Fed Week: Effects of FX

We think it’s a pretty safe bet that the Fed won’t raise rates this week when their decision is announced on Wednesday.  But it’s also clear to us that the Fed is definitely grinding its foot into the floorboard with printing to keep this ol’ pig of a market going up – for just a while longer.

As a result, we would look for the Fed, while not raising rates, per se, to perhaps indicate a “minor” change to their trading desk in order to move things gently toward the “detox” that will lead to problems as easy-money becomes less ease -ee.

Let’s look at some of the market drivers this week and you’ll see how FX (foreign exchange) is likely to be a big factor…

(Continues below)

Today, obviously, we don’t have too much economic news, but there is one hold-over item from last week to consider now that we are past the typical monthly minor manipulations that occur around options expiration (last Thursday for indices and Friday for stocks).

That is the Federal Reserve’s report called H.6 Money Stocks.

Unfortunately, while non-government agencies like the Fed talk a good gamer of Obamian Transparency, the fact is that the Fed Money Stocks report would be a lot more useful if it was published writ large with as much emphasis as it paid to the closing Dow.  Regrettably it is not.

What we note in last weeks data, however, is worth thinking about.

The date-wording of the top rate is important.  When they say
“TO June 2017” what they are really saying is “Here’s what we did in March, April, and May…”  Note that M1 was going up 6.7% (annualized).

The current information is in the lower part of this combined graphic to keep things simple:  Notice the date here is “ending July 10” and then look to the right where you’ll see M1 going up at a 9.3% rate (again, annualized).

If you’re a math genius, you will immediately see what we’re talking about:  the Fed has jumped all over the ‘money pedal’ and that likely accounts for MUCH of what we see as a market price increase.  Simply:  When more and more money is pumped into the system, a good portion of it will “leak” into the Stock Market and a rally will result.

The opposite will, of course, also be true.

When the Fed turns off the money supply, then we will see a decline, as well.  In our view of things, we are very close to a SIGNIFICANT MARKET TOP here.

While we have some colleagues who thing we are already there, we would direct subscribers to our Peoplenomics.com premium content to look at the 12th chart in Saturday’s ChartPack and compare the minimum forecast top (under Elliott fifth wave rules) and look at last weekend’s Peoplenomics Index number (20,260.57) and judge things for yourself.

Admittedly, our way of looking at things is different that most, but we continue to hold that an aggregate of multiple indices will always be more accurate assessing the social (and hence, investment) mood than singular indicators such as the Dow Jones Industrials which is a mere 30 stocks deep.

Consider Europe,  As Well…

In doing so, perhaps a mental exercises that I developed to help me quickly assess foreign exchange moves will help clarify why it SEEMS stock prices are down in Europe today.

Let’s begin with a box of “something fungible..”  It doesn’t matter whether it’s a box of wheat, oil, silver, gold, gunpowder, or Christmas tree lights.  Just a box of something that has intrinsic value.

Now we are going to “buy” that box with Euros.

Let’s say that Friday there were 1,000 Euros in all of Creation and the cost of the box was 1 Euro.  In other words, this box was worth 1/1000th of the available Euros.  (I know that would never happen in Reality, but this is a thought exercise and I’m making a point.)

Now fast-forward to Monday.  Only because of currency manipulations we find that there are only 996-Euros in all of Creation today.

What happened to the “price” of the box?

It went down.  That’s because we know that given static valuations, the price of the Box will be 1/1000th of all the Euros in the world.  But since there are fewer Euros, the price of that box will now be 0.996 Euro.

What has happened in Europe is the value of the Euro has gone up (it doesn’t take as many to “buy the box” today) and as a result, Euro demoninated “boxes” – which look a lot like stocks  – are down.

While is the underlying mechanistic explanation of what’s really going on behind the scenes when you read headlines like “High-flying euro pushes down European shares.”

Bet you feel better, and smarter, now!

Does it mean the US will go down today?  Yes.  That’s due to inter-market arbitrage and linked markets.

But while the US market may go down a bit, as we pointed out in the opening section, the US Fed (which will likely announce “No Change” on Wednesday) is printing for all they’re worth.  And making the money chasing “the box” become more plentiful, it means that higher prices are still ahead, more than likely.  But not without a short-term pullback to what in Peoplenomics’ world is a mid-channel trend line and what is in Elliott terms, a possible Wave 2 of V forming on the way to our August 21st region expected high.

We do note that other very savvy traders I know think we are in the final highs now, but in Aggregated Market Theory (which we invented), the large Elliott waves must be obeyed and it makes both time and price a bit more reliable than other methods.  But we won’t know for sure, obviously until we get to September.  So it’s a fun game to play: “Call the Market High.”

Balance of the Week

We will have a two-part regular post tomorrow as the Case-Shiller Housing data comes out.  The continuing low rates seem to be good for housing start data, but since we have been watching real estate prices  in a possible grand Elliott Wave 2 bounce from the 2009-2010 lows, and we see some softening in Western markets, it is possible that a topping process for Housing is starting to form at recent prices.

We shall see.

But there is some ancillary data and comments suggesting that cities where the minimum wage has been raised to $15 and such, may have priced “the help” too high and that may let “some of the air out” of the western tech- centric markets.  Again, we will await data.

Durable goods and International Trade data highlight Thursday and we finish the week with GDP…which should be instructive.

The market should be higher by now, but the abysmal mess in Washington as the Swamp Critters have done noting of substance (substance to us in healthcare reform and tax rewrites) we may see the Market Peak coming in at the low-end of expectations or even failing in its scheduled fifth wave up.

News to Blame It On

It’s always fun to see the headlines when markets are under-performing since people love nothing more than a good excuse.

In Europe see: French President Emmanuel Macron’s Popularity Is Plummeting.  Oddly, the French market is up today while the British market is down almost a full percent.

Baked Immigrants

We were appalled to learn of the deaths of illegal immigrants at the hands of human traffickers in San Antonio.  Nine dead as of this morning’s count.

But before you go getting political and hand-wringing over the need to “open our borders” consider this:  ENABLES SMUGGLERS’ Top Texas official blames sanctuary cities for deaths.  Liberal’s are going to applaud that view.

Today’s Homework Assignment:

Go read the story Robotic Process Automation Market to Reach $5.1 Billion by 2025, According to Tractica.

Then pencil out how many displaced humans are generated by $5.1 billion per year in robotic process automation.

Answers due by midnight, winning answers will show up in the Comment section.  (So will the losing answers, but then we really do walk the equality thing here…)

Dems “Kill the Golden Geese” Plans

Oh yeah:  Democraps are up to it again with plans to punish success in their lefty-leaning world as Democrats take aim at big companies in economic blueprint.

Oh yeah…WTFG:  Demonize success…the same weak-brained bullshit denying that there aren’t winners and losers in school is now being extended to corporations.

Who are these people and where are our Leaders who should be calling this out?

The only things that need to be killed to save America?  Prohibit lobbying in Washington – and make all legislative contacts with industry groups searchable online and in writing only.  Then maybe the Fools on the Hill will judge on merits, not political payoffs.

Oh, sure, no money from outside any political district, too…

Apply firmly and see Ure country evolve…

DON’T READ THE BILL

Even as LAST-GASP EFFORT? New health bill a mystery; Trump urges GOP action. we note that there isn’t enough time to give a thoughtful READ and ask INTELLIGENT QUESTIONS.

More important, WHO HID THE SAUSAGE WHERE? In terms of an unwarranted “bail-out” scam by the crooked insurance companies who have turned the FedGov into a captive payday-loan type collection outfit…  (but don’t get me started, lol)…

Third World Thinking:

“Can’t Afford a Toilet? ‘Go and Sell Your Wife,’ an Indian Official Suggests…”

Monetizing the Weather

Think we’re kidding?  Here’s an inconvenient story that goes along with the narrative:  A Comic Strip Mirrors the Ravages of Climate Change.

If I could handle a pen and ink, I’d do the Daily Doofs strip.  Maybe teach people statistics in it…