On Friday, the President of the United States had what can only be called a social media temper tantrum which had consequences once again:
Needless to say the stock market did not like what President Trump had to say:
The report from the Wall Street Journal’s Market Data page summarized it perfectly:
It was a brutal down move with a further leg down after hours as Trump announced 100% tariffs on everything from China, which created a massive crash in cryptocurrencies across the board.
Fast forward to Sunday afternoon and the TACO rumors begin once again, and Trump posted this on Truth Social to fire up the bulls once again:
The market viewed this as a “go” signal to rally and rally they did. Right through all day Monday as the close indicates:
The Wall Street Journal’s Market Data paged confirmed this also:
The move today was decisive but was in the vacuum of a holiday and the bond market not being open.
Thus when one hears that today’s recovery rally will only extend the current bull run, take that with a huge grain of salt. As our friend from @MacroEdge, Clayton points out, the damage may well have already been done:
Despite the massive move in precious metals today, I must reiterate that all caution is warranted in almost every market except US Treasuries. IF, the treasury market continues to rally at the short end in parallel with the dollar holding recent support, and gold specifically move up towards $4200 per ounce, it’s a very bad sign.
Odds are that the equity market cold be forming a top and preparing to roll over. Despite some parallels being drawn to 1987, it is not out of the question to do so if one takes time compression for market action into account.
What is more likely however, should the market flip over, is a prolonged deflationary drop across the board for economic data and then of course equity prices. And that should scare the hell out of everyone as the only solution would be a fiscal overkill in parallel to QE infinity; which is how this bubble of all bubbles became reality in the first place.