Things you need to know
- The big head fake – Mnuchin does little to settle the mkts
- Xi – lays out new terms to move the ball – NOT to settle the war
- Dems take to the stage – no blockbuster announcement – Part 2 tonight
- Oil – tested resistance, and is now backing off as it readies itself for the surge higher
Mkts started out strong yesterday – futs were surging in the pre-dawn hrs into the opening as the admin sent out Treasury Sec Stevey Mnuchin – to stop the bleed from Tuesday…..Headlines that screamed that ‘a deal is 90% complete’ were all of the tape…..all of the news services picking it up – pictures of Stevey with that ‘big smile’ plastered on TV screens and computer screens became the morning call……and it was all good……Cautiousness? Nervousness? Nah – no reason to panic – ‘a road to a trade deal is within sight’ – well guess what sports fans – there was nothing new in that headline…..NOTHING. But it did the cause the algo’s to go wild and erase any of the rate concerns that were all the rage on Tuesday….but by the end of the day – all of the indexes gave back the early gains and settled just a bit lower….the Dow ended the day down 11 pts, the S&P lost 3.5 pts, the Nasdaq was the only winner – gaining 25 pts while the Russell choked on 3 pts.
So all of the hoopla surrounding the Mnuchin headlines yesterday – did nothing really except cause the algo’s to go into overdrive when it first hit – sending US futures higher….but that WAS the point…! Period. The administration set it up. Was the sudden appearance by Mnuchin a coincidence? (I mean we hadn’t heard from him or Lighthizer in weeks). Was he nothing more than a show stopper? I mean really – think about it – on Tuesday, two FED talking heads – St. Louis’s Jimmy Bullard and FED Chair Jay Powell both came out and threw water on the idea that rate cuts were imminent, that 2 or 3 cuts that the mkt had now come to expect – may not be necessary at all……and that is what caused the mkt to go into sell mode on Tuesday afternoon…..so what was Trump to do? I mean – He was getting ready to go to Osaka, Japan for the big G20 meeting – the last thing he needed (or wanted) was for the mkt to go into sell mode as he was about to put the pressure on the Chinese to come to the table.
Like I said earlier in the week – the mkt had priced in perfection – on all of the issues – rate cuts – check, Trade deal – check, improving macro data performance – check, …so when the rate cut issue suddenly changed – the tone changed – now here is the issue with the tech again……the smart logic algo’s in fact are not smart at all…..the are reactive – unable to interpret the meaning behind the words or the story (how many times do I need to point this out?) – so they always shoot first – causing chaos and havoc…..because what you (humans) realized as the sun rose over that Atlantic is that there was NOTHING new in that story – but the headline would have made you think it was all new, that maybe there had been these ‘secret negotiations’ and the sudden announcement was Trumps way of surprising investors/traders never mind the politicians and Americans that are rooting for him to fail……. And so the clock ticks…
This morning – we see another headline – splashed across the WSJ…”China’s Xi to Present Trump with Terms for Settling Trade Deal” – now before you hit the BUY button – read the story – and not the headline…..the story goes onto say that Xi will
“present Trump with terms that he EXPECTS THE US TO MEET BEFORE BEIJING IS WILLING TO SETTLE THE CONTENTIOUS TRADE FIGHT BETWEEN THE TWO NATIONS”
Do you see the difference between what the headline would lead you to believe? The algo’s are once again pushing futs higher this morning…because the headline makes it look like the Chinese are ready to settle – but they are NOT, not unless the US agrees to the new terms he presents to MOVE THE CONVERSATION ON. That is key…..so be careful….Unless we see Trump agree to the new terms – then why would you expect anything to change? On a side note – the South China Morning Post (Gov’t run publication) is running with a story that says: The US and China will reach a ‘temporary trade truce’ on Saturday.
Next up there is sure to be all kinds of conversation around last night’s Dem debate (part 1)….not sure I found anything that rocked my boat – but the media is apparently giving the win to MA Senator Lizzy Warren…..not because she did such a great job, but more because no one called her out……..tonight’s event will feature Biden, Sanders, Buttigeg and Harris – along with a host of others…..The field needs to be culled – too much noise right now…..so who will rise to the top? The mkt won’t begin to pay attn until that begins to happen – so do not expect any mkt reaction today based on the circus last night.
The focus for today and tomorrow will be on Osaka, Japan and the G20 – period. Is the deal coming or not? Will Trump agree to the new terms to move the ball? Does he really want to come back to DC with nothing in hand? We’re about to find out….Eco data today includes the usual suspects – Init Jobless Claims – exp of +220k, Cont Claims of 1.665 mil Pending Home Sales of 1% m/m and +0.4% y/ty. The only other piece of significant macro data -is the final revision to 1st qtr GDP – and the exp is for 3.2%…..a report with a 2 handle will be viewed as negative – but that is unlikely to happen. Remember also that tomorrow brings the bi-annual Russell Rebalance trade – look for explosive volumes (mostly on the close) – and remember – it means nothing, but you are sure to hear about it…..
Oil – is beginning to make that move that I pointed out….it tested resistance right here at $59.50 – and is now backing off….. ….Remember what I said on Monday….all 3 trendlines are converging right here at $59.50 ish…..expect a bit of resistance – expect that we test and back off just a bit – in order to gain the strength to pierce up and thru…and once we do – hold on – oil prices will surge to $65 in a heartbeat….This morning – like clockwork – oil is backing off – it is down by 58 cts at $58.80…..My gut tells me that it might back off just a bit more before making a run at resistance again…..
S&P futs are up 3 pts, Dow futs down 27, Nasdaq futs up 15 and Russell futs are flat. Look for the S&P to waffle today…..as the headlines seep out of Japan……if we move lower – look for support at 2880 – Upside? Right in here….unless there is a breakthru there is no reason for the mkts to move higher. Remember – the Trump/Xi meeting is on Saturday……so anything before that is pure speculation.
Take good care.
Grilled Pork Chops in Dijon Marinade
Summer time – grill time….so try this one on for size. This is easy to marinate and grill and presents beautifully –
For this you will need: Dijon mustard, brown sugar, apple juice, Worcestershire sauce, and bone in pork chops….
Marinade – Mix ½ cup each of apple juice and Worcestershire sauce with 1 cup each of Dijon mustard and brown sugar…. Mix well and add chops…..place the whole thing in a zip lock bag and refrigerate overnight.
Next day – remove from fridge and let come up to room temp…..light the grill and heat to high. Now add the chops and sear – turn heat to med and allow to cook for 5 – 6 mins (depends on thickness) and then flip over and repeat…..(you can dip the chop back in the marinade when you flip it).
When cooked – remove and cover in tin foil and let rest for 3 mins or so…..Present this meal on a plate with garlic mashed potatoes and corn on the cob (which you have boiled in a pot of water enhanced with butter and whole milk). Have a large mixed summer salad with red onions, tomatoes, cucumbers, ceci beans, and even blanched French cut green beans. Dress with a red wine vinaigrette and you are done.