Early AM Sell Off in Stocks
New Round of EU Tariffs Coming?
Right from the EU open the equities were under attack as the 3120 Sep SP level gave way late yesterday and opened the door for some continuation probes lower in the overnight session. The word on the street is a fresh round of US tariffs on EU goods is coming and as reported here from Bloomberg:
We have also seen increased rhetoric about large Q2 pension re-balancing here at month end which may see a massive rotation of some nearly $50bln on average of equities into bonds as CNBC’s Patti Domm reports here:
Let’s look at the charts, first up the SP500 and you can see the range box since the 16th is still intact and we are testing the lower bounds this morning as the SP is currently down some 24 points @ 3094:
The Nasdaq is also back in our breakout box and below 10160 area should keep pressure on for now, let’s see if NY open can get this ball back in the bulls court:
Speaking of Nasdaq and for those that continue to use prudence and being patient to buy pullbacks in this ferocious tech rally, we have a chart for you:
Now patience back in 1999 wasn’t on anyone’s mind and the parabolic trajectory of that stumbling bumble is unprecedented, but we have to say present day is exhibiting a lot of that same euphoria as if Barstool Portnoy isn’t enough of an example. However we must also consider who actually garners all the attention today. (FAAANM) So with the tech in mind, this next chart from @soberlook should make perfect sense then:
We aren’t saying many mean reversion types shouldn’t continue to look for some sort of convergence, rather we suspect that they may be wishing and hoping for quite some time, why? Because of the old rule that markets can stay irrational longer than you can stay solvent!
It’s a mantra one of our oldest and earliest mentors beat down our throats over and over again, and one which we highly respect till this day. It’s why we have a disdain for over leveraging and multi factor modeling because any data can be used to fit a narrative and we would just rather keep things simple.
Basically if you use levered risk eventually you will run into an asymmetrical payout, but you will also run into an even larger asymmetrical draw down!
One of those outcomes has a lucky future, the other does not!
Finally, Late yesterday we saw a larger than expected crude oil inventory build:
Crude +1.749mm (+1.5mm exp.)
Cushing -2.605mm
Gasoline -325k (-1.9mm exp)
Distillates -3.856mm (+100k exp)
We know the $41 are is big and we know a nearby gap is still unfilled, but it will be interesting to see if we continue to rotate lower here:
OK, we hope you continue to spread the word on our work here with your friends and colleagues, remember, knowledge is key and it is the absolute goal of Magnelibra’s Econemotion to put you always ahead of the pack. When your family, friends and neighbors ask, how you know all this stuff, we hope you point them in our direction. We hope you consider contributing to our work and joining as a monthly subscriber and for the professional traders and investors, join our Founding Subscription because the position tracker is a uniquely proprietary driven model designed as a global macro market analytic that we believe can help to advance your trading and investing game.
-Magnelibra Econemotions
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