Debate Drags Markets Down

Barchart ^ | September 27, 2016 | Nick Mastrandrea

[expat_panama]

Good Morning Traders,

As of this writing 4:30 AM EST, here’s what we see:

US Dollar: Dec. USD is Up at 95.225.

Energies: November Crude is Down at 45.57.

Financials: The Dec 30 year bond is Up 2 ticks and trading at 168.10.
Indices: The December S&P 500 emini ES contract is 33 ticks higher and trading at 2148.00.

Gold: The October gold contract is trading Down at 1336.30. Gold is 35 ticks lower than its close.

Initial Conclusion

This is not a correlated market....

 

...Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

Yesterday the markets made it very clear that the political debates will have an effect on the markets. Just when we thought we were out of the woods with the Fed last week, the markets drive us back to let us know that the political debates will have an effect on the markets going forward and we won’t be out of this wood until after Election Day which is little more than a month away. From our perspective we’ll just follow our rules of Market Correlation just as we did yesterday.

Just so you understand, Market Correlation is Market Direction. It attempts to determine the market direction for that day and it does so by using a unique set of tools. In fact TradersLog published an article on this subject that can be viewed at:

http://www.traderslog.com/market-correlation-is-market-direction/

As readers are probably aware I don’t trade equities. While we’re on this discussion, let’s define what is meant by a good earnings report. A company must exceed their prior quarter’s earnings per share and must provide excellent forward guidance. Any falloff between earning per share or forward guidance will not bode well for the company’s shares. This is one of the reasons I don’t trade equities but prefer futures. There is no earnings reports with futures and we don’t have to be concerned about lawsuits, scandals, malfeasance, etc.

Anytime the market isn’t correlated it’s giving you a clue that something isn’t right and you should proceed with caution. Today our bias is to the upside. Could this change? Of course. In a volatile market anything can happen. We’ll have to monitor and see.

As I write this the crude markets are lower and the futures are trading higher. This is normal. Crude and the markets are now reverse correlated such that when the markets are rising, crude drops and vice-versa. Yesterday November Crude dropped to a low of $45.03 a barrel. It would appear at the present time that crude has support at $43.50 a barrel and resistance at $47.16. This could change. We’ll have to monitor and see. Remember that crude is the only commodity that is reflected immediately at the gas pump. On Friday, December 4th OPEC reiterated their stance not to cut production. OPEC appears to be adamant about keeping production where it is as they believe that oil will rebound. What they haven’t figured out yet is that the more countries like Canada and the US produce their own crude (by whatever means) the more crude prices will fall.

Last May OPEC reiterated it’s stance not to cut production. The problem? Iran refused to cut production (as they are recently recovering from sanctions levied against them) and therefore no agreement was made. Could this change in the future? Of course, anything can happen in a volatile market.

If trading crude today consider doing so after 10 AM EST when the markets gives us better direction.

 

Future Challenges

Well the debate came and went and depending upon who you listen to either Hillary or Donald won. They have different means of reaching the same objective. The Democrats on one hand think the economy is doing fine and that the only thing that should be done is to tax the wealthy. Donald on the other hand believes that unless you make the corporations pay dearly for their sins, then nothing will change. I have to admit he was right in this regard. His idea? Tax the products that were formally made in the US (now being made in Mexico) as a tariff and make it so high that no company would consider moving to Mexico to begin with. This would require a renegotiation of all trade deals as what we have now isn’t working.

As I write this it is early AM Tuesday, 9/27 and the futures are rising. It appears as though the Smart Money thinks Hillary won this debate as they want her to be President. Why? They like the status quo and don’t want any change to that status quo. Our take is simply this: neither one of these candidates will be good for the American people. Hillary thinks taxing the wealthy will solve all problems but Hillary has a serious credibility issue as few trust her. Donald on the other hand has no diplomacy or tact and could lead this nation into a world war with that mouth of his. He even interrupted Hillary during the debate by stating “it’s business” when referring to the financial meltdown of 2008. Do we really need a President that will refer to a downturn as “it’s business”? So once again the American people are faced with lousy choices….

 

Crude Oil Is Trading Lower

Crude oil is trading lower and the markets are higher. This is normal. Crude typically makes...

[goldstategop]

Markets down?

Translation - Trump won.

[Fresh Wind]

He even interrupted Hillary during the debate by stating “it’s business” when referring to the financial meltdown of 2008. Do we really need a President that will refer to a downturn as “it’s business”?

B******t. He was talking about taking advantage of a situation that was not of his making and beyond his control.

[seastay]

How is it the usefulness of material goods can change simply by people just saying words ?

[expat_panama]

Welcome to the morning after the night before!   

Futures contracts for both stock indexes are matals are down a % after yesterday's stocks closed w/ our S&P500 back below it's 50-day moving average and the NASDAQ forsaking its new highs and also heading back to a 50DMA.  Supposedly current trends mean we're supposed to panic but my problem is just staying awake; gold and silver are still going comfortably at $1,337.19 and $19.49 --a plateau that's been flat for months! 

All we get today from the bean counters this morning is Case-Shiller 20-city Index and Consumer Confidence, the big fuss must be coming in a couple days on GDP Day.

For those that want to re-line the bird cage:

An Economy Reliant On Yellen Isn't Worth Saving - John Tamny, RCM
Desperate Central Banks Double Down on Failure - Stephen Roach, MW
Should the Fed's Discretion be Constrained by Rules? - George Perry,RCM
Time to Pass Baton Back to Fiscal Policy - Nouriel Roubini,Project Syndicate
We Overrate Impact of Global Leaders on Economy - Roger Bootle, DT
The Future of the U.S. Economy Lies in Mexico - Conor Sen, Bloomberg
Separating Econ. Sense from Nonsense - Richard Rahn, Washington Times
Obama's Right About Clean Energy - Ruckelshaus & Reilly, New York Times
What's Left? Economic Echoes of Trump vs. Clinton - Ralph Benko, TAS
Where Are Trump's Business Backers? - A. Ross Sorkin, New York Times
Trump's Tax Returns May Hide 1990s Bombshell - Shawn Tully, Fortune

[expat_panama]

...the usefulness of material goods can change simply by people just saying words?

Everyone has their own uses for things --uses that can remain steady as a rock-- but what we can have in common are market prices. Those babies can change a lot w/ words.

[Oldexpat]

DB drove the market down. The bank is failing and will require a too big to fail bailout by the EU which has no money.

[expat_panama]

we really need a President that will refer to a downturn as “it’s business”?

B******t.

LOL!!!  Some how my speed reading missed that one.

Of course it's business!  This is exactly what downturns are and even while we find times when nobody wants to buy our labor and capital at yesterday's prices it's up to us to still be happy and feed our families.  That's what I did back in '08 and me & mine were just great.

[trebb]

They started to panic a bit when Trump called out the Fed for practicing politics instead of sound fiscal policy and telling the truth about how fragile the “best looking aspect” of the sick economy really is.

[Lurkina.n.Learnin]

There was a thread on here last night about world markets were soaring because Hillary so soundly defeated Trump. I guess you can have it both ways.

[Lazamataz]

This is the clearest indicator yet Trump did well.

[Fresh Wind]

Has the author ever heard the term “business cycle”?

Smart people look for opportunities when other people are jumping out of windows, or crying about “unfairness”.

This is just one of many excellent reasons to vote for Trump.

[be-baw]

After the debate futures are up.

[expat_panama]

world markets were soaring because Hillary so soundly defeated Trump

People see what they want to see and if they don't the make it up. Euro stocks closed down last night and Asia rebounded to where it was the day before.  Hire me as a pundit and I'll 'prove' that this outcome means everyone's happy (or angry) that Trump (or Hillary) won (or lost).

Capitalism, ya can't beat it!!!

[Diana in Wisconsin]

Does ANYONE under the age of 60 (me excluded, of course!) have ANY basic knowledge of business cycles, or how manipulated the market actually is? Any idea what’s going on, on the World Stage? How about the Fed? Do they know how messed up THAT is? How about the Globalists with their fingers in EVERYONE’S pie?

Is ANYTHING, even remotely connected to business or economics even TAUGHT in High Schools these days?

People are just SO clueless it astounds me. Don’t know why it still does, but it does!

[LS]

Not a believer.

[Lazamataz]

I don’t understand