Trouble With the Chop... (and Go Cubs Go)
The second best day of the sports year starts now... but it comes with a little warning on market momentum...
Dear Fellow Traveler:
This is my second-favorite day on the sports calendar.
The Major League Baseball playoffs kick off today - and Detroit’s Tarik Skrubal has tossed a gem.
Now, we get the Chicago Cubs against the murderer’s row that has become the Padres lineup…
I’ll keep this short today because the dogs need to go out, I’m running a fever, Amelia has pink eye, and I’m supposed to coach soccer this evening (in a mask, I guess?)
Today’s market has produced a few concerning elements - already bringing our momentum to an equilibrium level on the S&P 500. Breadth isn’t looking too kindly on us… as the number of stocks below their 50-day moving average continues to rise…
Selling pressure has picked up again on the Russell 2000… and there’s crowding (ample amounts) into the AI trade and names like NVIDIA.
Tensions exist around the possibility of a government shutdown…
But there are a few other things that I think are at the center… Michael Howell dropped his weekly liquidity update - showing that we’ve cooled a bit from the recent highs…
China is injecting a lot of money, while everyone else seems to be tightening…
That’s been a reason why JD.com (JD) and Weibo (WB) have hit the radar today after recent upward moves…
Howell has warned that we’re in a late cycle situation right now… something called “liquidity cycle maturing…”
So - what’s the key focus here… It’s in liquidity and momentum…
The expectation is that the markets will maintain their valuations and strength, but the lag in stalling capital flows might cap upside. We can expect strong performance from China, so keep an eye on its key indicators.
The big challenge will be if the U.S. dollar strengthens, and if gold cannot break the $4,000 level. We could see something break if China can’t maintain momentum, and we can’t suppress bond volatility.
One Last Thing
Yesterday, I got a lot of attention and comments on the socialism front…
As I’ve argued, we need capitalism. We need to let companies fail…
There was a great article today at CNBC… with this headline…
The bankruptcy process is actually working as planned…
You’ll recall that someone wanted to buy Spirit, and a judge wouldn’t let them. So, they failed… and that judge looked foolish - thinking they were some consumer advocate rather than a person engaged in a legal process.
Maybe we could try this at scale during the next crisis… instead of printing money and fueling a K shaped recovery for the fifth time in 17 years…
I’ll be back tomorrow with a deeper dive into momentum and quarterly rebalancing…
Stay positive,
Garrett Baldwin
Will you be giving any insights on the impending government shutdown? I am thinking that this one will be a little different from all of the others. I could be wrong though.