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It’s end-of-day Thursday, which means the latest liquidity-oriented data from our friends at the FOMC has tumbled out. Let’s thumb through it. We’ve got Yellen’s BTFP program, which ostensibly is just a few weeks ago from being shuttered to any new lending:
Below is the ratio chart of the XME divided by the GDX. This chart spans decades, and as you can plainly see, it has never, ever been higher. Thus, we are either (a) entering a whole new era in which this ratio chart goes into the stratosphere or (b) it’s an intriguing pairs trade, suggesting shorting XME and going long GDX.
It’s been a while since we looked at the ratio chart of the equal-weighted S&P 500 as compared to the normal S&P value, but here it is. As you can see, it’s a complete train wreck, which illustrates, once again, how a tiny handful of mega-caps are providing ALL the nominal strength to the headline numbers. People who read USA Today aren’t going to tell the difference between one S&P or the other, so it makes everyone chipper to see lifetime highs every day, even with all the rot beneath the surface.
One thing I always like to see on SPX the day after I call a possible high area is a big gap down and I wish that happened every time. Alas it does not, but it was nice to see that happen this morning.
In terms of the trendlines I was looking at in my post yesterday morning, SPX went a bit higher and hit the shorter term resistance trendline that I thought might need a hit. There was a nice rejection there that followed through hard this morning.
SPX daily BBs chart:
Introduction
This is an article from a source, yours truly, who considers it his job to define the ‘top down’ macro before trying to pick stocks. In other words, it is important to get the big picture macro, as well as its shorter-term rotations, right before trying to select stocks and the sectors they reside in. In an extreme example, the gold mining sector has been most often impaired by the ‘bubble on’ macro, including its inflationary phases, not helped by it. “Post-bubble” will be a different story. But you can’t change the macro because of ‘want’. It will change when it is good and ready.
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