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Just to shift gears, I’ll offer something somewhat bullish (although I don’t mean it for a second).
The emerging markets, mentioned here incessantly on Slope, have been extraordinarily chart-able for 2018. That’s plain to see from the tints I have provided below. At the moment, my eye is on that yellow since, which for the third day appears to be providing support.
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.
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.
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?
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.
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:
What I know about Turkish politics could probably fill about two sentences (which, I suspect, puts me in the 95th percentile of Americans), but apparently it’s even worse there than here. Using the oh-so-spiffy currency charts from SlopeCharts, allow me to show you how their lira is doing:
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…)