Market Briefing For Friday, March 29

This is not a 'litmus test' for stability given the market range-bound performance, although several narrow swings around (over or under) the identified (some say 'Maginot Line' of the market) near S&P 2800, has been the expectation for the market over the past couple weeks.  

While little has happened technically, it might seem simply toppy or in a 'waiting for Godot' poise ahead of 'potentially' a good deal or at least 'a deal' with China, that provides a modicum of psychological relief for the market. Realizing things won't change instantly, it's nevertheless a pretty-much essential development to 'get a deal'.  

Meanwhile (though that too isn't surprising even as media suggests it as unexpected), Mexico has benefited from the ongoing trade war; just a bit more than Canada or others. Proximity to markets and devalued currency moves years earlier put them in a great position for a number of manufacturing and exporting opportunities. Having just returned to the U.S. I can certainly appreciate the extremely favorable Exchange Rate, which frankly makes me wonder why I've not visited more often. 

I know that's not the common perception of Mexico these days; but at least in Puerto Vallarta, starting with a wedding party of about 70 from Missouri; there was a very relaxed, affordable and good time by all. A California friend even signed a contract for his 2nd brand new condo, in the playful Zona Romantica area. That attests to faith Mexico is able to get thru a tough time with the cartels (PV is in Jalisco State, which has a 'stable' cartel, if that term is appropriate; it's sort of mafia like I'm presuming as even the 'clubs' must get along with Policia and so on).  

I mention this on my return, since aside the 'new' NAFTA 2.0 (really a proper description of the Agreement with Mexico and Canada), which Americans generally focus on only related to manufacturing; currency devaluations (around 19 Pesos to the Dollar) make it a tourist mecca if you go to the right locations. (Per the State Dept. that's Puerto Vallarta and Cabo San Lucas and Cancun; the latter two just if flying and might not be as stable as PV.) A sales manager of one new condo project in fact was candid saying many customers were wealthy Mexicans trying to have beach enclaves, but avoiding the more 'contested' locations.  

So ironically (my last comment about this trip) the Federal failure really to get a proper grip on security elsewhere has probably driven buyers and tourists to PV; although it was discovered eons ago (Iguana is a restaurant in the former home of Elizabeth Taylor & Richard Burton for that matter; oh .. not my favorite of the trip; it was a humble tiny place called 'Red Cabbage'. Want fancy? 'Cafe de Artiste' was a production; and if one wants basic long-lines for tacos; there's 'Pancho's Tacos' of course ... or bargains ... 2 for 1 cocktails and all the fish taco you can eat at 'Joe Jack's' for about $7. See what I mean?).

Technically the market's in stability mode still; and recovery mode for me, as per usual after a trip. So let's hope that 'stability' mode endures for Mexico, after a deal is made with China; and also for the S&P here.  

  

No kidding; this stock market is almost where I left it a week earlier as there is some significance that it has been able to absorb huge news, on the political front, along with the lowest rates in years, with barely a stutter along the way. Ignoring wild news (good or bad the beholder's view) is normally a positive. At least in this case the market (and Pres. Trump) view it as a relief and with 300 pages in the Mueller Report; I'd not 'make book' on nothing more coming out of it 'over time'.  

But this market, while extended, is essentially on hold pending more. I for one don't embrace the idea that Lyft going public at $72 / share will pull so much money that nothing else moves; but of course you won't be buying it in the open market at 72; and maybe it pushes 100 within a day or two?  

The Yield Curve is not all-telling like it is historically; there's more to it, and that includes the 'trade war' aspects. Everyone knows the 'curve' is never this flat or inverted without inducing a recession; but as you're well aware, I believe the nuances of this were evident a year ago; and I'm thinking it goes into a process of 'ending' while most pretend there is a slowdown beginning. All kinds of data support my year-long view.

In sum: We called the market to go 'to the Moon' if Trump won; and it did. Now we see North American markets strengthening over time and I suspect Canada (which also has a favorable currency relationship, at the same time it's not incredible) and like Mexico sets-up an improved relationship, that is often masked by politics regarding border issues (of course they exist and even in Mexico they are cognizant of Central American gangs penetrating their country, which they do not want). In this 'mix', we'll get a better environment for trading with China, whether it takes a few more weeks or months (likely April or May) for a deal.

Speaking of the near-term focus not on nonsense about Lyft (by that I mean tomorrow's reports that will tell you it's up 30, 40 or 50%, when most likely it will initiate trading at a price and do very little thereafter). I believe most such IPO's matter to the insiders, and not retail buyers. It may well be like others; and something to 'fade' after the initial run-up; or if interested in the investment side, wait for Lockup Expiration later.  

  

The best example I cite is Facebook (FB), which pushed 70; then plunged to under 20 after Lockup expired, and then was 'cleared' as a buy. Of course I can't say this will do that; but you have to presume early seed investors will be looking to 'at least' partially monetize their investment when they can, and that's after Lockup expires. So we shall see.  

As to the macro view; my view was that the projected December low, in the S&P 2300-2400 area was likely an initial low; with a retest for a slew of small-cap stocks ongoing for weeks and weeks; while most of the present strength is dependent on big-cap momentum darlings; that is a shade of 2018 rallies; which means more risk than opportunity.