February 5th 2018

What has been learned based on that day?

Whether it be the broad term of “the market”, or analysts”, or”traders”, or “investors” there is a lot talk on the table, and I would say little that is really firmly understood. The bounce from the low on February 6th has been a little stronger than what one would expect if this was a TOP.  If one takes the liberty of ignoring the extreme recent low on the S&P at 2529, and use the more nominal low of 2595, which also corresponds to the high on November 9th, 2017, before the tax rally really got explosive, we see that the bounce does not look as impressive, only 67 % not the 73 % based on the raw numbers.  (again keeping in mind our baseline Fibonacci bounce level of 62 %)

There are people like me who believe that that was the day, February 5th,  when the Macro signals jumped out front.

And then there are the people who, maybe as Jim Cramer crowed this morning, just have to go with the bullish story that has been laid out.  As evidence of that, Consumer Confidence came out at 130, a lofty number. I think it is a good description of how the market feels as the buildout based on the anticipation and completion of the tax changes.  That feeling has been on the market’s radar for the past year.

Today the new FED chair gets to outline his view.  Does he really know anymore than most of the analysts ? Probably not, what will be important is how he reacts to real inputs.

For me the barometer is the one based on real numbers that reflect the real economic performance after the tax change buildout.  Today we got a few of those numbers and we saw under performance in durable goods, continued poor trade numbers, and the Atlanta FED GDP NOW forecast for the first quarter of 2108 which came in at only 2.6 %, much lower than forecast by many.  Interestingly I have not heard those numbers being spoken of on CNBC this morning.  Ignorance is bliss.

Kind of a late post today, wanted to wait and see the economic numbers, nothing else to trade on other than Powell’s testimony and the questions posed.

Posted at 9:40 AM CDT