Tuesday, April 3, 2018


We are witnessing Globalization imploding in real-time. You know, a buying opportunity...

No sooner did the Trump White House issue its list of China trade tariffs than China responded, after hours:

"The U.S. proposed imposing 25 percent tariffs on about $50 billion worth of Chinese-made products, focusing on high-tech items from semiconductors to lithium batteries"

China says it will respond with ‘same intensity and scale"

Normally, I don't make "short-term" predictions, but the set-up at this critical mass juncture is human history's highest stakes poker game.

Stepping back first for some perspective. The Dow already failed the "retest" of the February low, and is now back-testing the prior support line:

The S&P 500 however is where the real battle is being fought between the bulls and the bears. 

Two weeks ago, the S&P sliced through the 50 day and then retested it from the underside. The retest failed and the subsequent rollover crash was -5% in a straight line to the 200 day. Then, last week, the 200 day was tested multiple times finishing the week above the line. Yesterday however, the S&P crashed through the 200 day and then commenced a retest rally back through it, ending 15 points above the line today:

Zooming out on the S&P, tells the story. Bulls viewed last week's action as a successful "retest" of the rising 200 day moving average. However, the underside backtest today is deja vu of the 50 day backtest failure. Suffice to say, bulls can't afford to be wrong the way they were two weeks ago at the 50 day. Because a straight line drive back through the 200 day gets into the "deleveraging zone".

As always, don't take my word for it:

ZH: $100 Billion Forced Sale At 2535

"at 2535...the current “43% long” gaps through “neutral” and all the way to outright “MAX SHORT”—which then would require a notional deleveraging of SPX closer to ~ $100B."

"Thematically, longs in both “cyclical growth” AND “secular growth” are again massively underperforming consensual underweights / shorts in “defensives,” which of course rally alongside bonds and are thus viewed as “low vol / low risk.”

"we are increasingly ‘AT’ OR ‘NEAR’ PRICE-INFLECTIONS across equities, fixed-income and commodities…which just-happens to coincide with the slowing in global data."

"Crude nearing sell levels"

"By one measure, equity investors have been this disinterested in guarding against tail risks -- or an extraordinary spike in volatility -- only three other times in the past decade. The Cboe SKEW Index, which tracks the cost of out-of-the-money S&P 500 Index options, has been falling for the last two weeks, and is now two standard deviations below its average level"

"Investors bought up protection in early March, and cashed out as the downside move materialized"