The Markets continued their relentless rise this week with key US stock indexes up to new all-time highs. Key indexes were up about 2% for the week and 5% +/-YTD. Strong economic data, employment, wages growth and market breadth are all improving.

Forget about Risk On mode, its Melt Up mode.

The disconnect between market action and Geopolitical event risk has never been higher.

In an interview by Gillian Tett with Ray Dalio at Jackson Hole (one of my favorite NYC burger joints), just a few days ago, Dalio emphasized that economics is now secondary to political issues. He pointed out that income inequality at extreme levels leads to revolution and heads on lamp posts.

Short term, he sees the market chugging along. But longer term, the underpinnings stink and his eye is on the exits. His concerns are so high that he has even created an AI algorithm to determine when we have reached the tipping point. We as well. MarketGauge has active quant-based models designed to leverage both bull and bear markets. (See "Automated Trade-Ideas section here).

Taking things one step further this week, I had talks with two individuals who have worked at either the CIA or the National Security Agency. They were on opposite ends of the political spectrum, but both felt we were closer to war with North Korea than ever before.

One of them highlighted that the potential for conflict was exacerbated by Trump’s comments. The combo of historically low stock market volatility (VXX) in Melt -Up mode and the prospect of war with a nuclear power led by a sociopath, makes for tough risk control. This scenario goes far beyond Dalio’s longer-term concerns.

Speaking of stinking, Julian Assange, founder of Wikileaks finally got citizenship status from Ecuador after being holed up in their embassy for almost 6 years. His methods were quite ruthless. He didn’t shower for long periods, which caused a stink and forced Ecuador to grant him citizenship. Their hope, apparently, is to enable Assange to leave the Ecuador embassy, hence clearing the air.

Assange was directly involved in influencing the US presidential election after he released hacked emails from the Clinton campaign. WikiLeaks was formed in 2006 to help promote open societies by disclosing censored data kept from un-knowing citizens. His primary focus has been uncovering information from US and Western powers security agencies and politicians.

Since Assange is clearly not a fan of the US, the next question is will his new status embolden him to release information that further exacerbates global tensions?

The Retail sector, which had been languishing, exploded higher and according to our TSI (Trend Strength Indicator) is now the leading sector, surpassing Semiconductors.

Emerging markets, driven by energy and industrial metals, have been leading, a sign of inflation and growth for the Global markets.