S&P

S&P april 9 2018

The structures in the Dow, &P and even CAT are all similar but still they differ in the details. The S&P is relatively speaking the most straightforward index. It has this big A-B-C pattern that as a minimum promises a correction that should still go lower, and , of course, it can become a full blown bear market ultimately. Alternatively, in pink, there is an A-B-C going the other way as a wave 2. We would give that less weight as it would take a lot more time and violate proportionality.

Within the green scenario it is furthermore not perfectly clear where we are in this second major leg down. We could presently be in a 4th wave triangle of wave one down, or wave one could already be complete.

All of this appears to be driven by trade policies of the president. That that is in fact so, is hard to determine but, for the sake of argument, assuming it is then the “problem” continues to exist. As of today we have Navarro, a rabid mercantilist from the middle ages, and Kudlow a TV commentator taking conflicting economic views. In between we have this charming Mnuchin who owes his fortune to his predecessor at Treasury, H Paulson. Three alumni from GS in a row! Next Bolton is coming on board at a timely moment. This guy still thinks problems can be solved militarily and is chomping at the bit to prove the point. Wilbur Ross, a bankruptcy artist who once saved Trump’ bacon, needs no mention as no one listens to him anymore. And if that was not enough we have to keep guessing if this ignorant president is serious or just doing another “art of the deal” piece of theater.

 

Note: It is conceivable that rather than a simple A-B-C structure as shown in pink, this index will trace out a much more extended triangle A-B-C-D-E which would the constitute a large B wave. This would limit the ultimate bearishness that we expect and would take far too long.