By Charlie Bilello
After a perfect year in 2017 (S&P 500 up every single month), equity markets are struggling.
The S&P 500 just finished down 2 months in a row (February, March) for the first time since early 2016. Meanwhile, the Japanese Yen is rising, leading all major currencies against the Dollar in 2018. Are these facts related? Can investors count on the Yen acting as a safe haven during times of equity market stress? Let’s take a look…
Data Source for all charts/tables herein: Stockcharts.com (Philadelphia Yen Index, S&P 500 Price Returns)
With data on the Japanese Yen going back to 1977 (Philadelphia Yen Index):
Continue reading Is the Yen a Reliable Safe Haven?
By Keith Weiner
Let’s tie two topics we have treated, one in exhaustive depth and the other in an ongoing series. They are bitcoin and capital consumption. By now, everyone knows that the price of bitcoin crashed. Barrels of electrons are being spilled discussing and debating why, and if/when the price will go back to what it ought to be ($1,000,000 we are told).
As an aside, in what other market is there a sense of entitlement of what the price ought to be, and a sense of anger at the only conceivable cause for why the price is not what it ought?
Bitcoin, Postmodern Money
Anyways, during the incredible run up in price, we wrote a series of articles, entitled Bitcoin, Postmodern Money. We were not focused on the price of the thing, other than to discuss the problems of unstable price, and even rising price. We did not say the price will come down, or when. We said a rising price makes it unusable as money.
In an online forum, some folks insisted that bitcoin is a store of value (in contrast to the dollar). We said that even if you don’t think it will crash, a skyrocket is not a store. Here is the graph through Friday.
Continue reading The Skyrocket Phase
By Tim Knight
The shift from bullish to bearish since January 26th has been delightfully insidious. [Monday’s] market action created some more progress for the bears, although the breaks of February 9th lows were not across the board. Indeed, looking at some of the big indexes, you can see that we’re getting to the point of “challenging” those important lows, but not yet piercing them:
Continue reading That’s the Breaks
By Rob Hanna
The Quantifiable Edges Capitulative Breadth Indicator (CBI) is a tool I have spoken about quite a bit lately, since we have seen a few recent spikes in the CBI. In the Quantifiable Edges CBI Research Paper I published last month (download information here) I examined the CBI a multitude of ways. Below is an excerpt from a section of the paper where I looked at 50-day lows and different CBI levels.
By combining CBI readings with a market that is hitting new lows, the results are often even more interesting. Let’s consider some studies that examine how the market has performed after hitting new lows, and break down those returns by CBI readings. The first one looks at performance following 50-day low closes when the CBI is 0.
Continue reading CBI To Remain At 0. No Edge Apparent Despite Potential 50-Day Low Close.
By David Stockman
For the last five years the S&P 500 has been dancing up its ascending 200-day moving average (200-DMA), bouncing higher repeatedly whenever the dip-buyers did their thing. Only twice did the index actually break below this seeming Maginot Line: In August 2015, after the China stock crash, and in February 2016, when the shale patch/energy sector hit the wall.
As is evident below, since the frenzied peak of 2873 on January 26, the index has fallen hard twice—on February 8 (2581) and March 23 (2588). Self-evidently, both times the momo traders and robo-machines came roaring back with a stick-save which was smack upon the 200-DMA.
But here’s the thing. The blue line below ain’t no Maginot Line; it’s just the place where the Pavlovian dogs of Bubble Finance have “marked” the charts. And something is starting to smell.
Continue reading The S&P’s 200-DMA: Why It Ain’t No Maginot Line
April (and Q2) got off to a less than inspiring start on Monday as an early Asian rally shriveled up and died on the vine as the market tries to figure out how to digest myriad uncertainties around the burgeoning trade spat between Washington and Beijing.
China officially retaliated against U.S. steel and aluminum tariffs on Monday as previously announced moves against 128 imported goods went into effect. The Commerce Ministry claims Washington did not respond to a a trade compensation consultation submitted on March 26 and so, “in view of the lack of agreement between the two sides, on March 29, China informed the WTO of the suspension of the concession list and decided to impose tariffs on certain products imported from the United States in order to balance the benefits of the US 232 measures against the Chinese,” a Ministry statement reads. Here’s the full statement from the Customs Tariff Commission:
Continue reading Asia Rally Dies As China’s Tariffs On U.S. Imports Take Effect – All Eyes On Trump
By Tom McClellan
March 30, 2018
Earlier this month, the technical analysis community mourned the passing of Richard Arms, the creator of the eponymous Arms Index. You can read an obituary by Jonathan Arter here. I met him a few years ago and had corresponded with him, and I can tell you that he was not only a brilliant chartist, he was also a really nice guy. He was happy to share his insights with others.
The Arms Index is sometimes referred to as “TRIN”, short for TRading INdex. TRIN was the old Reuters screen code, and it is the symbol many quote systems use to this day. But professional technical analysts like to give credit where it is due, and so we call it the Arms Index.
Continue reading What Really Drives the Arms Index
By Steve Saville
[This blog post is an excerpt from a recent TSI commentary]
The year-over-year rate of growth in the US True Money Supply (TMS) was around 11.5% in October of 2016 (the month before the US Presidential election) and is now only 2.4%, which is near a 20-year low. Refer to the following monthly chart for details. In terms of effects on the financial markets and the economy, up until recently the US monetary inflation slowdown was largely offset by continuing rapid monetary inflation elsewhere, most notably in Europe. However, the tightening of US monetary conditions has started to have noticeable effects and these effects should become more pronounced as the year progresses.
The tightening of monetary conditions eventually will expose the mal-investments of the last several years, which, in turn, will result in a severe recession, but the most obvious effect to date is the increase in interest rates across the entire curve. The upward acceleration in interest rates over the past six months has more than one driver, but it probably wouldn’t have happened if money had remained as plentiful as it was two years ago.
Continue reading Money Matters