Top Advisors Corner

Gene Inger: The Inger Letter February 8, 2016

Gene Inger

Gene Inger


The perils of global monetarism - underlie our year-long bearishness related to 'distribution', which by the way occurred not only by insiders here, or money mangers in Europe; but we suspect 'sovereign' holders, responding defensively to the 'global competitive devaluation' race-to-the-bottom we forecast all along.


The significance of that, is that the money managers who defend long stances, such as even today, where some major firms argue values are attractive, might be missing my point that this 'is' a globally significant, even potentially systemic, 'unwind' (details expanded-upon to update subscribing members), which is why I've been so critical of exporting the concept of stimulus, especially Quantitative Easing; proven counterproductive (more). Oh, (In Tuesday's report I'll explore Deutsche Bank's desperate demand from ECB to save-the-day.) 

In fact I've contended QE exacerbated the problem; especially in 'submerging markets' (formerly known as 'emerging markets'); forewarned for several years; going way back to our calls for not just Tokyo, but for Shanghai to break hard (I think it's about 3 years since I called for a 'China Crash', with the bulls there of course wrecking the 'China Shoppe', as funds gravitated to the West for a bit).

With the superficial (not really good as they pretend) Jobs number allowing the Fed a bit of time to leave another 'potential' rate hike 'on the table', the markets didn't like that a bit; and it helped Friday's downswing to persist, as we outlined likely, but also basically ignored a possibility China's Sunday night 'statement' on Currency Reserves, might (redacted) Foreign Exchange markets or equities. 

In sum: should China's number be (sorry this is a forecast for market response depending on the data; so is reserved for actual subscribers), since China has Golden Week; Chinese New Year) during which their FX markets can't react. Of course US and EU markets would react immediately (as we've just outlined). 

So called 'quality' stocks are now going down; multiple compression just as I consistently warned; along with the structural aspect of insufficient leadership such a narrow universe of stocks, plus the most-shorted bouncing-on-occasion, provided. This has been a progressive decline as outlined for many months; as of course the market's top (measured by the S&P) was internally a year ago for many stocks; the Spring for the Index, and a secondary peak in July. That latter one coincided with our view that history will track a 'recession' back to July '15; and that is part of why stocks discounted the coming contraction from probably the weakest recovery ever relative to the money thrown at it, and concurrently a most-excessive one, with respect to the 'disconnect' we identified between 'real economic fact', and the fiction the hand-holders on Wall Street proclaimed. 

At the same time we indicated the 'Hail Mary' rebounds a few times in 2015 as well as the Fall, and notably -throughout December- the forecast 'brick-wall of resistance' that would greet the market as soon as you could sell longs settling in a new tax year. Hence, our most recent (and longest held ever) short-sale guideline that's still (50% of the total or more if you layered back-on as I called the reflex rebound of over two weeks ago to end ideally on Feb. 1) a live trade guideline from E-mini / March S&P 2065. (Much more below.)  

Daily action - intraday we faded all rallies for scalpers; outlining the ebb & flow as best able, and generally the market conformed. There's lots of unwinding as well as lots of whining; while pundits try to excuse or comprehend (redacted). Gold and Silver have been doing better as we expected. (Specifics redacted.) 

NOW: we had a battle at various points and broke down as navigated this past week. The late effort on Friday was a desperate effort to hold Wednesday's low because if you 'x-out' (part of our technical trading approach; so is reserved).

Breaking that (still expected sooner or later) would enhance the prospect of the S&P attacking (number given) immediately; which would trigger renewed 'bails' out of the market; perhaps a subsequent (redacted). Sure this can be disrupted by China Sunday night; (redacted) as it's pretty clear how I expect things to go depending what shenanigans China's monetarist dragon plans. 

Conclusion: interim jostling or not; we expect (redacted). The rebound of the past two weeks ended where projected (1920-1950 S&P); and that retraced a part of the 'vacuum' under the Nov./Dec. lows as we termed it for two months. 

All along we suggested (and still do) that we'd fill the vacuum, get the rebound, and then work into the 'No-Man's-Land' as I termed it; which extends from the October 2014 lows down to (discussion must be for members only).

With a good trading week for S&P / E-mini scalpers (intraday moves) simply by fading rallies now behind; especially on Monday afternoon; we look forward to a very interesting week without Chinese markets; and with little news. Technicals in a sense should dominate (and we love that). 

Prior highlights follow:  (includes specific bank vulnerability; so is reserved).   


Enjoy the weekend!

Gene
 
Gene Inger
www.ingerletter.com