On Monday, the "markets" surged higher right out of the gate, once again, igniting hope that the BTFD trade was well intact and is immune to any and all calls of its demise or cautioning. The issue here is - it's showing to be anything but, and, is showing just how precarious holding that view may have morphed.
I made the case in my latest article that the current gyrations are in response to two things. The first: Either the belief, or the realization that the Trump Trade still has life - or is dead and buried. Second, if it is the latter, then the "markets" will then begin to play catch-up to what the Fed has already wrought. i.e., raised rates into deteriorated data, setting aside what they may still yet do, or not. Then the "markets" would need to adjust the entire rise from November if this was so.
I argued the current gyrations showed precisely that.
Many in the media could not hit the keyboards and airwaves quick enough to point out their reasoning why this entire "market" rise was still, "fundamentally sound, based on solid earnings and more" as to add currency for why the Monday BTFD trade was "still a prudent strategy." I beg to differ, and here's why…
The reaction on Tuesday (all my opinion, of course) was in direct response to a news story via Politico™ that lawmakers were making strides on tax reform. What this caused (or generated) was just the raw meat needed for the HFT parasitical, headline reading, front-running, algorithmic programs to engage their stop running hunt-and-seek programs as to gorge on any and all positions with the tenacity to be short.
And as quickly as it began - it's where it ended that leaves the clues for those who wish to see. To wit:
The above is the S&P futures as of this morning and as I type this, represented in 1hour bars/candles. The shaded areas represent Fibonacci retracements of the prior downswing. The issue here is all those "fundamentally sound" earnings are falling prey to what's also known as technical analysis, and it's clearly superseding any of those so-called "fundamentals" for why this "market" should be at this level. No matter how much the next-in-rotation fund manager cabal protests.
As I have stated over, and over again: The rise since November is pure "hopium" based on the Trump agenda. If the Trump agenda fails (i.e., meaningful tax cuts, meaningful Obamacare reform or repeal, etc., etc.), the entire Nov. rally is at risk - and then some.
Some (especially the media) have scoffed at this assertion. Fair enough, but the point now is - my assertion is now proving to be far more correct than not. And as proof I offer the following…
If one thinks it's been anything other than the Trump agenda, and the hopium it provided to levitate these "markets," then explain why these recent gyrations are in direct proportion to whether or not it will pass?
And as proof to back up that claim, I offer today's latest via the New York Times™. To wit:
"The relationship between President Trump and Senator Mitch McConnell, the majority leader, has disintegrated to the point that they have not spoken to each other in weeks, and Mr. McConnell has privately expressed uncertainty that Mr. Trump will be able to salvage his administration after a series of summer crises."
If this market was fundamentally sound on all those earnings, then why is the "market" rolling over as if on cue? Hint: Trump agenda trade once again in jeopardy via congress.
The only thing that's now fundamental to this market is whether or not, with congress now well aboard the pile-on-train, is if the Fed will do the same in concert, and throw the mother-of-all-monkey-wrenches straight into the teeth of both a debt ceiling debate, as well as what appears to my technical eye (which I have and can keep up with the best of them) the beginning of market rout.
But not to worry I'm told, for the Fed is not a political-sided body.
Again, as always, nobody knows the future. But that doesn't mean there are not signs to show one the possible path it may take. But the clues are getting harder to ignore.
Even for those who try.