There were a couple of factors that pushed the Dow Jones Industrials down 200-odd points Monday. But, to our way of thinking, this is likely a pre-shock of a much-more dangerous period ahead for the market.
The softness in housing numbers and a not-so-hot 0.3 percent annual growth of GDP forecast by the Atlanta Fed, is not the kind of thing that gets people excited. “Here…put money at risk and expect only principal in return…”
Which gets us to this morning and where things could be headed over the longer term.
Matryoshka Dolls are a popular thing in Russia. Nested dolls having what to do with the Market? Well, that’s how Elliott Waves, work, too.
If the top is in for the bounce off the Christmas eve low of 2018 (when the Elves were cooking bulls for chow), then we will likely see a similar decline trajectory and it ought to be nested.
If the smallest of the Matryoshkas showed up Monday, and IF that was a tiny Elliott Wave 1 down, then today’s pop at the open might be a tiny 2 up and who knows how far it could go?
Thing is, though, the first nested doll is likely to be five small waves down (a few hundred points more downside) and then a rally and then a (next doll larger) wave 2…
The problem when looking at markets is trying to figure out how the “dolls all fit.”
One idea is to think about how things would be for a pullback this morning, another wave up (bigger doll) and then down into the first part of summer. A rally in later summer would be peachy, too, As (unfortunately) would be a crash in the fall.
So we look into the crystal ball of news flows and try to understand how events will play out. Was Monday a pre-shock or was it just seismic trading noise.
As one UCLA seismology expert has already shown, a template that works to find pre-shocks around earthquakes may be useful when looking at markets. See Didier Sornette’s Why Stock Markets Crash: Critical Events in Complex Financial Systems.
By the way, I was trying to explain my rabid fascination with “template-mining” in life to colleagues this week. Thing is, it’s like seeking the “ultimate quadratic” that will, when solved,with just the right terms, reveal all answers to all things. The is just One equation. We’re just too dumb to find it and our division as peoples and specialization hinders the quest..
Template studies are like that: What works as electrical laws also work (as thought templates) in economics when the terms are aligned. And as Sornette showed, ditto the use of templates against noise from seismometers and in Wall St. trading data.
I think that’s where we are this morning: Let’s see if this is a tiny 1 down and this morning is a 2 up and then see what some implications are. Because there’s also a good chance that the market will instead go higher. In which case, the Monday action would have been a corrective move with more impulsive upside to come. Buried in the personal schedule at the moment, it’s interesting watch the action from the sidelines.
The real issues to watch aren’t changing much: Will there be a meaningful Trade Deal, will Trump survive the gauntlet, and will India and Pakistan go to war this summer? Answer the wrong way to these and there’s a house of cards with U.S. Economy written on it.
Gold dropping, by the way, says the Fed’s L4L (lower for longer) rate approach (super-accommodating) is ending inflation fears and we don’t know how far down is, especially if consumer discretionary fails if the job number suck this week.
China, meantime, is also getting in the L4L line trying to stave off recession.
Dear Global Warming Fanatic
Are you still in denial? Here is this morning’s NOAA/Weather.gov warnings map. See the unseasonable freeze warnings along the Gulf of Mexico?
We apologize for the facts. 22F here in the Texas Outback today and Denver had the coldest in 60 years and all…But it’s weather and you’re a tool of political machinations far beyond your realm. So GTFU, pah-leaze.
Financial News for the Day
Not too much to it, really. Europe is up a shade, so the US rally could build on that.
In the economic data flow, PMI will be out 45-minutes into the day with December new home sales about 10 AM and then we will get a look at federal budget (madness) numbers around 10 AM Eastern.
The flow of news will be picking up tomorrow through Friday.
AWK (Also Worth Knowing)
We have a twisted way of living here in the Outback. As part of our “PSRP” (personal stress reduction program), we don’t waste mental processor clicks (k) on things we can’t change, leverage, or use.
Also, we try to hold our commentary in check. For example, HRC saying she’s definitely not running in 2020 is not to be trusted, but if true, suggests there is a God after all.
We will also not suggest that Bernie form the FOSC Party for (Friendly Old Socialist Codgers).
And, representative Ilan Omar continues to be a great divider sounding decidedly anti-Semitic. Democrats to become the self-inflicted party?
That’s three reasons (as we count ’em) that the 2020 campaign will be framed by the GOP as “Are you an American or a socialist?”
To be sure, this will be cast by the ultra-libs as Macarthyism’s return. But, as military affairs contributor “warhammer” notes, politics – especially of the Online Digital Uprisings sort are state-actor backed but out of the public eye:
What is increasingly apparent is more than a few politicians on both sides of the spectrum distort the truth. Pro-socialist politicians are aided by news entities seemingly intent upon exploiting every possible avenue that will lead to the deconstruction the foundations of the American capitalist powered democracy, aka, the status quo, to the advantage of a few elites who mislead the masses into believing the playing field is being leveled to the advantage of the masses.
Follow on Twitter. Like on Facebook. Connect on Google+. These are fundamentally socialist tools which deconstruct geographic and societal barriers to virtually level the collective playing field. We are all encouraged to use them. The founders and controlling partners for those social media tools are all billionaires. The followers are brainwashed into believing that those who are not are ‘not connected are not with it.’
These are the tactics are classic psychological warfare, blended with the fundamental principles of raw political propaganda: ‘deftly appeal to humanity’s loathing of those who are better off than ourselves.’ Yet some elite group in the ‘cloud’ holds editing and censoring power for these ubiquitous tools. The decision of these closeted judges is always final.
We need to stop and comprehend precisely what is happening to us via social and networked media, be it ever so slowly and often subconsciously. Tell a lie. Make is believable, then keep repeating it. Eventually people will begin to accept and believe it. When that lie can be transmitted to tens of millions in a nanosecond, ignorance is easy and deceit an increasing danger.
Sir Winston Churchill’s classic quote rings a clarion call to common sense for any free people: “Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.”
And all framed nicely in our Monday headline “Communicable Hysteria.”
Licensing the Web? Still Coming
This brings me to a fine point that I made in my 2012 book Broken Web that you may find on Amazon.
The Internet, like an automobile or voting, or drinking or recreational drug use, is something for the “grown-ups.”
Licensing the web and requiring users of social media platforms to reveal their ages and prevent posting and such for underage, is just one of the critical moves in saving America from digital disruption that we need to get very serious about.
Just in the last week, we have seen ISIS remnants calling for digital jihad and that should scare the hell out of you.
Although, I’m sure it doesn’t. Far more “clickable” with lowest common denominator web use to click on the flash and flesh and trust others – more crooked than you can believe – to package your choices for you.
That is, sadly, the road to dusty death for democracy…
So, on that cheerful note, on goes the consulting hat again after a trip through the gourmet line in the kitchen. Where Zeus the Cat somehow beats me to chow every day…
Moron the ‘morrow…