Market Briefing For Tuesday, June 26

'Rinse & Repeat' - has been a reference I've repeatedly made to so many effort to revive every effort to 'correct' the overpriced Senior Averages for a few months now. Nevertheless risk predates it all to the parabolic January thrust, which we not only viewed as unsustainable, but which led to 'flash crash' conditions (delivered in early February); and a 'ragged pattern' that followed throughout the Spring.  

 

  

 

It was indeed 'rinse & repeat' for the rallies, the failures, oscillating S&P or Dow moves; none of which maintained traction in any direction. Now we're in a 'wider' scope of cycles involving forms of 'rinse & repeat', which also in many ways are unresolved.  

First of all the market; with the Summer beginning with expected volatility, as identified forthcoming not by after-the-fact breakdowns like tech-stomp Friday, or washout Monday; but starting two weeks ago with nonsense like 'sweet-spots' for markets being proclaiming by too many pundits.  

In reality it was a series of short-squeezes every time they leaned-on that small universe of stocks that did the heavy-lifting of this market for months; and they never saw upside follow-through because there was a dearth of a needed flow of fresh money to keep it alive  

That will also likely be the case this week; with Peter Navarro's repudiation of the Bloomberg or Wall Street Journal morning stories (that accelerated the ongoing decline from last week in the FANG stocks as only the oil-led Dow boost held it together on Friday) suggesting 'restrictions on all foreign investments in technology'; with an obvious target identified as China.  

 

  

 

So Navarro took the pressure off that (far better remarks that his asinine comments about Canada weeks earlier) by saying nobody was singled-out and that indeed China was guilty of industrial espionage (basically) as well as intellectual property theft for years. He didn't mince words, but at least it was proper English without personal insults.  

Notably Navarro defended the markets (that part he shouldn't focus on as there will be market ramifications of this fight, call it 'trade war or not') over the months ahead. He spoke in terms of being friends but negotiating, and that takes us right back to whether or not the USA if bluffing or not. To that degree he might not have misspoken; but while assuaging markets a bit; it seems in foreign capitals they might say 'ah ha we knew it's all a bluff'.  

If everyone thinks it's a bluff; then here we go again; rinse & repeat more. So we'll get a possible further selling wave (some compelled) tomorrow; a likely Tuesday turnaround; and then rinse & repeat later in the week.  

And I suppose we could extend 'rinse & repeat' to the monetary policies of a few central banks; the affronts within the EU about how to 'reform things' after Macron and Merkel's talk; and even the 'rinse & repeat' oil production squabbles involving OPEC and others, like Russia.

Every new affront ratchets up already tense market volatility, just like it will rile up the mob-like emotions of fools and some Congressional members (I have one in mind but this isn't the forum to discuss her). Or might it be? A concern will develop if we continue to see how this becomes less political debates for the media to referee, but rather a 'kabuki-threatre' droning on and on by media that might at some point be themselves (if not deserving already) be the accelerant of hostile behavior that goes beyond politics. If that goes too far, as to enrage people beyond activists into radicalism; well it's a shame and deleterious to our Democracy, and hence markets too in a broader sense. So far the markets have paid scant attention to all that.

 

  

 

In-sum: Monday was a continuation of the decline accelerated by 'fake (if you believe the White House response) news' on investment prohibitions. The 'trade issues' themselves persist; China threatens tit-for-tat; and this is all getting out-of-hand. At some point it's beyond 'rinse & repeat.  

I also suspect North Korea was part of the unsung story here. Trade deals with China were not far from the core of dealing with Pyongyang; although it was only mentioned obliquely on occasion; even by the President. If this all melts down with China; so too will the ongoing progress toward peace and denuclearization of the Penisula. I think the market sniffs that too.

Technically the S&P has broken the pattern levels I outlined by video and rebounds should be anticipated but not much beyond short-covering. If at all possible they'll create a full 'rinse & repeat' cycle back up; but doubtful it can be sustained.  

 

  

 

Bottom-line: the only thing that really occurred on Monday was fulfillment of the expectations from last week. The key was the 'inability' to rally to a series of higher highs over the preceding two weeks; which I thought very clearly opened-up the risk of breaking down.  

That's why last week I termed a forthcoming break of the support points as a 'confirmation of weakness', not a sell signal (hate that term) as such. To those who want a 'signal', it was over those two weeks when momentum stocks failed to advance, and distribution under-cover of Oils and others of course kept things alive, but not progressing.