to keep in under so many words. I decided to respond with the following…

I don’t need any words, for if a “picture” can speak a thousand words then the following chart speaks volumes. To wit:

(Source)

Usually there is a 24hr. embargo on such things (that is, if I offer exclusivity, which I did not), but I’m quite convinced they won’t use it, which is usually the case when I respond using such items as the above. However, as far as I’m concerned…

It says everything one needs to know or understand. Without saying a single word.

© 2018 Mark St.Cyr

An Addendum To The Addendum

The only reason for this update is because I feel it’s important. (Earlier Addendum is here)

As I’ve watched and read many a prognostication on the so-called “understandings” made in reference to the Fed. Chair’s latest speech I thought I’d follow up with what I’m looking at currently with the recent move now fully expressed for the day. Here’s two charts that are updated versions of what I showed earlier. The first is the futures. To wit:

https://www.investing.com/charts/live-charts(Source)

As one can see the move broke right through my original observations. However, where it stopped, or fizzled out as some might say, is also of interest.

As I noted the area notated as “no man’s land” represents nothing more than that. i.e., it means nothing unless the market breaks above with some real follow through.

On the other hand, not breaking through or not traversing higher into that realm says far more should it not. The reasoning is simple:

If Mr.Powell or as some commentators are now expressing i.e., “blinked” then there is no reason for this market not to pile onto this already hearty move. For if they don’t, what it shows more than anything is that my hypothesis of nothing more than another version of Month-end window-dressing has taken place on the back of an event that was used for a catalyst and has now run its course.

Who knows? No one one does. All one can do is watch for clues, but at least you now have something to watch for and make your own judgements in the overnight and before the open.

As far as what is called the “cash” or normal markets everyone thinks of when thinking about them here’s an updated version of the same one I posted  prior for that, with an additional notation. It pretty much speaks for itself, even for the non-technical watcher, again, to wit:

So there you have it, what may come no one knows, but at least here’s some frame work to go by, for as always…

We shall see.

© 2018 Mark St.Cyr

Addendum to: Where We Might Be…

I just finished watching Mr. Powell’s speech and all I can say is I didn’t hear anything that signals what I’m currently hearing across the business/financial media via many a talking head (cough Cramer cough) professing something on the lines as “That’s it the Fed’s blinked!” and so on and so forth. (Earlier article “Where We Might…” found here)

Maybe he did and maybe he didn’t, but for those that want to know here’s what I was watching from the moments his remarks were first reported (as in released prepared text) the instant reaction to that via the headline reading HFT algorithm trades. And then the reaction during the actual testimony and after its conclusion. This is what I noticed. To wit:

(Source)

The above is the S&P 500™ using one minute bars/candles. Via a technical perspective what I saw was a knee-jerk reaction to a very easily defined pattern which would infer a short covering move with a run up to the highs of the day – a wait and see what else can be inferred as the Chair spoke – then another resolving of, again, a very well defined technical pattern.

So far this final pattern seems to be resolving like one would infer, which is – now resolving lower.

Doesn’t mean it will stay this way or continue, what I am saying is that I didn’t hear anything like “a soothing cooing of dovish nature” as what seems to be what everyone else is trying to imply. 

Yes, the market rocket higher, but higher – not like some blast off that one would conclude should have happened if the “Fed. blinked” as is being portrayed.

As always we shall see, but at least we have something to watch for clues. i.e., follow through to the promised land from here. Or – a failing and retracing into the G-20.

Just sitting and waiting here at these levels is not a vote of confidence for “the coast is all clear” in my view. From my perspective it all seems nothing more than a technical reaction. And if I’m correct, then these calls of “blinking” are going to find out what the term “It’s all fun and games till someone loses an eye” means in the front-running “blinking” narrative.

As always, we shall see.

© 2018 Mark St.Cyr