Bombs Away

All Domestic equity markets closed with weekly losses. The S&P 500 closed under its 50-day moving average, and down -1.22%, right on its lows for the week. it’s the lowest close since mid-February. The deterioration of the Trump bump trade is palpable.

Consider this cause and effect as Trump is distancing himself from key political allies and campaign promises.  Here are the monarch notes. First, Steve Bannon, has taken a bashing. it’s obvious that Trump is moving away from Bannon’s Alt Right Isolationist policies to a more centrist position. It is evidenced by the tomahawking Syria and massive (MOAB) bombing in Afghanistan.

Trump proclaimed that NATO is once again relevant even with its incurring late fees on money owed. Additionally, China is no longer a currency manipulator. One last thing, Yellen is now doing a good job and might even be allowed to stay on as Fed chairperson.

Considering the above list of Trump reversals of campaign promises, it should not be a shocker that Mr. Market is reconsidering his feelings about the post-election rally.

Of course, there was the weekly White House faux paux when press secretary Sean Spicer defended Trump’s use of force in Syria, stating that even Hitler didn’t use chemical weapons. Not exactly a confidence inspiring recollection of history.

Gold and the VIX, both anxiety plays, roared this week, with Gold up +2.87%.Our volume indicators show institutional selling. The Yield curve has been flattening which is often an indicator of a contracting economy. The combination of a flattening yield curve and higher Gold prices is not a happy picture for equities longer term.

Adding to the list of woes is that most of our key sectors are now in warning phases as is 3 out of our 4 key market indexes. The bell-weather flight to safety sector, Utilities, put in a positive week and is in a bullish phase.

However, all is not lost as there are two short term indicators showing that we could be close to seeing a bounce not far from current levels. On a long-term basis, the uptrend is still intact on the monthly charts.