Phoenix Capital Marketing posted some helpful charts on the ZeroHedge site. The central topic continues to be, where is the market headed next? Veteran and Retail traders alike have watched the U.S. equities markets behave in a historically bizarre manner due to the combination of algorithmic trading, artificial stimulus of Fed Quantitative Easing, and the heavy-handed manipulation by unseen ‘powers that be’.
The charts posted at ZeroHedge with the article, The Market Has Topped. Now Comes the USD Driven Collapse are of the Chinese Yuan, the SP500 Index and Copper futures. The Yuan chart shows the current downward float of the currency, and the previous Yuan de-regulation back in August 2015. Juxtaposed next to the SP500 one can see that the Yuan drop preceded the U.S. market drop. The current scenario may be stage one of a repeat scenario as the SP500 is due for a correction, and the Yuan just began a free-fall.
Copper has been historically used as the ‘canary in the coal mine’ in regards to the general health of the manufacturing sector. As copper is used extensively in both electrical and plumbing applications, a drop in demand can be a leading indicator of a slow down in manufacturing production.
A summary of the charts is that the increasing strength of the US Dollar and weakness of the Yuan and copper demand may indicate we are rolling over the cusp of a peak towards a down turn in the market. The second SP500 chart draws a downward sloping trend line as a way to suggest that a market drop could reach a support low of SPX 2050.
Note: As editor I would add one caveat. The market must regularly correct simply for the natural and cyclical process of profit taking. But 2016 has indicated that ‘the powers that be’ will drive this market higher at all costs. Hedge your long positions but prepared to be nimble in taking your hedged profits on a drop, and then reverse back into Long weighted positions.
This ‘zombie market’ will likely be a roller-coaster in 2017 but will be pushed into the stratosphere as other global markets fail first. One should always ask oneself, which way does the ‘House’ want this ‘casino market’ to go? The House always wins.