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Gene Inger's Daily Briefing (highlights) - for Thursday, May 18, 2017

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    Mark S. Young

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Posted 18 May 2017 - 02:53 PM

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Gene Inger's Daily Briefing (highlights) - for Thursday, May 18, 2017

(This is an excerpt of Thursday's report, with a few previous highlights. As this is essentially a sample of our analysis to invite you to join, you may share it via Twitter and so on. At the same time please understand the videos in fairness are reserved for actual subscribers. As we were bullish from Election Day forward; we're pleased to have called for a May break.)
'It ain't over 'till it's over' - as the old saw goes; saw this market's stamina of an unprecedented nature, leading to a downside performance very much as outlined in the last few days. That 'show' is barely underway; while sure sensitive to all sorts of developments that unfold almost by the hour or day.

In a true 'raid' on the 'House of Ill Repute' (and I'm referring to the market in this case not Congress or the White House), the saying goes: they 'take the good girls, the bad girls, the Madam, and sometimes even the piano player'.

That's a way of describing our warning about the concentration in ETF's and Index funds; with managers falling-back on this modern version of 'bankers hours' (recalling the old saw about how they started at 10 and left at 3 just to play golf and not work beyond the minimum). That's my sort of humor about 'passive investing' risks; which reflects the discrediting of active managers in recent months; and is something I warned about because it would enhance the downside, once the market faltered below key algo-triggering levels.

We had a preview days ago; and another shot-across-the-bow Wednesday. I wrote a special report Tuesday to emphasize how everything predicted for the entire post-Election rise that we accurately predicted would sure soar if Trump won; while it was in-essence predicated on 'optimism' for guiding the United States to economic revitalization; not based on earnings, like pundits and the analyst majority proclaimed.

It meant that risk was far greater than all monkey-see / monkey-do manager approaches (peer-performance-matching rather than heroics) was a threat, not a true reduction of risk by diversification. Passive was a lazy way mostly, of appealing to investors (and sure, ETF's do that) looking for simplification, at the same time it allowed managers to work less at analyzing stocks.

In-sum: triple videos cover the bases; no need for more text. It's not over.
(Extra videos tonight; to cover significant factors impacting markets including politics.)

Daily action - yesterday detailed 'what and why' this was the real deal with respect to the downside; and why we did not view it as just another 'dip'.

The videos thoroughly describe this so we'll abbreviate all here. Compelled selling will be part of the pattern just ahead; as a closing bell comment also noted. Then we have the 'delay' built-in by virtue of 'testimony' that cannot even start until next week, and will run-into the May 26 recess thereafter. At the same time everyone (including the President) is expressing confidence in Special Counsel Mueller; he's likely to be supportive of his successor, at least in terms of the believably of the memos which will be revealed. This is all going to drag-out, so as I said yesterday, if this is the 'Summer of Comey' and not the 'Summer of the Economy', that's not particularly encouraging.

It takes me right back to warning about 'what underpinning' all this had. In that respect from 2 am Election night until early March, I was 100% bullish; and that faded as we projected rotational distribution masked by FANG and other stocks that gave an illusion of strength. Hence we correctly assessed it as little upside potential with immense risk; and called for a May decline.

For now look for defensive liquidation; perhaps compelled selling and some rebound, with fading thereafter. Perhaps not the 'shock & awe' of today for a lot of folks who didn't agree with us; but we'll hear 'awe shucks' that they will not see the kind of buy-the-dips dramatic snapback they're accustomed too. We've called for lightening-up and building cash throughout recent weeks.

I think the comments I made about CTA's and money managers overweight risk and basically 'stuck', is also important. You know the strategy we have prepared while outlining the emergence from our super-bullishness of half a year ago (from Election Day forward); starting with the projected internal or 'actual' rotational peak from March 1 forward. There is no change in outlook, and that includes more on the downside from an overall viewpoint.

Note: investors and traders who have stuck with us profited in the enormous rally, and rang the cash-register as well; looking for just this overall pattern. I invite guests here to join us; as the entire structure of the post-Trump scene has evolved and is changing as projected, in-front of our eyes. 

Prior highlights follow: (a bit of yesterday's report gives you an idea too).
Constructive destruction - is not what is at-play here; neither for moderate Republicans slithering-away from the President's side, nor for 'rejectionists' or interlopers, seriously enthusiastic about a likely Constitutional Crisis.

The 'Trump Destroyers' are thrilled at 'how bad' things increasingly look for the young Administration, as opponents jump-on each and every story they can, to discredit the President, to throw-off his game ahead of a crucial trip abroad; and to take moves (presumably while he's out of the Country) to try pushing this further. There is a heavy market concern too, of course.

Real questions now exist whether anything at all can now get done; not just because of the latest opposing views between Trump and Comey. That few Republicans are standing-by the President, suggests they're shell-shocked by how this evolves; and I suppose we all are to some extent. The tempting moral ground (typically contrasting the campaign rhetoric) aggressiveness is not the key; but whether forthcoming 'discovery' reflects what is the truth.

I've reflected (even before the Election and our forecast soaring market if a Trump victory occurred) frequently, on the market's more significant risks, if anything distracts the Administration's economic initiatives, such as pushing tax reform into next year (not the effective date but simply the Legislation). A perspective must be understood: the Democrats would possibly recover the House; the tax-reform would not occur at all; and economic recovery as well as 'capital repatriation' would retreat to the back-burner, if not 'off the stove'.

I say that not with a political bias; but simply knowing the reality of what the return of gridlock would mean to Washington. Even without that, just 'hopes' that they can 'after the fact' reverse the Election and recapture Congress, is going to defeat any prospect of bipartisan support for measures the people of the United States seriously need, to deflect not the political circus; but to further the return of jobs and capital that can enhance our economic future.

Perhaps that's why the 'rejectionists' and media have amplified every story; rattled the 'businessman' President; sought to stir-up pertinent but sidelined issues, which perhaps triggered more efforts to show that the US could work with the Russians in fighting terrorism (and the sharing of warnings about terror tactics against civil aviation is a normal matter to share) and a myriad of other issues. Do they (and even the President) know not what they're all playing with; and it's a fire that can keep the economy simmered-down; and of course ignite a maelstrom in the market's Senior Averages if uncontained regardless of false perceptions that this market 'is bullet proof'? It is not. 

It only matters because it is more evidence that even as Trump presumably thinks he's 'in the right', and everyone's (at least the swamp inhabitants) are out to get him (to varying degrees that's probably a valid presumption), he is using his 'negotiating' (or threatening litigation) style in governing which now he's learning doesn't work well when you delve into jurisprudence.

In-sum: the President was likely irked that Comey really never switched (his allusion to being sick at the thought he influenced the Election); and thus his moves, which have mushroomed into a crisis; even before today's latest NY Times story about asking Comey to 'lay-off' the Flynn investigation (more).

Politically, this is now beyond 'circus antics' and 'keystone-cops' running in a lot of circles under the stock market's 'big top'. Not even the Marx Brothers could script this. Yes, sometimes truth is stranger than fiction; now is such a time. And it's timed to throw-off crucial meetings overseas. That the Israeli intelligence source (apparently a mole planted within ISIS, whose life is now likely at-risk if uncovered) is compromised, impacts our relations with the strongest friend in the Middle East, days before the Saudi's may be asked to cooperate with anti-terror efforts and move away from radicalism. It creates additional doubt ahead of important meetings in Europe as well.

If one was the enemy this would be perfect timing to destabilize Washington and throw the Administration off-balance on a major international foray. The Israelis have already said they 'trust' the United States (more for members).

'Be careful what you wish for' should be a theme out there. Especially as it's already at the point where Pence and Tillerson were not at 'arm's length', it seems. McMasters had it right and sounds solid; but that's why tonight we don't hear that part very much. And how will G7 and the EU (not just all the Middle East leaders) feel about committing to deals with Trump under all the smokescreens out there now? The Sally Yates interview tonight on CNN will further embolden the 'destroyers' and keep the pot boiling, which (more).

To summarize this: in Trump's case my old saying applies: 'just because you are paranoid, does not mean they're not out to get you'


Avoiding corrections of a greater magnitude in the weeks ahead was seen as unlikely; with interim short-term higher highs projected correctly to get nowhere, and had no significant chance of extending, even before all this.

(If you're a visitor; please assist your own good efforts; and support our daily analysis, by joining as a regular subscriber to our Daily Briefing service.) 
Enjoy your trading day! 

Gene Inger


Mark S Young
Wall Street Sentiment
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