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Welcome to the Stock Market Danger Zone

There is the absurd, as highlighted by James Cramer on CNBS:

Then there is reality.

There is a good chance for some wild action this week to start the trading on Monday but it, like the last two weeks will be on thin volume with no directional commitment. On Tuesday, April 11th, the real money returns tanned, rested, and ready from the Caribbean, Europe, the South Pacific, etc. and starts making the hard decisions about the direction of the stock market and investing into the next two quarters.

The reality is that earnings expectations are expected to decline in the first quarter along with some seriously bad projections for the end of this year.

The one chart I like to watch for directional change in equities has been the equal weighted S&P 500. It provides a better flavor as to where the market is moving, in my opinion, with enough diversity within the calculations to provide a hint as to the investor’s preferences.

Through this past Thursday, this chart provided an indication that equities have of what I would call an exit from a potentially bullish structure and back into the danger zone of rolling over again.

Another chart showing some demand returning to the markets but also is on the ledge confirming the uncertainty about the remainder of this year is Dr. Copper. It appears to be preparing to lurch higher but one has to ask is this due to supply constraints, currency issues with Old Man Dollar, or potentially new geopolitical conflicts?

If Copper drops below 3.60 then we are heading into some serious disinflation then deflation this time in concert with a US slowdown. Above 4.40 and another run towards 5+ is possible along with a massive move in precious metals as it means that inflation, sustained sticky inflation, is here to stay for a while.

Enjoy the movie.

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