The world changed overnight. President Trump ordered the killing of Iran's top military man General Qassim Soleimani. King Donny crosses the Rubicon. America becomes an assassination nation; perhaps it is time to look in the mirror before its too late. The action will place the Middle East on the verge of a shooting war and perhaps the start of World War III. At the least, any American in the Middle East now has a bulls-eye on their back. If it is acceptable to simply kill top military and political leaders of other countries now, even if they are likely dirtbag terrorist masterminds, then the US has to expect the same from everyone else. If you are a drone pilot, you become judge, jury and executioner. Iran's Supreme Leader Khamenei vows "severe revenge" and retaliation for the killing. Iran will likely consider cyber warfare as fair game so now would be a good time to back-up your files.
The mess started when an American contractor was killed. The US then retaliated with air strikes on specific targets. Then a militia and group of radicals, backed by the Iranian government, attacked the US Embassy in Baghdad, Iraq. The Iranian forces are charged with protecting the US facility but they were sleeping on the job. King Donny performed his Baghdad Bob impersonation telling everyone that US forces immediately handled the situation at the embassy and things were under control--as the cable news networks are showing the walls of the compound on fire and the radicals breaching and fire-bombing the front office!! What are you going to believe; King Donny's bloviations or your lyin' eyes? Trump tweets a threat at Iran but it has no gravitas since a tweet can be sent while sitting on the can.
There are probably about five hundred US personnel in the embassy compound. There are several thousand American diplomats and contractors in Iraq. There is likely a concerted effort to evacuate many folks although this information would not be released to the public for obvious reasons. The US does not want to be put in a position of evacuating people via helicopters if the compound is breached. The radicals abandoned the attack on the US Embassy but feel emboldened that they can come back with more people and firepower and perhaps breach the compound. Then, overnight, Donny orders the killing of Soleimani.
The Shiite (Shia) and Sunni factions hate each other's guts. The groups split on religious grounds 1400 years ago and have battled each other ever since. Iran is mainly Shiite while Saudi Arabia is Sunni. These two powerful nations carry out non-stop proxy wars across the Middle East. The Shiite faction is from the Persian Empire and believe they have the right to be the dominant power in the Middle East. Iraq is a mixture of Shiite and Sunni but Shiite dominant. Interestingly, Saddam Hussein, the dictator of Iraq that was hung after the Iraq War, was Sunni. Hussein treated the Shiite very badly and brutally. Revenge killings by Shiite targeting Sunni were rampant in Iraq after that war. Humans love to kill each other.
Who is stupid enough to believe that 1400 years of hatred can be fixed in a few weeks or months? The other thing people do not understand about the Middle East is that the regions are more controlled by local warlords rather than the nice lines you see drawn on a map. The world changed overnight. Hopefully, President Trump understands the situation and thought through in detail all the ramifications of ordering the killing of Soleimani.
China's central bank, the PBOC, lowered the triple R's yesterday creating a big global stock market rally on further central banker easy money. The central bankers are the market. The Fed gooses stocks in Q4 and hands the blueprints of the easy money printing presses to the communists. The US-China Phase One trade deal is supposed to be signed on Wednesday, 1/15/20. Comically, the Whitehouse continues to use the bush league excuse that they are waiting for translations. If this is the case, the US officials are proven incompetents since that stuff should be conducted, recorded and documented in real-time as the talks proceeded. Trump is likely waiting for Xi's blessing and then the 1/15/20 date will be cast in concrete; it's only 12 days away.
The impeachment saga against President Trump continues. The House has impeached the president and must send the articles over to the Senate for a trial (where Trump is expected to be acquitted; he will have the impeachment stain forever but he is not expected to be removed from office). Democrat House Leader Pelosi is holding back on sending the articles to the Senate since republican Senate Leader McConnell says he will conduct the trial on direction from and in concert with the president (who is on trial).
President Trump's State of the Union speech is on 2/4/20, only a month away, so Pelosi may be playing a game of delaying the handing over the articles of impeachment so the trial will bleed into the State of the Union speech or, perhaps she wants to have the trial in progress when the speech occurs (this would take away the possibility that Trump can brag that he is acquitted on the impeachment matter; instead it would hang over his head during the speech). McConnell is no dumbbell and he likely has some dirty tricks of his own up his sleeve. Congress returns to work today after the holidays and the speaker plans to talk about the impeachment trial today. Politics is a dirty corrupt business just like the crony capitalism system now crumbling in America.
Emails and other information continue to leak concerning the Ukraine scandal showing more stink around President Trump. His inner circle can provide the answers about the Ukraine scandal but King Donny will not permit his loyal subjects to talk. The corrupt democrats would do the same thing if they were in power. Former Vice President Biden, who appears to be Trump's leading rival in the upcoming November presidential election, is knee-deep in his own scandal in Ukraine. In 10 months, Americans will have their choice of voting for two corrupt silver-haired white guys; that is funny, choose your poison.
Putting all the geopolitical and domestic drama aside, although it is difficult since Trump operates a reality television presidency, the weekly chart shows the parabolic rise in stock prices due to the Fed's Q4 QE money pump. The red and maroon rising wedges are ominous since the collapses from this pattern can be quite dramatic and sharp.
The SPX is overbot (RSI, stochastics, money flow) agreeable to a pullback. The red lines show the negative divergence in place over the last two years despite the ongoing massive global central banker intervention. The RSI and MACD line have a smidgeon more of bull juice in the tank as evidenced by the short green lines. This may create a jog move in the S&P 500 price such as down one week, up the following week, then the rollover, or, down, up, down, up, then roll over which would be about four weeks. Since the chart is neggie d over the longer-term, the SPX can roll over and fall out of bed at anytime without the jog moves.
The ADX shows a strong trend higher for the SPX in 2018 but it petered out in the summertime that year. The Q4 2018 stock market crash occurs and just as the ADX is about to identify the move lower in price as a strong trend lower, one year ago, the Fed and other global central bankers colluded to save the day, as usual, in the rigged markets. Interestingly, the entire rally move from the Christmas Eve 2018 bottom to the present day is on central banker largess and has nothing to do with fundamentals. The power of the central bankers is astounding. The central bankers are the market.
Price has violated the upper standard deviation band so the middle band at 3061, and rising, and the lower band at 2840, are on the table. The SPX is extended above its moving average ribbon requiring a mean reversion lower. The chart is bearish, however, as evidenced over the last month, the happy US-China trade talk and Fed and other global central banker largess (yesterday the PBOC announced another easy money pump) continues to support the stock market and create new record highs. Overnight, markets are harpooned by the killing of the Iranian general.
S&P futures are down 30 points six hours before the opening bell for the US stock market. Dow -235. Nasdaq -81. Oil prices are up about +3.2% after spiking above +4%. Copper -1.3%. Gold and silver pop over +1% each. Euro 1.1158. The dollar/yen pair is at 108, no check that, 107.99. Investors are seeking perceived safe havens such as the yen and Treasuries (yields move lower).
Today is setting up as a risk-off day. The world awaits comments from President Trump on the Iranian matter. The seriousness of the event and escalation of tensions in the Middle East warrants a public statement from King Donny in front of the cameras and not a tweet while he is sitting on the toilet. Anything less would be a weak response. If the US has many documents showing all of Soleimani's nefarious deeds and plans, they will need to release this information to justify the assassination. Drone assassinations are futuristic scary. 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 4:50 AM EST: S&P futures are down -37. Dow -280. Nazzy -118. Russell -23. VIX pops to 15.39 above the critical 200-day MA at 15.03 which is a bull-bear line in the sand. The bears are planning to bite off a chunk of bull flesh today. European indexes are lower with the DAX off -1.5%. Asian stock indexes were negative overnight but marginally. As the hours tick by, there is an increasing negativity developing around the drone assassination. Perhaps everyone is slowly realizing that the world has changed overnight. WTIC oil gains +3.5% on the turmoil. Brent oil is up +3.6%. Gold gains +1.2% to 1548. Silver is up +1.1% to 18.25. Copper collapses -1.9% to the 2.772 palindrome. Euro 1.114. Dollar/yen 108.08. Treasury yields are; 2-year 1.53%, 5-year 1.61%, 10-year 1.82%, 30-year 2.28%. The 2-10 spread is 29 bips.
Note Added at 5:20 AM EST: S&P -36. Dow -280. Nasdaq -120. Russell -23. VIX 15.37. Markets are steady awaiting comments from President Trump on the drone killing of Soleimani.
Note Added at 5:55 AM EST: Futures are tanking and not steady. S&P -45. Dow -350. Nasdaq -142. Russell -28. VIX 15.87. Oil is up +4.6% on its way to +5%. Gold 1549. Silver 18.25. Copper -2.0%. Euro 1.1134. Dollar/yen 108.06.
Note Added at 5:59 AM EST: Markets are deteriorating, quick, get the women and children inside and batten down the hatches. S&P -51. Dow -400. Nasdaq -155. Russell -30. VIX is above 16 at 16.02. Dollar/yen 108.04. USD 97.08. 10-year 1.81%. The news idiots discuss the justification of the drone killing but nobody understands the big picture. The world has entered a new era where nation leaders, really anyone, can be targeted and assassinated via drone. Think about that.
Note Added at 7:22 AM EST: Secretary of State Pompeo runs to the right-leaning Fox News cable television outlet to defend the killing of Soleimani and proclaim the brilliance and genius of President Trump. Tens of thousands of Iranians take to the streets of Tehran protesting the killing of Soleimani. S&P futures improve to down -36. Dow -282. Nazzy -117. Russell -22. VIX 15.36.
Note Added 7:59 AM EST: While sitting on the commode, King Donny tweets a cryptic message; "Iran never won a war, but never lost a negotiation!" It is unclear what the message is supposed to mean; perhaps he should wipe himself and then grab another cup of coffee so he can wake-up to today's reality. To divert attention and create misdirection, Pompeo is doing back-flips, tap dancing up a storm and performing magic tricks as his words justify the killing. S&P -36. Dow -278. Nasdaq -117. Russell 21. VIX 15.30. Dollar/yen 108.12.
Note Added 9:10 AM EST: S&P -31. Dow -251. Nasdaq -100. Russell -18. VIX is at 14.79 dropping back below the important 200-day MA at 15.03 so the bulls are not concerned about this morning's selling. Bears got nothing unless the VIX moves above 15.03.
Note Added 9:25 AM EST: S&P -36. VIX 14.93. The opening bell for the regular session is only minutes away. Watch VIX 15.03; it tells you everything you need to know about stock market direction. As Julius Caesar said at the Colosseum, "Let the festivities begin."
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