Thursday Pre-Holiday Blues

Yep… markets will be closed in the U.S. tomorrow and we have a boatload of reasons NOT to want to hold stocks over three days when you’d be “locked in” to holding for the longer term.

As we explained to Peoplenomics readers some months back, people have three ways they can “play the market” – even it said “play” is something like positioning of your retirement account money.

There is Long – expecting things to go up.  Short, expecting things to go down.  And then there is cash.  Which is where we sit at the moment and have since about 10:45 EDT Monday.  Right around the high for the week.

The “Plan of the Day” around here calls for me to subject you to a short column, mow the lawn and edge it – about three hours work there – and then see if the market is low enough to make going long at today’s lows worthwhile.

The problem is we have three “hot spots” to consider:  Our military affairs advisor “warhammer” sized up two out of three:

In a classic case of strategic posturing, the U.S. Navy is sending a carrier battle group (CVBG) to ‘exercise with Japan off of the Korean Peninsula.

<http://www.military.com/daily-news/2017/04/11/north-korea-calls-us-aircraft-carrier-dispatch-outrageous.html>

The move sends a message, and nations being much like barnyard animals during rutting season, Korea and their primary sugar daddy – China – are posturing right back. The Chinese have moved their land forces directly next to the N. Korean border, while Kim Jung Un threatens to nuke the planet into a cinder if he ends up losing face. Somebody please give the fat boy a jelly donut!

Speaking of strategic posturing, Russia’s naval forces are nearing Syria. Normally not a big deal, commanders on both sides must insure they tightly control their hotshot sailors and pilots so as to avoid inadvertent provocation and escalation. A standoff with lots of maneuvering is all that ‘should’ result from this Med encounter, but boys will be boys from time to time . . . that’s when things can spiral quickly out of control.

Two hot spots separated by thousands of miles. American military forces will surely be stretched. Trump will use these deployments to request more military operational funding. An Interesting series of concurrent chess matches are being played out domestically and abroad. It all bears close watching.

And here’s the point:  While watching, do you want to hold a long position?  Or, is sitting in green paper a more reasonable tack?

The third  situation to watch is in the (overstuffed) folder we call “ATT: All Things Trump.”

Today we have NPR worried about revisions to the financial disaster called Obamacare.

Then there’s the Trump talking down the dollar problem which has set global markets jittering.

Futures, an hour and a half ahead of the open, were down about 40 on the Dow.  So you and I are not the only ones trying to figure out how to play this.

There is “one other ugly” which no one talks about.  That is – in our long wave economic work – the possibility (however small) that the Long Wave Top is actually already in.

If it is, we could mush along for a couple of months.  Then somewhere around the end of May, some technical analyst somewhere might wake up and declare “There’s been a fifth wave failure!  To the Lifeboats!  Women and children first!”

Of course they will be trampled because the last time anyone did something chivalrous in America was the spring of 2000.  (I opened Elaine’s care door.)

Of course this is neither a prediction nor financial advice.  We simply notice that the all time high for the Dow was March 1st (21,115.55)_ and we haven’t been that high since.

If the Dow ere to close down 50’ish today, perhaps 20,550, then we would have given up about 2.7% since the high.

Our Peoplenomics.com subscribers have access to a little tool I built (top of the Master Index page) called the “OpenBrain.xls.”

It’s a spreadsheet that does the Elliott Wave calculations and considers possible futures.

IF THE TOP IS IN: (Or if this is a larger five wav e version of Wave IV before the larger V completes):

We might look at the move from 21,114.55 down to around 20,550 today as the first leg down in a new Bear Market.

You can do these calculations by hand, of course, but it’s a beast so that’s why the spreadsheet.  It allows us to play this “What If…” game to our heart’s content.

As you can see, the prospect of a Dow under the 20,000 mark might be there.

BUT THERE IS A BULLISH CASE

Again, using the same tool (I like to do math once and then manipulate data sources) there is a case that March 1 was the top of a Wave III and we are finishing IV now and we will shortly do Wave V up to finish the run from 2009’s low.

If that’s the case, here’s where the Dow could go: 23,370. 

It’s not certain it will go that high and in fact, the minimum in Elliott terms has already been met.  Which is why we use an Aggregate Index because it’s total market performance that interests us, not an easy to move pile of 30 stocks.

Point is, we could go MUCH high from there, but not until we first get past the old high of 21,115.55 and close the week over that.

Then we’ll be True Bulls again.  But for now – in an increasingly uncertain world, trading and being quick to run to cash (or money markets that invest in treasuries) seems a not entirely nutty way to play things.

Let me repeat THIS IS NOT TRADING ADVICE.

Still, it’s easy to play the what-if games and I can’t think of a more profitable pastime, other than bank robbery. 

The risks are not dissimilar.

“Kill With Borrowed Knife” II

We read in the South Korean press how “Trump attempts ‘deal’ with China on North Korea” which fits our outlook we laid out here.

Directly related now is the story in the Washington Post this morning claiming “Kim Jong Un’s rockets are getting an important boost — from China.”

Fortunately, the UN report on the NK dependent on China for machine and electronic parts is nothing new.  If it were, the war would have already started.

Still, the backgrounder UN report here is worth some study if you’re short of things to worry about.

“The Democratic People’s Republic of Korea is flouting sanctions through trade in prohibited goods, with evasion techniques that are increasing in scale, scope and sophistication. The Panel investigated new interdictions, one of which highlighted the country’s ability to manufacture and trade in sophisticated and lucrative military technologies using overseas networks. Another interdiction, of the vessel Jie Shun, was the largest seizure of ammunition in the history of sanctions against the Democratic People’s Republic of Korea, and showed the country’s use of concealment techniques, as well as an emerging nexus between entities trading in arms and minerals. The Panel’s investigations further revealed previous arms trading by the Democratic People’s Republic of Korea and cooperation in Africa, including hitherto unreported types of cooperation on a large scale. “

Just freakin dandy, huh?

Producer Prices

Oh my, lookie here:  Press release of the day from the Labor Department:

“The Producer Price Index for final demand declined 0.1 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today.

Final demand prices advanced 0.3 percent in February and 0.6 percent in January. (See table A.)

On an unadjusted basis, the final demand index rose 2.3 percent for the 12 months ended March 2017, the largest increase since moving up 2.4 percent for the 12 months ended March 2012.

In March 2017, three-fourths of the decrease in the final demand index is attributable to prices for final demand services, which fell 0.1 percent.

The index for final demand goods also inched down 0.1 percent. Prices for final demand less foods, energy, and trade services edged up 0.1 percent in March, the tenth straight advance.

For the 12 months ended in March, the index for final demand less foods, energy, and trade services climbed 1.7 percent.

Final Demand Final demand services: The index for final demand services inched down 0.1 percent in March following a 0.4-percent increase in February. Over half of the broad-based decline can be traced to prices for final demand services less trade, transportation, and warehousing, which decreased 0.1 percent.

Margins for final demand trade services also edged down 0.1 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) The index for final demand transportation and warehousing services fell 0.2 percent.”

This is something of a “bitter pill” for the Trump administration.  There had been lots of hope that the prices would keep firming and the job of policymakers would be easy:  Just move up rates as prices advanced and life would work out OK.

Unfortunately, this isn’t happening and in case you missed it, we asked rhetorically in a Peoplenomics piece April 1: “Are Federal Reserve Rate Hikes Over?”

This morning’s data doesn’t me we were right – time will tell on that score – but we are sniffing around the right fire hydrant.

The New Economy of Trump-Bashing

How many times have I told you that in America, Everything is a Business Model?

Well, turns out that the Trump-Bashing Industry is now global and doing films as “Cannes takes on Trump with highly politicised lineup for 2017 film festival.”

I have been admittedly remiss in pointing out that Anti-Trump is a huge employer.  Other than the democrats and the (still absent) Obama who’s off learning to write (a book) in Tahiti, or some such, we are beset daily with dozens of emails from People for the American Whatacallit and others who are really turning Trump-noia into a huge payday.

Again, and as always, when you see someone attacking the Trumpster, see if you can hear where the cash register is ringing.