This
Week in Barrons – 9-11-2016:
“With
the opening of the new World Trade Center, let’s remember what separates us
from animals and from chaos – is our ability to mourn people we’ve never met.”
– David Levithan
Thoughts:
On this 15th Anniversary of 9/11, I pay homage to the many
killed, and my heart goes out to all those still in pain.
The stock market has been in
an odd place for a while, but no more so than during the last 2 months. The S&P has NOT moved more than 1% in
over 40 days. During which time, all
‘heck’ was breaking loose such as: the 7th largest global shipper going
bankrupt – stranding $14B worth of goods, more companies declaring lousy
earnings than ever before, the ITT school closing – stranding 40K students and
laying off 8K teachers, Wal-Mart laying off 7k, Caterpillar laying off 2k, auto
sub-prime loans showing double-digit delinquencies, AND high-end real estate in
New York (and other cities) starting to fall.
But as we talked last
week, something feels different now.
-
On Thursday we
learned that 5,300 employees of Wells Fargo were fired for taking money out of
customer deposits and opening over 2M new fake accounts for them. And when these fake accounts became overdrawn
(even for lack of use) the bank sent-out overdraft notices and charged the poor
customers that they had robbed in the first place.
-
Then the Government released its preliminary
findings on its own JOBS numbers. The
government compares real job-related tax receipts to the job numbers that it
has been reporting, and displays that difference normally in February of the
following year. In this case they have
already over-estimated the number of jobs out there by at least 150K. If
you combine this number with the hundreds of thousands of fictitious
Birth/Death model jobs that they keep adding, you come away with our jobs
market being completely broken.
On Friday Mr. Rosengren (a
FED-head) gave a speech suggesting that NOW was the time to start hiking interest
rates. A few other FED-heads also chimed
in with their agreement, with Mr. Gundlach directly saying: “Rates had hit
bottom and the FED is ready to hike rates and change the entire game.”
On Friday, the “entire game”
did change. Previously on a daily basis
as the market pulled back, the Central Banksters would rush in (late in the day)
and push stocks right back up into the trading range of between 2160 and 2190
on the S&P. The chart below shows
you the ‘tails’ of how LOW the markets were BEFORE the Central Banksters rushed
in and pushed it higher.
However, Friday’s almost
400-point drop was different – notice NO TAIL.
Our Central Banksters just let it fall and did NOT come in and rescue
the market in the last hour of trading. Why Friday?
Is it the September 21st FOMC meeting (when they hike rates
or not), or is it about the 1st Presidential Debate coming up on
September 26th? Let me lay
out a couple different scenarios:
-
#1: The common wisdom is that since the
economy really does stink, our FED would not dare raise rates – ESPECIALLY
ahead of the strangest election in U.S. history.
-
#2: The FED is all aboard the ‘Hillary
Train’. It would be a great
psychological mind game for the Central Banksters to take the market down ahead
of the FED meeting on the 21st. Then
have the FED hold tight with NO rate hike that would ignite a rally as we go
into the Sept 26th debate. This
would give Hillary the ability to point to a market roaring back to ‘all time
highs’ under a Democratic President.
-
#3: The FED knows that Trump believes that the
Central Banksters have created a false market.
The FED also knows that their ‘propping actions’ are so blatant that
everyone knows that they ONLY care about keeping the stock market up. Could it be possible that our FED (to save
face and despite this being an election year) will actually announce an
interest rate hike in September? Could
it be that they think Trump might win this, and they'd best begin looking like
they're really doing something before Trump dismembers them? http://www.reuters.com/article/us-usa-fed-idUSKCN11C2C1?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29
-
#4: Could it be that our FED thinks that a
Trump win is possible, and wants to crush his supporters by changing the game. Instead of keeping the market up at any cost,
they will now pull the plug on the market and force it to crash just as Trump
is taking office. The fear of a Trump
Presidency is so strong by the establishment, that they could punish every 401K
holder by crashing the market and then blaming it on Trump’s ‘wild and
frightening ideas’.
Each scenario is intentionally
crazier than the last. The world is
awash in debt that it can never repay, and $15T sits in accounts drawing
negative interest. Often the way to fix these
types of things has been to start a war, go deeper into debt, and then decide who
owes what to whom at the end. We’ve seen
sabre rattling in the Ukraine, in Syria, and now in the South China Sea. Could we be just a few months away from a major
event such as: global ‘reset’, a market crash, a war, or even civil
disobedience?
But even if nothing horrible
happens within the next 6 months:
-
Do our debts go
away? Nope.
-
Does the racial
divide heal? Nope.
-
Does Obama-care
become affordable? Nope.
-
Do the Trillions
in student debt disappear? Nope.
-
Does the average
saver see a decent return on deposits? Nope.
IF something is going to
happen, it would seem that we're in the right season for it. But here’s a TELL. Our FED has thrown together another FED-presentation
to come out on Monday. This was NOT a scheduled
talk, and the person coming out to make the statements has been a ‘Dove’ –
meaning that she’s been all about NOT hiking rates. If she comes out on Monday and suggests that it's
time to raise rates, then the game has changed.
Hold onto your hats.
The Market...
In the world of Crude Oil, the Saudis and Russians are finally talking
about ‘stabilizing the energy market’. The
Saudi tactic was to increase production, reduce price, and bankrupt the weakest
players. The only problem with their
tactic was that the non-diversified economies (like Saudi, Russia, Iran and
Venezuela) are being hurt far more than diversified economies like the U.S. The Saudi / Russia talks are to take place on
September 26 and 27. I think that any potential
joint action is more an attempt to shore up sentiment since there is little
else to lose – given that most countries are producing at full capacity already.
But the oil sector is definitely one of the few sectors that raises my
interest. The XLE (the Energy Sector ETF) holds major players
like Exxon Mobil, Chevron, and Schlumberger.
The XLE hasn’t really
launched out of its summer trading range. If it can break resistance at $70.00 – it should
take off to $80.
In terms of the ‘here and
now’, Friday was NOT your run of the mill down-day. Friday was a ‘Katie bar the door’ and rush for
the exits day – that we haven't seen since BrExit. Until Friday, the average volume on the SPY (which
is the proxy for the S&P) was running around 60m shares – on Friday it was
221m. Everything but the U.S. Dollar fell. The small caps (IWM), the financials (XLF),
the oil sector (SMH), and even gold and silver fell. The DOW dropped almost 400 points, and the S&P
fell 52. This was something akin to a
panic. For two months I talked about
remaining inside the 2160 and 2190 box on the S&P, until we would either ‘break-out’
or ‘break-down’, and I didn’t know which way it would go. Friday we got the first answer – we broke
down.
Until Friday the
manipulation in the market was very clear.
No matter how far down we may have been at 1 pm – by the close we'd be
safely back inside the box, or pressing toward the all-time highs. But on Friday that didn't happen. Instead of coming in and saving the day, the Central
Banksters just stepped away and let the market fall like a rock. Did the Central Banksters decide that enough
was enough? Was this some form of ‘warning
shot’ from the market to the FED telling them to not ‘monkey’ with the interest
rate? Was this the start of a major decline
in the stock market? Or was this really
just a nervous reaction because some FED-heads mentioned they want higher
rates?
But we've heard FED-heads
threaten rate hikes multiple times in the past – so why would the market panic
so much over this one? After all, this
plunge did some significant technical damage:
-
The DOW = largest
weekly drop since January, closing at its 100-day moving average.
-
The S&P =
largest weekly drop since Feb, closing just above its 100-day moving-average.
-
The Russell 2000
= largest weekly drop since Feb, closing at its 50-day moving average.
-
The NASDAQ =
largest drop since April, closing below its 50-day moving average.
-
And the
Transportation Index closed below its 50-day moving-average.
So what happens now? If the ‘Dovish’ FED-head comes out on Monday
talking about higher rates, I think we have more to fall. If she comes out neutral to ‘Dovish’, I wouldn't
be surprised to see a major ‘dead cat’ bounce on Tuesday.
It’s up to the Central
Banksters and what they do, as to whether I'll be buying this massive dip, or
if it's time to truly go short. As the market
says: “You take the stairs up, but the elevator down.” Meaning that markets fall a lot faster than
they rise. As a caution, the ‘buying the
dip’ philosophy has worked for the past 7 years – is this the week that it
stops working? After all: “A trend is
your friend until it ends.”
TIPS:
Typically, if stocks are going down – then bonds are going up, or some
corresponding asset-class is moving higher.
On Friday, we had stocks down, bonds down, oil down, and gold down –
essentially a reduction in wealth across the board. What’s setting up is a mirror image of what
happened in 2001 to 2002:
-
The Transports put in a high approximately 10 months
before the NASDAQ,
-
And from there you had a sell-off into October 2000,
-
Then a bounce into 2001,
-
And then a sell-off into October of 2001 until it finally
bottomed.
Now, history does not often repeat itself exactly, but it often rhymes. What I’m looking for here – if this pattern
continues to unfold is that we:
-
Continue to sell-off into October 2016 to about 15k on
the DOW,
-
We get a nice rally (back to 17k) from October through
the end of 2016,
-
And then we get crushed into October of 2017 (down to
13.2k),
-
Until we resume our trek higher.
I sold out of everything long and short last week that was NOT gold, silver
or oil related. I’m currently holding:
-
JPM Butterfly – for a pinning play around 67.50,
-
FB Butterfly – for a pinning play around 130, and
-
AG, AUY, CDE, FCX,
FFMGF, FSM, HL, NGD, PAAS, PGLC and SAND.
To
follow me on Twitter.com and on StockTwits.com
to get my daily thoughts and trades – my handle is: taylorpamm.
Please
be safe out there!
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