Market Snoozes, But Keep Your Tools Close By

It was a choppy session today, which given where the indices sit on the both the Daily and Weekly charts, makes sense.

Choppiness also makes sense, given the potential government shutdown and the vague details on the progress of the China-U.S. Tariff discussions.

Today was a good day to have all your tools around you, but not act on using them to build anything new in your portfolio.

Rather, today was a good day to sit back amongst the clutter and take a little snooze.

Meanwhile, the U.S. Dollar continued its gains, while the interest rates remained relatively flat.

The Economic Modern Family vis a vis Transportation IYT gave the bulls solace.

Actually, all the Economic Modern Family held up well.

Because of the dollar’s strength, the big losers were commodities.

Are commodities too cheap relative to equities?

With the dollar at new 2019 highs, that is good news and bad news for the market.

The good news is that the dollar buys more for Americans.

The bad news is that it hurts U.S. exports and therefore U.S. production and employment. It also makes the United States a less affordable travel destination for foreign visitors.

On the other hand, it encourages Americans to travel abroad, looking for good deals. Baby Boomers are booking trips 9% more than they did a year ago.

Circling back to commodities, the strong dollar has a negative influence on demand.

However, individual commodities can also have fundamental supply and demand characteristics, so they might move one way or another at times regardless of the direction of U.S. currency.

And that brings us back to tariffs.

A new round of Chinese economic data has pointed towards more weakness. Furthermore, if the U.S. and China fail to break their trade deadlock by the March 1 deadline, a new wave of tariffs will automatically kick in, heightening the risk to the global economy.

This is what happened during the Great Depression, following protectionist practices.

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Moon Kil Woong 1 week ago Contributor's comment

China worries still are at the forefront recently. Until some resolution is done the threat of more tariffs, a weaker global economy, higher inflation, and higher interest rates will keep the market from moving up strongly.

Michele Schneider 1 week ago Author's comment

In the scenario you present as a strong possibility, I totally agree-thanks for writing!