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Damn Shame

106 Posts.

11

20/06/18

09:20

Post #: 33816114
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Originally posted by Diver Dan ↑

US Market Update

The US had a down but mixed session where the Indices retraced much of their initial losses and participants cycled their cash from one port to another.

The Dow (-1.15%) sustained the brunt of selling and dropped through its 50 day while SPX (-.40%) flirted with the 20 day moving average and over -1% at one point. The R2K (+.06%) exhibited impressive resilience today as money goes out of multinationals and into small caps. Tech took a break today with the NASD Comp finishing down (-.28%)

Telecom (+1.42%), utilities (+1.06%) and consumer staples (+.52%) led the tape out of its initial stupor while industrials (-2.14%), materials (-1.82%) and tech (-.72%) endured the most selling.

US yield curve flattened to levels not seen in a decade and an initial spike on tariff fears in ZN futures was paired by roughly half leaving the yield of the benchmark at -3bps and 2.89%. The 2-year note ran a similar intraday pattern and its yield is unchanged at 2.55%

July soybean futures sustained a very large drop but recovered - perhaps helped by the words of support from a US trade advisor's statement about having farmer's backs.

Gold (GCQ8 1278.0 or -.16%) is flailing on the stronger Dollar (94.975 or +.18%) and an apparent lack of safe-haven buying interest.

China is busy controlling the local narrative and sending internal messages today to the effect of don’t worry, investors, we've got this after their markets were down substantially overnight. Meanwhile, the US administration is saying they are "working on measures that will have the backs of Farmers. I can assure you, we are not unprepared" - thus readying crucial constituencies for further escalation of the situation.

NYSE Internals
A-D lines opened lower and tested -1671 and climbed to finish at -432. NYSE breadth - 1.33:1 held just below the neutral line for most of the session NASD breadth finished at -1.55:1

NYSE TICK: flat until 12:45 and climbed into the close. TRIN: opened near 1.80 and finished at .98.

NYSE MOC: -185M on balance

Implied Volatility
VXM8: 13.51 VXN8: 14.21 VIX:13.35 or +8.45%

Front month VX futures expire today

Commentary

Financial media and traders had a pretty successful day if they sought to rationalize, qualify or mitigate any impending trade stuff. There is the aging thesis that the president is using his old tactics to further American interests and that everything will work out in America's favor. Such arguments over the merits and downside of a trade war with China seem moot, though, because just as a military leader would not want to engage in war under the current administration, international business leaders are skeptical that disputes can be successfully navigated by those who might not appreciate the intricate supply chain dynamics involved. But you only need a basic understanding of world history - and for good measure Chinese history - to suspect the flying monkeys might be in over their heads. The counter narrative to this argument - and dominant force at work - is that in a world where globalism has contributed to partitions of economic malaise, only a far right politician and blunt force trauma can prevail against unfair trade practices and intellectual property theft.

My take is that Dear Leader's cortex is rather implastic - and frozen in some previous epoch - like the carefree debauchery of the 1970's Manhattan club scene. Such intractability can reflect the cumulative effects of too many cheeseburgers, illicit CNS stimulants or even the residual sequela of the clap. I reckon it would be out of character for him to back down if Beijing mounts further rebuke to what his fans see as divinely gifted moral authority.

Further, he seems to be ceding greater authority to trade hawks who now say that "talk is cheap". But we know China has a capacity for suffering and personal sacrifice that Americans - including those seduced by the fantasy of isolationism - do not. Also, even their agrarians can overcome a relative lack of technology and outwork ours. They simply know how to work hard. But no one wants to hear that. Never mind, the masses will be soothed now that we will soon have the US Space Force.

No matter one's personal view on any impending trade war, one thing I am certain that is missing in these folks is a knowledge of a phenomena well described by Solzhenitsyn in his Gulag. I reckon this because I speak with them daily. Outlined in chilling details is a psychological event that occurs in people wherein they become prisoners of their cause - no matter how degenerate - and are so given to it that they will do anything to further it, even as they begin to sense its futility. This is fairly common; and it does not limit itself to the kind of catastrophic economic and social upheaval seen in the 20th Century. Investors had better hope that some iteration of this is not unfolding now.

S&P Futures Now

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Your commentaries are outstanding. Thanks Diver Dan!

XAO Value at posting: 6,208.9
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