January 10, 2018
Mish's Daily
By Mish Schneider
The uncertainty of this administration’s’ policies have come home to roost once again.
I purposely use the word “roost” as we are nearing the final month of the Year of the Fire Rooster.
In line with the astrological predictions, it has been a banner time.
However, will those banner times continue?
Today, Canada came out with a statement that they are convinced Trump will announce withdrawal from NAFTA.
On top of that, China is reportedly thinking of halting the US Treasury purchases. This move, would be in retaliation for any added tariffs Trump might impose on Chinese goods.
Companies that have benefitted from NAFTA, General Motors, Ford and countries such as Mexico and Canada took a hit after the Canadian supposition came out.
Chamber of Commerce CEO Tom Donahue warns that a pullout from NAFTA would mean absolute destruction for the economy.
Trump is considered a “wild card”, which is a bizarre yet accurate way to describe this President.
Nonetheless, we got an Earth Dog coming ‘round the corner.
Have I mentioned that Trump is born the Year of the Dog?
The macro picture didn’t really change very much today.
Until the Dow breaks 25,000, any correction is most likely healthy.
The index that would have the most volatility and vulnerability to any disrupting changes in economic policy either her or abroad is the Russell 2000 (IWM.)
Today, IWM closed red after failing to hold new all-time highs yesterday.
However, the market has been here before. In December, IWM made a new high and then sold off for 5 days.
Just as the Bears became emboldened, IWM turned and roared to another new all-time high. Then, it sold off for another 8 days.
Then, the last two weeks, IWM roared back again.
This proves the point of its volatility and vulnerability, but hardly proves the market top. At least not yet.
Of course, the Modern Family remains the best “go to.”
Regional Banks, Biotechnology, and Retail all posted gains.
Transportation (IYT) hit $200 (as predicted) and retreated. Since trains, planes and automobiles all live in this sector, eliminating NAFTA would indeed have a negative impact here.
Which in turn, would also negatively impact the market.
To simplify your watchdog eye, focus on IYT.
Lately, I have written about the trend I am watching for-a lower dollar, higher rates, rising inflation and an overheated economy.
I stick to that prediction for now. However, never assume anything-which is the lesson of 2017. Just follow the price.
S&P 500 (SPY) Although this closed slightly under yesterday’s low, the lack of volatility or fear dissuades me from reading too much into it.
Russell 2000 (IWM) Held the fast-moving average so definitely not reading to much into this yet either. Under 153.50 would be more concerning.
Dow (DIA) Nothing concerning here at this point
Nasdaq (QQQ) This reduced its overbought readings and barely budged. Bears-nope-not yet
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