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Market Red Flag: Stocks May Be About To Tank: “If There’s One Thing That You Need To Pay Attention To It’s This…”
Market Red Flag: Stocks May Be About To Tank: “If There’s One Thing That You Need To Pay Attention To It’s This…”
Stock and bond markets may be teetering on the edge of a widespread crash following a stellar year that has seen all-time highs across just about every major asset class. Earlier today Zero Hedge reported that Bloomberg market commentator Mark Cudmore says markets could be in for a violent downside break in the weeks ahead.
It’s a sentiment also shared by Traders Choice analyst Greg Mannarino, who up until this point has been generally bullish on short-term market movements. On Thursday, however, Mannarino reports that bond buying, which has been used to prop up stocks through massive cash injections in recent weeks and months, failed to keep stocks from falling.
This, says Mannarino, is a major red flag that could signal a reversal going forward:
If there’s one thing that you need to pay attention to it’s this… savage bond buying occurred today in an attempt to re-prop up the stock market and it didn’t work…
They’re trying to play a game here and it’s been working time and time again…
Without fail every single time… except for today… that has worked.
…
I am not sounding the alarm saying ‘this is it… this is the market crash.’ What I am saying is that you need to exercise caution right here… there’s a divergence going on and when you see divergences like this your eyes should open up… maybe it’s time to pull profits… maybe it’s time to hedge positions…
…
If we continue to see this action… the one thing we need to watch for is a simultaneous sell-off which will occur in the bond market and the stock market at the same time… when these things start to fall in tandem get out of the market…
…click on the above link to read the rest of the article…
Brodsky: This Is A Red Flag Warning
Brodsky: This Is A Red Flag Warning
Authored by Paul Brodsky via Macro-Allocation.com,
Red Flag Warning
Two identifiable dynamics may signal significant market shifts imminently:
1. The US debt ceiling will be debated soon and signs point towards a messy outcome.
2. Recent economic data have been weak, confirming our thesis that US economic growth is slowing and will not be reversed until a recession is acknowledged.
Debt Ceiling
Excessive debt has a way of catching up with people and institutions, and the first true test for the US government may be at hand. Congress was expected to raise the debt ceiling by October or else Treasury could not fund all the government’s programs and current obligations. Yet talk of Trump tax reform in 2016 may have given taxpayers incentive to defer their liabilities. As a result, Treasury received about 3 percent less in revenues than expected, accelerating the timetable to debate and raise the debt ceiling.Progress on raising the ceiling will unlikely be made in August, as Congress is in recess.
Meanwhile, the political atmosphere in the Republican Party has splintered further under President Trump. The conservative wing, which tried to block raising the ceiling in the past, has signaled it will again dig in its heels to force the government to begin balancing its budget. Though it caved in the past, the conservative caucus’ resolve should not be doubted this time, judging by its will and ability to so far block health care reform that does not absolutely repeal the Affordable Care Act.
Treasury Secretary Mnuchin has stated that the Department has options if Congress does not raise the ceiling, but has not been forthcoming with specifics. If a cash flow shortfall develops in the fourth quarter, principal and interest payments on Treasury debt would be prioritized so that the government would avoid default.
…click on the above link to read the rest of the article…
A New Red Flag for Our Rosy Economic Scenario
A New Red Flag for Our Rosy Economic Scenario
Wholesale inventories balloon to Lehman-Moment levels.
A lot of economists, particularly those quoted in the media, claim that rising inventories are a sign of confidence, that merchants believe that the future is rosy, that sales will be good. There is some truth to that. Merchants stock up for expected good times. But when these hopes of good times turn into sales that are less than rosy, these inventories begin to pile up, and the ratio of inventories to sales suddenly takes a nasty turn.
Inventories tie up precious working capital, so companies manage them aggressively. But in the US, wholesale inventories have been ballooning since summer. And they now have become a red flag for the economy.
Part of the problem: hopes meet crummy sales. December sales by merchant wholesalers (except manufacturers), adjusted seasonally but not for price changes, fell 0.4% from November to $449.8 billion, the Census Bureau reported today. Year-over-year, they rose a mere 1.4%!
The good part: sales of durable goods jumped 7.3% from a year ago, with a number of big gainers, including electrical equipment up 13.4% and metals up 14.3%. But non-durable goods sales dropped 3.5% from a year ago. Wholesales of petroleum products, including gasoline, plunged 13.7% for the month and 29.4% from a year ago.
…click on the above link to read the rest of the article…
