The stock market battle of technicals versus happy talk continues. The SPX remains in negative divergence wanting to correct but President Trump jumps in to rescue markets. The SPX LOD yesterday is 2924 but the bears were unable to gain traction since copper was not failing.
At the lows, King Trump steps in proclaiming that the Federal Reserve should cut rates by one full percentage point and to begin quantitative easing (QE) again. Pause for laughter. Trump brags that we have the best economy and markets in the history of mankind and then in the next sentence he calls for a rate cut and more QE. Never forget; the central bankers are the market.
When someone mentions 'free market capitalism' you can now officially laugh in their faces. It is only something that exists in theoretical economic textbooks. America is best described as a 'faux free market crony capitalism financial system'. In other words, crony capitalism is a rigged system for the wealthy class as clearly evidenced over the last decade. Everyone likes the positive side of capitalism where the economy is strong and stock prices go up but no one wants the negative side where stocks drop and companies go bankrupt.
The very essence of a capitalism system is that companies go bankrupt time to time which automatically purges these weak links from the economy. As seen during the 2008-2009 financial crisis, the wealthy class could not bear to lose any more money so Federal Reserve Chairman Bernanke stepped in with QE1 in March 2009 to save the day. The stock market has rallied ever since without a recession. The wealthy privileged class dances with glee raping the American financial system for all its worth.
The banks were bailed out in 2009 to protect the wealthy elite class in America. One-half of US citizens do not own a single share of stock so implementing QE was solely enacted to protect the elite privileged class. Companies such as GM and AIG were bailed out. Comically, this is not capitalism. Bailing out banks and companies is actually the complete opposite of capitalism.
The Federal Reserve members keep rates low to pump stocks higher, performing the bidding of the investment banks, because once they leave office they are rewarded with lucrative speaking engagements; a quid pro quo that allows them to live an extravagant retirement. This is how the crony capitalism system works in America.
And now our fearless leader, King Trump, proves that he is like all the rest before him, directing the Fed to cut rates and start QE again. To H*ll with the national debt (that Trump ridiculed President Obama over during the election campaign) that is now heading towards $23 trillion (a new record Trump should not be proud of). Trump has added over $2 trillion in debt to the US government during his short time in office. What a joke. The US financial system has become a caricature of itself.
Both the democrats and republicans led by President Trump agree to spend $2 trillion on infrastructure projects yesterday (the devil will be in the details so don't hold your breath that the bill will proceed). Of course the United States needs the improvements for roads, bridges and communications, but why didn't America's orange-headed leader already pursue this during his first two years in office? It would have supplied great jobs for common people.
In the US crony capitalism system, the answer is easy. Trump went with the tax cuts and decreased banking regulations, that benefited the wealthy class, investment banks and corporations, since this privileged elite class provides the millions in donations for his reelection campaign. The democrats do the same thing. The demopublicans and republocrats are two sides of the same coin. This is how America's crony capitalism system goes round and round.
So, on Tuesday, 4/30/19, the stock market launches higher on President Trump's dovish proclamations catapulting from 2924 to 2946 a 22-point recovery in the afternoon; +0.8% intraday. Traders love dovish talk since easy money pumps stock prices higher. The world remains awash in central banker liquidity and this cash has to flow somewhere. The easy money pumps all asset classes higher including stocks, bonds, real estate, antique cars, art, collectibles, vineyards, etc...
For the last few years, companies implement buybacks (stock repurchase programs) that artificially pop the EPS numbers and keep PE's deceivingly low. A company that has bot back 30% to 50% of their stock may report a PE of say, 17, which is actually an elevated value up off the average of 15, but in reality their (adjusted) PE is far higher in the 20's (factoring out the buybacks) and the stock is highly overvalued. If you are a young person, it is best to stay away from the stock market for a year or two.
The Tuesday candlestick displays a hanging man because the price action was lower early in the day and then the big rally occurs on Trump's dovish talk. The SPX closes at a new all-time closing high at 2945.83 on 4/30/19. The SPX all-time high is 2949.52 from Monday, 4/29/19. S&P futures are up +11 as this message is typed 4 hours before the opening bell for the US session.
The daily chart remains in neggie d wanting to see a spankdown despite the Trump Rally. If the futures hold up, the S&P 500 will print a new all-time record high. The chart will have to be monitored to see if such a move can create anymore upside juice (if the RSI would squeeze out a new high). That would simply delay the top for a couple days.
The FOMC decision and Chairman Powell press conference will tell the tale this afternoon. A rate cut will create a big rally in stocks but the Fed would never move one full point. It would only be a 25-bip move but that is not expected today. There will be more of a focus on Powell's words. There may be a wild and crazy day ahead for markets and no one knows where stocks will end up at 4 PM EST. The chart says down but the Fed and President Trump keep cooing dovishly extending the top.
That was big volume yesterday on the Trump intraday recovery (brown circles). This up volume day matched the down volume day from 9 days ago, however, the bulls are still unable to generate enough volume to surpass the big sell day in March. This hints that price will want to come back down to explore this 2800-2850 range at some point forward.
The SPX has violated the upper band so the middle band at 2906, and rising, is on the table as well as the lower band at 2859. The overbot conditions and rising wedge pattern are in the bear camp. Ditto the neggie d. Ditto the upper band violation.
New money comes into markets for a new month which typically creates buoyancy. Stocks are usually bullish moving into the Fed meetings and this occurs yesterday and perhaps today. The new moon is Saturday so stocks may be weak from Friday into Monday. Humorously, the chart says down but Donny and Powell say up. Bears need lower copper but this is trading marginally higher right now. Keybot the Quant remains long and has been tracking copper for the last 3 weeks as the most important parameter currently impacting broad stock market direction. Watch copper. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added Thursday Morning, 5/2/19, at 3:25 AM EST: Copper failed bigtime yesterday collapsing -4% ushering in stock market weakness. Comically, not one business network reported on the copper crash. Chairman Powell, who may now want to be called Chair Powell, probably due to all the ongoing political correctness drama in society, initially appeared dovish with no intent on hiking rates. In the presser, however, Chair, ahem, Powell, opines about inflation which creates concern that the market may be pricing in a too-dovish Fed. Powell is simply trying to manage expectations and stay in the middle lane saying the economy's porridge is not too hot and not too cold. The VIX spikes to 14.83 the highest since late March. The S&P 500 prints a new all-time record high at 2954.13 on 5/1/19 but the joy turns to sorrow for the bulls as price plummets to 2924 an intraday loss of 30 spoo's or -1%. The SPX prints an outside reversal candlestick on the daily chart. Price takes out the prior day's high but then reverses and closes below the prior day's low. This portends weakness for stocks in the weeks ahead. The 20-day MA support is at 2908 and price has needed to back kiss it since late March. S&P futures are up +5 about 6 hours before the opening bell for the regular US Thursday trading session. Copper is down -0.1%. The SPX daily chart receives what should be the start of the neggie d spankdown but the bears should not get too excited since the weekly chart still shows a long and strong MACD line. Thus, stocks either roll over now for a significant drop, or, equities will be soft for a few days and then recover to a matching record high, and then roll over for a big drop. The market has a lot of moving parts these days. The bulls have the Fed, other central bankers and the happy US-China trade talk creating a positive vibe. The bears need the US-China trade negotiations to collapse which would likely be a major downside catalyst.
Note Added Thursday Morning, 5/2/19, at 5:06 AM EST: The S&P futures are up +7. Copper -0.1%. VIX 14.10. The bulls jam volatility lower to boost the futures.
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