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As in January of 2013 (ahead of an economic up cycle) and Q4
2017-Q1 2018 (ahead of an economic ripple that began in 2018) the
Semiconductor sector and in particular its Semi Equipment sub-sector are
front and center in forming our analysis about coming events. Excerpted
from the January 20th edition of Notes From the Rabbit Hole, NFTRH 535…
Semiconductor Sector – Watch the Early Bird in 2019
This one is special for me. I started my work life many moons ago as a
participant with the Semi sector [circa 1983-1993], painfully learning
first hand how violent the cyclical turns can be. Dialing ahead a couple
decades, in January of 2013 NFTRH began a narrative that saw the then
up-turning Semi Equipment bookings (this data is unfortunately no longer
published) lead the sector, general manufacturing and eventually the
whole raft of components that make up the economy into a cyclical
On this quiet market holiday, I thought I’d share a few economic- and rate-related SlopeCharts for a change. We begin with the unemployment rate which, as you can plainly see, has been on an incredibly powerful and consistent slide downward, far more impressive than any other time in this data stream’s history.
Chinese Communist dynasty emperor Xi knows they’ve blown the biggest bubble in the history of humankind. All measures being taken by Communists are to ensure the survival of the party when this bubble eventually pops. Dynastic succession in China usually involves the losers’ entrails being paraded around Tiananmen square (or other significant public gathering place), so this is about survival. Politics, economics and ideology are secondary.
The Communist dynasty knows that the bubble will pop and they will lose the mandate of heaven (economic prosperity). The only way they can stay in power is if the blame can be diverted. Trump is heaven’s gift to the Communist dynasty. EVERYTHING can be blamed on Trump. The Communist dynasty will play the nationalism card – having been attacked by Trump. The Chinese will rally around this. Trade was forced on China (Most Favored Nation was a punitive trade measure against China by the western powers) and now Trump is going back against trade treaties designed to humiliate China since the Boxer Rebellion. (more…)
I have been getting such a chuckle from the market of late.
As the market made its way down to our 2600 target region towards the end of October, more and more market participants and analysts became more and more bearish. In fact, the bearishness was palpable as we approached 2600SPX.
However, our analysis suggested that the market should bottom in the 2600SPX region, and begin a corrective rally, which then topped at 2815SPX.
But, the day after the market began a strong rally off the 2603SPX level, many were quite fearful that Oct. 31 would provide us with a market crash. You see, that was the day that a quantitative tightening was scheduled by the Federal Reserve.
Yet, that day provided us with a 50-point rally. Yes, you heard me right. And, again, market participants and analysts were looking the wrong way in a big way due to their fundamental beliefs about what drives the stock market.
Let’s take an in-day snapshot of gold vs. several key competitors (for your investment dollars/euros/yen, etc.) and check the progress in turning the macro from risk ‘on’ to risk ‘off’, cyclical to counter-cyclical.
Gold/Commodities motors along above the SMA 200. The move has been hysterical, and thus looks impulsive. That could mean something as we look back in hindsight one day.
OK, so let’s just take a deep breath, step back, and assess the situation:
The United States has, for many months, been ratcheting up a trade war with China;
All attempts in the past for the two sides to get together and hammer out a deal have been comically similar: lots of warm feelings, positive talk, encouraging press releases, and then…………nothing…………..followed by more tariff increases;
Over a span of three weeks in October, worldwide equity markets took a beating, freaking out heads of state whose constituents had become addicted to soaring equity prices;
During this week, the United States Government has frantically been creating reasons for people to get into stocks again including, cynically, seeking to dismantling some of the last regulations around the bank industry (since the poor dears have such a hard time of it);
At the same time, Trump appears almost assured of losing power in the House of Representatives, so………
Out of the clear blue sky, he announces that trade talks are going well, and that he’s not just going to meet briefly with Xi on November 30 but instead will meet AND have dinner with him (because God knows there’s no more appealing offer than the opportunity to watch Donald Trump eat);
Thus, even with a complete catastrophe at AAPL, worldwide equity markets exploded higher in the middle of the night.
The misery index – – chartable, of course, with my superiorSlopeCharts creation – – has been nothing but good news for our really smart, super handsome high-achieving President. Did I mention how smart he is? OK, good. Just want to be clear on that. Seriously.
I must say, I was impressed – – disappointed, but impressed – – when the news stuck that Trump’s bullying of Europe had paid off. I mean, sheesh, is it REALLY that easy to bludgeon an entire continent to bend to your will? If so, then maybe he IS a great negotiator and the master of the art of the deal. It was a shocking rolling-over on the part of Juncker and company.
As of this writing, though, I just want to mention that the “Trump Triumph” explosion to lifetime equity highs seems to have disappeared in an awfully big hurry. I obviously have no idea what things will look like in the morning, but as of this moment…………it’s already gone.
From the daily percentage comparison chart below of the four U.S. Major Indices, you can see that the Nasdaq 100 and Russell 2000 Indices have begun to surge above their recent all-time highs and have accelerated faster than their Dow 30 and S&P 500 counterparts.
The spread between the first two and the latter two indices is ever-widening and higher risk investing is on the rise…signalling that, either this latest surge is the beginning of a new bull market that would, ultimately, pull in the Dow and S&P and send them to record highs, as well, or is in the process of forming a climatic thrust before the end of a very long bull run that began when stocks plummeted to their lows on March 6, 2009, following the 2008/09 financial crisis.
With today’s drop in these markets (as of 12:40 pm ET), presumably in response to further tariffs imposed on China by President Trump, we’ll see how escalating world-wide trade wars, inflation, and Central Bank interest rate actions affect/infect U.S. (and world) markets in the coming weeks. (more…)