Everything is Fine, Things are Stable

That is what a quick glance at our F2 Fracture Chart and also listening to commentators would seem to say.  Sure trade is in turmoil and Trump is getting even crazier, but the markets are not fazed. The players are either believers or followers of the believers who believe in the Trump goldilocks bull market and like his negotiation style.  Maybe most importantly they think stock markets will start to run up again after he modifies his stance during the negotiations.  The risk here is the real world economy may not have the resilience to catch hold at that point.

In a close look at the inputs into the market equation you see how this is unfolding. We like to use our market puzzle and fracture chart to provide a picture on where things stand.  First lets compare the last two high levels of the F2 Fracture Charts, comparing todays, June 25th, and April 2, 2018 data.  What one sees is that today’s Fracture number is slightly higher, 0.066 compared to 0.062 on April 2. We continue to look for the fracture to trigger around the 0.100 value and to accelerate at a value of 0.124. Look for reactions to hold at the 0.050 value area on back-offs. What is important to view when you drill down, is that there are big changes in the underlying inputs, compared to April 2, stocks are a lot higher, the dollar is up, but gold is down, and the yield curve is down a lot, getting much flatter.

I would read this as a much riskier environment, stocks are vulnerable, the dollar is vulnerable, and the risk adjuster, Gold, is primed for a big move up.  As we mentioned recently we liquidated our long dollar trade because the 97.00 original objective looked unlikely, although we did see the mid 95.00’s last week.  We look for gold to find support in the 1245-1250 area.

See charts here…

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