Idiocracy Meet The Brick Wall Of Deflation

Contrary to ubiquitous belief, raising interest rates at the end of a ten year debt binge is not "reflationary"...

One of the undertold stories of the past year has been the absolute obliteration of the U.S. Dollar, which has attended the global risk rally. When global growth expectations are strengthening, the dollar weakens, when global growth expectations weaken, the dollar gets stronger. This week, the dollar put in a triple bottom. The S&P 500 is trading inverse to the dollar...

https://www.investing.com/analysis/currency-speculators-sharply-decreased-us-dollar-bearish-positions-this-week

When the dollar strengthens, commodities and oil fall, Emerging Markets take a hit, and corporate profits translated from FX back to dollars fall. Volatility rises.

The S&P 500 versus the $USD:

Here we see the $USD, with copper as proxy for global growth. For a while, the dollar strengthened with copper due to Fed tightening, but that correlation reverted back to the normal negative in 2017:

Copper with EM stocks:

EM stocks with S&P volatility:

Instead of worrying about the dollar going down, gamblers need to worry about the dollar going up...

Why? Because it's the end of the cycle:

U.S. factory output was flat for the second straight month in January, raising questions about the manufacturing outlook as production dropped in the aerospace, plastics and food industries.

The lack of growth in U.S. manufacturing, reported on Thursday by the Federal Reserve, confounded analyst expectations for a 0.3 percent monthly gain

The industrial sector has received support over the last year from a strengthening global economy."

Here are some bonus charts:

I was reading a blog on Stockcharts.com today, and here is what he had to say:

"History and Fibonacci Say We Topped Friday" (Tom Bowley)

"The last time we saw panicked selling (before the past few weeks) was in August 2015.  Let's take a trip down memory lane:"

I re-created his chart from 2015:

"The drop was a little more than 10%, the VIX spiked to 50, a major counter trend rally topped at the 61.8% Fibonacci retracement level...all with a topping shooting star candle"

And here is the chart from now:

"The drop was a little more than 10%, the VIX spiked to 50, a major counter trend rally has potentially topped at the 61.8% Fibonacci retracement level...all with a topping shooting star candle"

Of course, there's only one problem with the re-test thesis, which is that it's not 2015, and large caps did not participate in this decline.

Yet.

Nor did Emerging Markets. Because there's a global synchronized reflation. Don't you know?