Weekend August 11, 2018
Tom McClellan points out the markets are in a weak seasonal period of August September. That and the fact that the US is way ahead of the rest of world markets had more to do with Friday's sell off than the weak Turkish lira.
SPX versus VEU Vanguard All Word ex USA
The SPX and VEU, purple line, fell together in early February. The strong US Dollar has caused the VEU to fall back to its February lows. The SPX has simply gotten too far ahead of the rest of the world markets. And so right at the previous January resistance high, the US markets turned back Friday.
On Balance Volume
On balance volume looks rather toppy in the bottom panel.
US Dollar and Gold
The strength of the US Dollar has tanked gold and silver and mining shares. Note the strong up move of the Dollar Friday. The Weekend WSJ has an excellent chart of the Turkish Lira.
Trump's negotiations for Turkey to return an imprisoned American pastor failed so now he is turning up the heat with both currency wars, halving the Lira, and threatening new tariffs so Turkish goods are not attractive due to the weakened currency. See social mod section below for comment.
US Dollar and Gold Shares Negatively Correlated
Here I substituted the XAU index of gold shares for the price of gold. I added the correlation below which is near completely negative.
So we wait for a top in the dollar to enter a gold or silver position.
Energy Service XES Two Hour Chart for Two Months
On a day when the DJIA was down 196, ES actually finished the day up 20 cents. And notice the MAs are all converging, the usual preliminary to a change in trend. I am guessing our new direction will be up.
Bottom Line
Expect a stock market correction lasting into September.
Interest rates fall in this situation.
Watch the US Dollar versus gold silver mining shares for an extreme and what should be an excellent entry on the long side of metals.
Energy service finally appears to be bottoming.
Social Mood
NFL Players take knee despite NFL policy
Erdogan Defiant as Turkey Slides to Financial Crisis
I suspect that Trump is making a point to all the tin pot dictators on the planet that taking Americans hostage to further their private schemes is a very bad idea. And it is certainly past time to do just that.The Weekend WSJ warns that such financial instruments should be used sparingly.To which I posted a question, gee would you be so cautious of Editor Paul Gigot was jailed in Istanbul? And I suspect this part of his strategy for dealing with North Korea and Russia. This is what Trump fans like, Trump strikes back.
That said, I worry that the tariffs will take a toll on American business, there are continue to be many reports on just this outcome.
Chuck Thompson at the Socionomic Institute had an excellent article on the popular decline of football.The players are creating their own demise and do not realize it. Trump realizes this 'protest' which will not stop a single of the 70 civilian shootings in Chicago last weekend, resonates with his base.
Maxine Waters urges open attacks on Republicans, and the November elections are 2.5 months away, What will she want by election day?
Tom McClellan may well be right that markets bottom in Sept. But my recollection is that all the crashes happen in October.
As Trump ramps up the Tariff Game, social mood is declining, see SPX versus VEU in the first graph, world wide.
Caution,
Comments