I loved the movie “Wayne’s World.” What I loved even more was how my kids saw the movie as their reference point for much of the history we boomers actually lived. You would have thought the rock group “Queen” was born of that movie. Of course, all of this history came before it was clear that the boomers had ruined the country – which seems to be our major accomplishment these days.
If you get a chance, read Helen Andrews’s new book ” Boomers: The Men and Women Who Promised Freedom and Delivered Disaster.“ The book chronicles the tearing down of all of the institutions that had previously stabilized our nation. As spoiled rotten kids of the “Golden Age” of the 1950s and 1960s, what more could we expect? Unearned wealth in undisciplined hands. So it is fitting that we would bankrupt the country as our final act of gratitude. The new “stimulus” bill all but guarantees that. Kind of our last gift to the future! The Fourth Turning – in its most classic presentation.
Of course, not all of us have gone along with the program. But we are often outvoted, outcheated, or outmaneuvered. We don’t live for “the cause.” We work hard, try to make a living, and enjoy our families. For us, the ends are just as important as the means. For the guilty parties, the ends always justify the means.
So the weekend wrought the biggest boondoggle socialist spending bill of our lifetimes – another $2 trillion “stimulus” bill. One thing you learn about Congress, whatever the title of the bill – you can be sure the bill does the exact opposite. Don’t get me wrong; there is a smidgeon of stimulus in the bill. Maybe 10% or so. Otherwise, it is nothing more than a socialist spending spree, bailing out many poorly run states, pension funds, and Marxist constituencies. But who cares, right? The music is still playing, and it is time for another dance.
Oh, and on the economic front, last Friday saw the largest trade deficit in U.S. history. It turns out that for all the talk about bringing manufacturing jobs home, we still don’t make anything here. In fact, another 750,000 people filed for unemployment last week. About the same number filed the previous week too.
But don’t worry, according to the monthly employment report on Friday, we added 379,000 jobs in February – mostly in restaurants, hotels, and gyms. Those aren’t new jobs – they are old jobs. By the way, only half of those old jobs exist now.
There wasn’t any talk of “new” jobs in the monthly report. You know, all those “green” jobs putting together solar panels for the Keystone pipeline workers. Of course, we can buy the said panels anywhere in Asia for half the cost of making them here. And the price of oil? It continues to move higher, unabated. And there is no evidence that drilling is picking up either. Nor will shale mining be likely to return. Can we buy stock in Saudi Arabia?
As for the markets, you can see from the S&P 500 chart above that you better know how to dance with this crowd. Volatility is off the charts. This week is slated to be no different. The Weekly Expected Move is 100 points in both directions from last week’s close at 3842. So we could tag 3942, just shy of the all-time high this week. Or, we could test 3742 again on the downside. If the 20-week cycle has finally bottomed, then the former is more likely to be the case than the latter. By the close today, we should know if that cycle is finally pointing north again. I bet that it is – on the back of the Congressional spending spree.
Meanwhile, interest rates are misbehaving, rocketing north of our 1.5% 10-year line in the sand. Repurchase agreements and credit default swaps are experiencing unusual volatility signaling trouble in the credit markets. So the warning signs are already there, but the markets are likely to try one last push before the dominos begin to fall. The rotation math will make selecting the right index tricky.
Since the 20-week cycle has been running for about 16-18 weeks, you can project out about that far to find the next important low. Given that the next low will coincide with the larger 18-month cycle, it promises to be a low that gets your attention. And given that the 18-month cycle’s influence is often felt early in the last 20-week cycle of the sequence, we need to stay on high alert if we take the next Navigator swing buy signal – which could manifest today.
Sorry to be so cheery on a Monday morning, but when you are in the middle of the Ocean, and the ship is sinking, it is hard to enjoy the sunrise. I had hoped Congress might grow a brain over the weekend, but it was not to be.
Day Trading Plan
You wouldn’t know it from my rant above, but I am more bullish than bearish this morning, just not for the right reasons. I am looking for pullback buys as long as we stay above the Globex low at 3796. If we can get continuation above Friday’s high at 3850, so much the better. I will monitor for continuation in the usual sequence of 50 point increments.
Reminding you, a day trading session is about letting the traders test the overnight highs and lows and Friday’s highs and lows to see where the market finds acceptance, and then you monitor for continuation. The chances for reversal of the market’s opening direction are better than 70% out of the box, so don’t get sucked into a rally or decline off the open unless our rules justify it.
I see Friday’s action as a reversal, and I believe last night’s Globex session confirmed that. As with the start of any new rally, I will look for a follow-through day as confirmation. Acceptance below the Globex low today would call the reversal into question and imply a retest of recent lows.
Technology looks weak, as does the NASDAQ 100. Reverse rotation is possible as technology stock prices become more attractive, but the cyclicals still command most of the attention. Again, the math gets complicated here. I also know that anything can happen in a Monday session, so I rarely day trade on Mondays.
A.F. Thornton