Stocks Spiral, Gold Holds

"We believe the Fed is hamstrung  Politics, data, and price action tell us they cannot raise. Neither can they stimulate  unless we have a major market selloff.  Their effectiveness is waning, almost like the Emperor is doing a slow strip tease before our eyes. But looking at where we are now, how can anyone oppose Fed intervention, given that they are the cause of this? The lack of courage to take our medicine years ago has put us in a position where to take the proper dose now would kill us. So we are wed to the Fed. It is possible that they now need a quick washout to justify intervention on a massive scale. And that could be the inflation switch"

The risk in owning stocks is very asymetrical.The danger is in being long stocks now.Central Bankers and IMF leaders are beginning to telegraph that no new stimulus is coming. In the least they are flying test balloons to gauge mkt reaction. We believe sadly that the Fed is using stock prices as its barometer to make decisions on rates. Instead of deciding what to do based on the economy, it does so based on stock prices. The economy and stock market are untethered.-Echobay Partners July 19th

- Soren K

h/t Vince Lanci

Summary

The global stock selloff continues. Equity markets have seemingly drawn the conclusion from a confluence of events that Central banks' hands are currently tied. Perhaps starting with Draghi's speech last week, and triggered by Rosengren; the first wave of selling started Friday in US bonds and stocks. We strongly believe that the marketsare also now pricing in a Trump victory. That in effect Donald could be running unopposed in November.

Putting Out Fire with Gasoline

Wall Street Banks are pouring gasoline on the fire as Goldman, Deutsche, and other banks almost on cue began reminding us of the fundamentals of the markets being poor. We have seen this before. If the Street gets its punch bowl taken away, it sells us on why that should not be; Classic addictive behavior ignoring how bad the eventual outcome may be. Some of their analysis later today.Markets will be looking for their hand to be held today when Fed Gov. Brainard gives a scheduled speech.

Hillary's Health

Meanwhile, Hillary Clinton's health, and her lack of transparency about it, are another "landmine for suddenly vulnerable markets". As of this writing, SPX futures are down 11 handles and the Dow is down 100 points. Gold is little changed. but we feel vulnerable to irrational "estate sales" as banks will be looking for liquidity. We still see the bull flag trade outlined last week as very viable using what we call the "Tudor Method" of execution. That will be covered later in today's Technical Brief. We are still bearish on Crude oil and see $40 as a possibility. We have been bearish stocks and said so in July. But we know how many times the "top" has been called over the last 20 years. Still, third party analysis says Friday's event was rare.

In Focus- Global Selloff and the Gold Trade

Friday and this weekend MSM was correlating a Fed rate hike as the cause for Friday's fallout. We disagreed, and cited Fed paralysis as the cause and the markets focusing on the fundamentals in lieu of fed flexibility. And today's headlines are now reflecting a "loss of faith" in the Fed's effectiveness.

Friday After the Close- the damage may not be done

 

The Gold Trade

Contrary to popular belief, the Fed still is in control. They are just ineffective right now. Here is where we stand on our Gold trade idea of last week. We need to look at a couple indicators and will publish more in our Techncial Brief later this morning. For now: Lather-Rinse-Repeat

interactive chart here

Global/Market News

  • MSCI Asia Pacific Index dropped 2.1 percent
  • FRB Governor Lael Brainard speaks today-
  • WTI CRUDE DROPS 2.4% TO SESSION LOW, DROPS BELOW 50-DMA
  • Global Selloff Threatens to Spiral as Central Banks Angst Builds:BBG
  • European Stocks Retreat Amid Concern Over Central Bank Policy
  • Clinton Health Another Landmine for Suddenly Vulnerable Markets:BBG

WatchList

SYMBOLPRICECHANGE% CHG GC=F1,328.90-5.60-0.42% SI=F18.83-0.53-2.75% PL=F1,055.60-15.30-1.43% HG=F2.08-0.02-0.81% NG=F2.96+0.07+2.42% CL=F45.35-1.11-2.39% GLD126.75-0.84-0.66% USO10.59-0.37-3.38% 

On MarketSlant

Global Equities

Shanghai 3,021.98-56.88 (-1.85%)Nikkei 225 16,672.92-292.84 (-1.73%)Hang Seng Index 23,290.60-809.10 (-3.36%)TSEC 8,947.06-106.63 (-1.18%)FTSE 100 6,661.46-115.49 (-1.70%)EURO STOXX 50 2,988.62-64.58 (-2.12%)CAC 40 4,400.10-91.30 (-2.03%)

Currencies

EUR/USD1.1223-0.0016 (-0.15%)USD/JPY101.9125-0.5535 (-0.54%)GBP/USD1.3274+0.0002 (0.02%)USD/CAD1.3117+0.0066 (0.51%)USD/HKD7.7581+0.0015 (0.02%)USD/CNY6.6800-0.0014 (-0.02%)AUD/USD0.7505-0.0036 (-0.48%)

Economic Calendar

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised FromSep 132:00 PMTreasury BudgetAug-NANA-$64.4B-Sep 147:00 AMMBA Mortgage Index09/10-NANA0.9%-Sep 148:30 AMExport Prices ex-ag.Aug-NANA0.3%-Sep 148:30 AMImport Prices ex-oilAug-NANA0.3%-Sep 1410:30 AMCrude Inventories09/10-NANA-14.513M-Sep 158:30 AMInitial Claims09/10-262K263K259K-Sep 158:30 AMContinuing Claims09/03-NANA2144K-Sep 158:30 AMRetail SalesAug--0.1%-0.1%0.0%-Sep 158:30 AMRetail Sales ex-autoAug-0.3%0.3%-0.3%-Sep 158:30 AMPPIAug-0.1%0.1%-0.4%-Sep 158:30 AMCore PPIAug-0.1%0.1%-0.3%-Sep 158:30 AMPhiladelphia FedSep-1.50.02.0-Sep 158:30 AMCurrent Account BalanceQ2--$123.1B-$122.8B-$124.7B-Sep 158:30 AMEmpire ManufacturingSep--1.00.0-4.2-Sep 159:15 AMIndustrial ProductionAug--0.2%-0.3%0.7%-Sep 159:15 AMCapacity UtilizationAug-75.6%75.7%75.9%-Sep 1510:00 AMBusiness InventoriesJul-0.1%0.1%0.2%-Sep 1510:30 AMNatural Gas Inventories09/10-NANA36 bcf-Sep 168:30 AMCPIAug-0.1%0.1%0.0%-Sep 168:30 AMCore CPIAug-0.2%0.2%0.1%-Sep 1610:00 AMMich SentimentSep-91.091.589.8-Sep 164:00 PMNet Long-Term TIC FlowsJul-NANA-$3.6B-

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