Key S&P Levels

It’s been a while since drilling down on the markets.  We have been concentrating on rebuilding our website to deal with the free riders and honing our web scraping coding skills.  Our economic and market analysis has focused on the major secular issues, which we believe are starting to send tremors through the markets, mainly the shifting of global geopolitical tectonic plates, which, we believe will soon usher in the Big Dipper or bear market.

The Coming Bear Market

Unless Trump and XI can pull a rabbit out their hats at the June 28/29th G20 in Osaka, we are starting to doubt our target of a 3025 peak on the S&P before Ursa Major comes calling.  Unfortunately, the Year of the Rabbit doesn’t come until 2023, and 2019, is, after all, the Year of the Pig.  Ouch!

We have been selling into this year’s strength.

President Xi seems to be preparing his country for the “long march” in the trade war.  Could be posturing but it’s a  danger to whip the hoi polloi into an anti-American frenzy. We suspected as much back in February but still think the two global superpowers will be able to come to some sort of cease-fire in Osaka, though of little substance.   If so, sell hard and fast.

President Xi already seems to be preparing his population for the worst case scenario, warning of “challenging times ahead” possibly in the event Trump goes ahead with the tariff hikes.  Maybe we are reading too much into it and maybe not. – GMM, February 2019

Domestic Politics  

U.S. domestic politics are about to get even uglier.  The impeachment market was up 30 percent today.

We wrote on April 18th,

We’re not making a political statement or being partisan but just trying to give our readers a heads up on the results of our brief analysis and how we see it playing out.  The odds of impeachment have gone from around 6:1 to 4:1 in the past two weeks.

We expect the market price at PredictIt to move up another 30-50 percent in the next few weeks, or 3:1 odds for impeachment.  Don’t think your gonna make that in Amazon in two weeks, though the shares might get an impeachment bump.  – GMM, April 18th

The impeachment market is up 75-85 percent since that post.   None of the above is priced into the stock market.

S&P Levels

The S&P is up over 14 percent YTD, just 3.13 percent from its all-time high, and just 5.6 percent from our peak S&P target, not surprising after a down year.

Inertia and hopes of a ceasefire on China trade could get it there but we will continue to sell.

If Chimerica has been a major factor driving global growth, corporate margins and profits for the past 20 years, how is its unwind going to positive for stocks?

Buybacks?  Where is the cash flow going to come from?

A new round of QE?  Negative interest rates?   Hope not.  They will try and it may succeed in keeping asset markets afloat for a short period but that well is running dry.

We suspect it will eventually destabilize money demand and the world will be in a world of hurt.  See our friend, Sebastian Edwards latest, Modern Monetary Disasters.

Key Levels

Taking out 2877 would be huge and get the S&P back above the 50 percent Fibo retracement level and the 50-day moving average.  To the downside, this week’s low at 2831 needs to hold or the risk of a trip to the 200-day at 2777 increases markedly.

We suspect Mr. Toad’s Wild Ride is just beginning.

Stay alert, stay tuned.

Source: https://global-macro-monitor.com/2019/05/22/key-sp-levels/