Market Briefing For Monday, June 12
June 'boom' preceding 'swoon' might be the ultimate whipsaw following the 'trifecta' muddle through the week just past. Certainly, with pre-release Comey testimony on Wednesday; the actual hearing having a similar response in markets on Thursday and then the overnight stunning currency and futures swings while the British election was clarified you had all the elements of a roller-coaster on Disney's Space Mountain.
And as I've warned of all week long, the air-pockets in FANG stocks which did the heavy lifting of this market; cratered big time pretty much all at once. By doing so it validated by 'embedded' chart comments Thursday, that 'now' would be a good time for the market to break down a bit. Sure, it did recover partially at the close (expected too) but after another washout likely early in the week; and a pattern I'll discuss in the main video; look out.
What the week resulted in is a 'contended' vindication by President Trump, almost nothing new in economics (other than 'hope' for 'chewing gum and walking' toward tax reform and a healthcare bill amidst the political turmoil that the investigations still portend), and finally a 'dodged' upset in Britain, as dismay failed to toss-out PM May, though the duration of her rule is a bit tenuous.
Meanwhile, here in the U.S., matters can move forward with essentially new monetary reform, which amounts to a repeal of Dodd-Frank. This, I'm not so enthused about, given it's being done without a concurrent return of a new variation of Glass-Steagall (separation of brokerage, investment banking, as well as commercial banking; or at least have valid 'firewalls' to prevent such commingling of funds as were allowed to penetrate the firewalls, contributing largely to our forecast 'Epic Debacle' back in 2007-2008; which clearly must be avoided ahead). We are not in 'that' kind of mortgage derivative bubble but it is a variation with respect to concentration of money and detachment of asset valuation from economic realities.
Now, as then, people ponder whether it's the 'age of the machines'; whether there will 'ever' be a shakeout of meaningful market decline; or whether you now have algorithmic computer-controlled algorithms that will never unwind a higher than 35% proportion (for instance) of stocks. The answer is yes to all. How so? Because of course there is a proportion (probably larger than a third) that will never come out, and never should be liquidated. There also is a computerized system but in the final analysis it shouldn't function different than the old 'program trading', once things unwind below key support points.
In sum, though damaged, we continue to have a partial 'technical cushion' (above the primary rising S&P trend-line for instance) that inhibits declines from getting too far before they rebound, as periodically the short sellers are repeatedly run in.
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Disclosure: None.