Woah-oh, we're halfway there….
The Russelll 2000 Index is halfway back to 1,750 after falling from there to 1,300 (25.7%) since the August highs. Yesterday I expressed my misgivings about the recent low-volume rally and it's easy enough to manipulate the Dow, with just 30 stocks, the Nasdaq, with just 100 stocks and even the S&P 500 has half it's market cap in the top 30 stocks so it only takes a bit of firepower aimed at the leaders to prop up the markets so unscrupulous people can pretend things are better than they are.
Not so much the Russell, with it's 2,000 small-cap stocks, which are more evenly distributed throughout the index or even the NYSE, with it's 2,800 companies that trade 1.8Bn times a day – those are VERY EXPENSIVE to manipulate but, the good news is that they generally follow the other 3 so manipulating the Big 3 usually leads to the NYSE and Russell following suit.
Still, when we get to major inflection points, it's often the NYSE or the Russell that warn us that things may not be quite as they seem. The NYSE topped out at 13,600 last January but then plunged 10% in two days and never regained its highs in the Summer, which is one of the things that kept us cautious while the rest of the indexes were making records. In December, the low for the NYSE was 10,723 but we'll call the support line 11,000 and that's a 2,600-point fall (19%) and now we're back to test the 50 dma at 12,500 after a 13.5% rally, 2/3 of the way back to the top.
The Russell's 200 dma is at 1,588 and we need to see both of those indexes cross over before we waive the all-clear flage and get back to more bullish betting (we have plenty of bullish bets so less hedges, really). Until then, we're crossing our fingers that we don't have a repeat of last January, where the market collapsed right after the State of the Union address, leading some people to believe the Administration had manipulated the market into the address in order for Trump to brag about it.
There was nothing to brag about last night and Trump did not mention the stock market, which is down about 5% from his last address. Trump did take credit for some interesing things yesterday, like the number of Women in Congress which, we would have to admnit, is because of Trump as hundreds of thousands of women marched against Trump's election in Washington DC and thousands of women we're still pissed off enough two years later to run for Congress on a platform aimed at stoping Trump before he could destroy more women's lives. Trump also thanked them by pledging to attack Roe vs Wade in the courts.
Trump called Mexico "The lawless state of our southern border – a threat to the safety, security and financial well-being of all Americans." I imagine Carnival Cruise Line (CCL) and others will not be impressed this morning. Of course this whole border security thing is BS, just a story Trump tells to make his base scared enough to want a wall where Trump can direct tens of Billions of Dollars to his builder buddies, with kickbacks for his family for decades to come – THAT is why the wall MUST be built!
Other Trump claims were a bit more BSy:
“We have created 5.3 million new jobs and importantly added 600,000 new manufacturing jobs.”
Actually it's 4.9M so only a 10% lie and only 436,000 were manufacturing jobs so a 40% lie there but, more importantly, Trump didn't do anything, we lost 2.4M manufacturing jobs under Bush and Obama got 900,000 back and now Trump has added 436,000 but we're still over 1M jobs short so "not fixed yet" is more accurate than "creating jobs". It's not a new job until it's a job that didn't exist before…
“Wages are rising at the fastest pace in decades.”
Actually inflation is rising at the fastest pace in decades, wages are barely keeping up at just 1.3% ahead of inflation in 2018, slowing from the pace set in 2015 and 2016 BT (before Trump). The White House argues that traditional economic measures do not full capture increases in compensation, such as bonuses (handed out on Wall Street and to Corporate Executives), and so real wages have actually increased even more than shown in the economic data.
“Nearly 5 million Americans have been lifted off food stamps.”
3.6M people (40% exaggeration) have stopped RECEIVING food stamps since Trump took office but mostly because he changed the rules so Millions of people are no longer eligible and immigrant families have been scared off the program as receiving food stamps brings the attention of ICE, who like to rip families apart in the middle of the night – that's a lot scarier than going hungry – just ask Anne Frank!
“The U.S. economy is growing almost twice as fast today as when I took office, and we are considered far and away the hottest economy anywhere in the world — not even close.”
Trump's first quarter in office showed 1.8% GDP growth and last Quarter showed 3.4% GDP growth and Q4 is thought to be much lower but has been delayed due to the Government shutdown – so who know's what's true there. Obama's 8-year average, even with the Bush disaster to work out of, was 2.1% and Trump, so far, is averaging 2.8%, which is still a good 33% faster but 33% isn't 100%.
“Unemployment has reached the lowest rate in half a century. African American, Hispanic American and Asian American unemployment have all reached their lowest levels ever recorded.”
Actually, we're only back to where we were this time last year (4%) and African American Unemployment bottomed out at 5.9% in May but is back to 6.8% as of January and Asian unemployment was never something I was worried about but now I am as it popped from 2.1% in May to 3.2% in the last report.
“And now, for the first time in 65 years, we are a net exporter of energy.”
Actually, we've been a net exporter of energy since 2015 – under Obama.
“We recently imposed tariffs on $250 billion dollars of Chinese goods — and now our Treasury is receiving billions of dollars.”
Treasury data show that there was an increase of $6.7 billion in customs duties collected in the fiscal year that ended in September, and it’s possible most of the increase is due to tariffs. But the exporters do not pay the tariffs; it is the importer, who in turn passes it on to consumers. A study by the Council on Foreign Relations estimated 115% of the money raised from tariffs is being used by the Administration to aid farmers hurt by the tariffs, so it’s a net loser.
“The next major priority for me, and for all of us, should be to lower the cost of health care and prescription drugs — and to protect patients with preexisting conditions.”
We were hoping he'd say that and took a bet on LABD yesterday – we'll see how it goes.
Without me, we'd be at war with North Korea
What???
An economic miracle is taking place in the United States — and the only thing that can stop it are foolish wars, politics or ridiculous partisan investigations. If there is going to be peace and legislation, there cannot be war and investigation. It just doesn’t work that way!
WTF?
Anyway, lies and threats were the theme of Trump's message – just like any Mafia guy who takes you to dinner, tells you stories and then threatens to kill you and your family if you mess with their business. We'll see how the market reacts to this mess but, so far, the Futures seem to be holding up so we're just looking to make those technicals and all will be well(ish).
