Slope of Hope Blog Posts

This is the heart and soul of the web site. Here we have literally tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. You can also click on any category icon to see posts tagged with that particular category.

Yanking the Wax Away

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I know almost nothing about politics in Brazil. I had heard, however, there was a Presidential election on Sunday (that is, yesterday), and the “Donald Trump of Brazil” was rising in the polls. Well, he won, and Brazil equities exploded higher this morning. Examining the Fibonacci retracements, I noticed that we were trading near a possible reversal point, so I shorted the symbol EWZ at 39.37 with a stop at 39.50. It’s up about 1.43% as of this moment. This was definitely a “sell into strength” type moment, because Brazil’s problems are probably bigger than their version of Trump can solve.

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Crazy Not-So-Rich Asians

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Near where I live, there’s a middling Chinese restaurant called Chef Chu’s. I’ve been to Chinese restaurants hundreds of times, but in spite of its proximity, I’ve gone to Chu’s maybe once. It’s the kind of place where white people eat and struggle with how to use chopsticks. Unless the menu is rife with misspellings and I’m the only white boy in there, I’m not that interested, because I know the food will be overpriced and inauthentic.

The reason I bring this up is because the little boy who grew up at that restaurant, John Chu, went on to become a famous director by way of the smash hit Crazy Rich Asians. It’s the kind of cultural marker which turns my stomach, because it’s a movie that gawks and gasps and gyrates over the insane wealth of a small slice of Singapore elite.

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The Latest Salvo

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So if the prospect of a relaxation in trade wars is worth 3,000 points on the Dow, then surely the total collapse of trade talks is worth – – what – – about 70 points or so? Anyway, as I type this on Sunday evening, the ES is down, getting slaughtered and vanquished to the tune of two-tenths of a single percentage point. It’s just like last weekend. A mountain of bad news resulting in a tiny downtick, all of which will be green by tomorrow, right?

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Brazil

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We are back to an “Othello” market. Down one day. Up the next. Down the next day. Up once again. I have just described this entire week to you.

Although stocks are very strong at the moment, I would suggest to you that Brazil’s longer-term trend is still downward, and that the ETF shown below is quite vulnerable to resuming its tumble the moment the “buy” algos are off.

A World Financial Battle Approaches

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The first three ratio charts show:

  1. the U.S. Financial ETF (XLF) compared with the SPX,
  2. the European Financial ETF (EUFN) compared with the STOX50, and
  3. the Chinese Financial ETF (GXC) compared with the SSEC.

Each one’s Financial ETF is weaker than its country’s major index, and in the case of the EUFN and GXC ratios, are sitting at a major support level, while the XLF ratio is approaching major support.

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Beyond the Border Breakdown

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It was only a few trading days ago that most U.S. equity indexes were at the highest levels in the history of Earth. They are cheerfully and blissfully overvalued, far more than all prior bubbles, and no meaningful breakdown has occurred in over 30 months. Even so, the markets outside the U.S. has been ripping at the seams, and I wanted to share seven charts that are illustrative of that happy fact:

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China’s Shanghai Index Approaching Freefall

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I last wrote about China’s Shanghai Index in my post of June 19.

This index is in bear market territory and is headed toward its last (monthly) swing low of 2638.30, as shown on the following monthly chart of SSEC. A break of that level could see a swift drop to its next major support level of 2260, or lower.

Both the momentum (MOM) and rate-of-change (ROC) indicators are below the zero level and are accelerating to the downside on this timeframe. Watch to see if they make a new swing low below the one made in February 2016.

If so, this index could be headed for major problems, and the increasing trade war with the U.S. is not helping. (more…)

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