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Allow me to share with you the Manufacturers’ Value of Shipments from our friends at the Federal Reserve. This data lags badly, so the chart below is updated through July. The update for August will be tacked on early in October. Still, the data set goes back a full third of a century, so it’s a fascinating cycle which even a 1st grader could see moves in broad sweeps up and down.

If you would surmise, as I do, that this thing isn’t going to just defy all history and blast straight higher, but instead will, as in the past, erode lower, you may be curious how it relates to the equity market.

Below I have helpfully used the layered chart mode to place the S&P 500 cash index on top of the aforementioned economic data, and as you can see, they line up beautifully (with some “noise” taking place around the unprecedented Covid mayhem).

Simply stated, if the manufacturing index heads south as it has in the past, it’s going to drag equities down, kicking and screaming, with it. That is unless of course the government’s profound insertion of itself into all-things-equities has mucked up things so badly that even THAT convention gets defied.

Much shorter term, I’ll point out that the mega-rally over the past nine trading days managed to do nothing more than get the /NQ to ALMOST match its prior peak (not lifetime, just the lower high) in the final week of August.

Since I’m relatively light right now, with almost 40% cash, I will seriously consider locking myself in a 1940s style refrigerator if the market plunges on Friday. Let’s just say I have mixed feelings.

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