So, China ramps up its own breakout from covid restrictions and the ISM US Services Index comes in (yesterday) at a surprisingly optimistic 56.5 (above 50 denotes expansion)!
The former rings bullish in terms of Chinese assets, and the yuan, and bearish in terms of the US dollar and, thus, at first blush, rings bullish for US equities… Beyond first blush, however, China coming back on line — while some might say that it further alleviates production bottlenecks — clearly, net net, the consumption that comes with it can only serve to exacerbate the current inflation setup.
As for ISM Services, that’s very good (surprisingly good) news with regard to the present state of the US economy, and for the US dollar, and, thus, it’s bad news for the US stock market… I.e., the market’s not looking for good news right here, as good news is anathema to the Fed’s inflation fight… Remember, the Fed’s trying to slow things down right here.
That MACD (bottom panel) is beginning to look suspect right here as well:
While that may indeed be the look that signals yet another failed attempt at breaking out of the current bear market (our present base case), keep in mind (an open mind), it’ll also be the look that ultimately precedes the beginning of the next bull.
Asian equities struggled overnight, with 12 of the 16 markets we track closing lower.
Same for Europe so far this morning, with 15 of the 19 bourses we follow trading down as I type.
US stocks are mixed to start the week: Dow up 39 points (0.11%), SP500 up 0.01%, SP500 Equal Weight up 0.11%, Nasdaq 100 down 0.16%, Nasdaq Comp down 0.21%, Russell 2000 down 0.14%.
The VIX sits at 20.49, down 1.29%.
Oil futures are down 0.60%, gold’s up 0.44%, silver’s up 0.84%, copper futures are up 1.29% and the ag complex (DBA) is flat.
The 10-year treasury is up (yield down) and the dollar is down 0.12%.
Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), 23 — led by AT&T, base metals futures, Brazil equities, silver and base metals miners — are in the green so far this morning. The losers are being led lower by Dutch Bros, AMD, Disney, communication stocks and Nokia.
“As soon as you leave school, get ready to exchange obedience with curiosity, logic with psychology, risk-management with risk-taking, and theory with experience – otherwise, you won’t survive.”
–Andrei, Vizi. Economy of Truth
Have a great day!
Marty