The dragon dance is a customary way to celebrate the Chinese New Year.
We all know what dragons breathe-FIRE!
Furthermore, where there’s smoke, there’s fire.
Plus, as the element this year of the brown earth dog is water, bulls now have to hope its enough water to put out the fire, rather than just enough water to create steam.
Here are just a few of today’s fires:
- Imposing tariffs on steel and copper-will make it more expensive to buy, and possibly start a trade war.
- Chairman Powell-“No signs of wage inflation. By continuing to gradually raise interest rates over time, we’re trying to balance those two things and achieve inflation moving to target but also make sure the economy doesn’t overheat.”
- Volatility on the rise-like throwing a match on a scarecrow made of straw.
- Dollar, on the upward trajectory, changed course midday.
- The tax cuts-has resulted in lots of corporate stock buybacks-but weak GDP will outweigh positive results.
- Trouble in the White House with Sessions, Hicks, Jacobson, McMaster and Kushner.
The Year of the Brown Earth Dog brings many warnings from several Chinese astrologers. I have written about these in earlier Daily posts.
Yesterday I asked, “Is this a good time for active investors to settle up and go to cash?” Today, I ask the same question, only with different answers.
At the sake of repetition, the biggest warnings are twofold.
First, the water element and the prediction of starting in October, a 5-year bear market.
Secondly, that President Trump is born the Year of the Fire Dog, hence, he could have a huge impact on world events that shake up the market.
Today, the dollar’s weakness, along with the pop in rates, is not exactly the inflationary setup I expected.
Rather, it reflects the fear that we saw in the rise of volatility and gold.
However, I had affirmation on both stagnation and/or stagflation today from 2 pretty smart men.
Paul Tudor Jones, a former Floor mate, said that, “Standing there is none other than Inflation Nation, led by the fiercest warmonger of them all: Commodities.”
Alan Greenspan said, “Budget Deficits engender some introduction of an acceleration of money supply and price level. In other words, inflation is going to enter into stagnation as I’ve been arguing for a long time. We are already moving into stagflation which actually feels better than stagnation.”
Yesterday I also wrote, “Nevertheless, it also sent the U.S. dollar rising against foreign currencies. That means my usual hedges-long metals, oil, etc., have not set up well at this time.”
Today, the flight to safety, especially after the dollar dropped, presented an opportunity to start building a position that favors inflation.
So, cash is king for many.
Yet, these Daily’s intend to educate those not familiar with what wild commodity rides look like, so as to broaden trading perspectives.
S&P 500 (SPY) Confirmed warning phase. 266 managed to become intraday support. More Importantly, a weekly close under 268.50 will not look good
Russell 2000 (IWM) Held 148 today. 152 big resistance and 146.25 the 200 DMA support
Dow (DIA) Confirmed warning phase with 251 resistance and 244 support, then 240
Nasdaq (QQQ) 163 is the 50 DMA-and that’s the biggest news-if it can hold it or not