The UPS Transports Non-Confirm Is a Warning

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 |  Includes: AMZN, UPS
by: Karl Denninger

There's a funny wind blowing this morning in that UPS (NYSE:UPS) reported earnings and got slammed for more than 4% on the downside, breaking the 50, 100 and 200MA all at once.

But looking at the technical picture it's even more troublesome than it first appears. The 50MA is about to cross the 200 and the stochastics, after being overbought at the end of June have failed to recover during the last "pumpfest" leading into earnings:

There's no way to read that as a "good thing." There are a number of people trying to dismiss this as part of the Amazon (NASDAQ:AMZN) "sales tax fight", but the problem with that argument is that the company's stock isn't really reacting all that badly thus far, although momentum has flagged off in the last month:

We'll get the story on Amazon this evening, and either confirmation or refutation of that thesis. The options are quite expensive, with the weekly's showing implied volatilities in the mid 60% area. That's a pretty good-sized move that is expected; we'll see how it turns out for traders.

I'm more interested in the macro picture, and here I find something to be concerned about. We always hear people try to poo-poo discussions of softness in shipping volumes, but they're an important concurrent indicator and not one that's wise to ignore.

On the macro in the electronics area we have a decision point here and now with the SOX, which is sitting right under the 50MA. This is an important resistance area - and one that, thus far, has stopped the advance. We'll see - the index is already under a previous "death cross" and this would be the first potential non-confirmation from it.

On balance what you have here is an "uncertainty" position from a top-level view looking forward three to six months. Given the extraordinary support from government deficit spending this should worry you - the economy should be cranking out 4-5% GDP numbers and producing roaring forward-indicating indices such as the SOX. It's not.

Could it all fall apart and end horribly right here? Yes. Especially if we get an upset out of the credit markets. And there are some whiffs of smoke coming from there, although thus far they're more hints than visible indications. What worries me more than anything at this point is complacency - there's too much of it, given the uncertainty that is clearly present in the forward outlook. The market is even ignoring the blatant threats from the White House, Turbo Timmy and Congress. Maybe that's because they really aren't worried, or maybe it's because all of them have cried "wolf!" too many times and now, even if there really is a lit stick of dynamite in their hands, nobody believes it's anything other than a prop - or worse, a tool of extortion.

Markets have a tendency to shrug off things like this right up until they don't, just as occurred in 07 and, more importantly, in 2001.

Trade and invest accordingly.