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Thursday, March 28, 2024

SOTU Tuesday – Trumped-Up Rally Continues

Everything is Awesome!

Well, that's what they want us to believe this evening as Trump gives his State of the Union message.  One year ago, Trump taled about the $8Tn the stock market gained during his first year in office and the S&P had run all the way up to 2,872 into his Jan 30th speech but then we collapsed back to 2,532 just a week later (2/9) and it took us until September to get back to where the BS pre-SOTU rally had taken us.  

Now we're at 2,724 so the market is down a couple of Trillion Dollars but has also ralled back 16% off the 2,346 low just 6 weeks ago in December and thank Trump it did or he'd have to be explaing how the State of the Stock Market was WORSE than when he took office.  But thanks to the Fed reversing course and the Administration telling us how AWESOME their trade talks with China are going and thanks to the economic data the Administration has released showing the Government Shutdown was GOOD for the economy – EVERYTHING IS AWSOME!

Of course, having actually seen the Lego Movie, I know that things were not, in fact Awesome but a brain-washed society that had fallen under an oppressive regime run by a TV-obsessed, orange-haired psychopath (relax, it was 2014 – no one was picking on Trump – it's just a very strange coincidence) and had to be saved by a girl who looked a lot like Alexandria Ocasio-Cortez who did all the work while some nobody got all the credit.  Again, coincidences…

Image result for hedgingStill, I would not go into today's end without hedges – just in case we have a repeat of last year and the great efforts to prop up the market end as soon as the President is done telling you how great things are.  Trump also bitched about Government Regulations and said it was ridiculous that we were once able to build the Empire State Building in one year and now it takes 10 years to get a road built but 5 people died building the Empire State Building and 60 people died building the First World Trade Center while NONE died building the second one – BECAUSE we have learned to make construction safer.  President Trump wants his construction permits now and he'll bury the bodies later – so great!

Last year, Trump praised "Mad Dog" Mattis but the Secretary of Defense resigned over Trump's policies.  Trump also vowed to lower prescription drug costs (still waiting), to do massive infrastructure projects (still waiting) and to rebuild our nuclear arsenal (which has led to breaking our anti-proliferation treaty with Russia, who are now also developing new missiles so congrats on re-initiating the Nuclear Arms Race after we spent 40 years disarming each other!).  

Trump called for bi-partisanship ahead of the longest shutdown in history and now, with a Democratic House, he plans to call for it again but, after sticking it to the Democrats for 2 years – I don't think he'll have many takers.  Our dysfunctional Congress is back in session in February and we'll see if anything can get done and, don't forget, Trump is still threatening to shut down the Government again if he doesn't have his wall funding in 30 days.

Whether or not it's true that the Shutdown caused the recent 20% crash in the markets or if it was just a huge coincidence, as Team Trump claims, what's not a coincidence is that we're heading right into the 200-day moving average on the S&P at 2,741.55 and I'd call 2,400 and let's say 15% over that is 2,760 so that's the line we'll watch closely (dmas change daily) for a rejection and a 360-point rally gets 72-point rejections to 2,688 (weak) and 2,616 (strong) but that's OK as the 50 dma is down at 2,609.75 so a bit of consolidation between the 50 & 200 dmas will be nice and healthy.

We've gone back to anemic volume during this rally.  In the 10 trading days from Dec 17th to Dec 31st, 1.87M shares were transacted on SPY while, in the last 10 sessions of January, also from the 17th, just 900M shares were traded in the "rally" so it's a 50% decline in volume while the S&P moved up 10%.  That means the last 10% is build on a very weak foundation indeed!  

Other than saying BE CAREFUL, I'm not making any predictions but PLEASE, do be careful as it would suck if we give up all these lovely gains.  We'll be checking our hedges today in the Live Member Chat Room but I think we're well-covered and we'll also see if the S&P can indeed take out the 200 dma so the President can say "at least we're only down 5% from last year."  

 

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