EWI Insight

Today the Senate plans to vote in Donald Trump’s impeachment trial. We’ve been tracking Donald Trump’s prospects to stay in office on socionomics.net. Historically the stock market has been a reliable indicator of how a presidential removal vote in the Senate will go. In a nutshell, the higher the market goes, the better a president’s chances to stay in office. For an in-depth look at President Trump’s chances to win the 2020 election, including key levels to watch in the Dow, click the link in the show notes. https://bit.ly/2OwnI70

Chinese stocks got slammed in Monday's session. The Shanghai Composite was down nearly 8%. 8% in a single day for an equity index. That is huge. That'd be like the Dow losing 2,200 points in a day. So all the time, and certainly when a market gets volatile, one of the best things you can do is block out the noise. The media's going to be going crazy, so are your fellow traders for that matter, emotions are running high. And in that environment, it can be tough to make good decisions. https://bit.ly/2v0RpGw

Let's make this a myth-busting Monday. "Earnings drive stock prices." How many times have you heard that? Dozens of times, right? It seems logical, but is it true? Well, one problem is that quarterly earnings reports document companies' earnings from the previous quarter. Using what a firm did three months ago to predict what the company's stock is going to do in the future is like driving down the highway with your eyes glued to the rearview mirror instead of the windshield. https://bit.ly/2tqwz31

Today is Brexit Day. The UK begins its withdrawal from the EU, embarking on an 11-month transition. Now for the past three years we’ve heard all about how Britain’s departure from the European Union would impact stocks and economies in Britain, Europe and beyond. And one thing’s for sure: No matter where British stocks go over the near term, the media will make Brexit take the brunt of the credit or blame. https://bit.ly/2S45quU

Yesterday was Fed day. Were you sitting on the edge of your seat, biting your nails, hardly able to breathe until you found out the Fed’s rate decision? Well, that’s what a lot of traders do, but around here we mostly yawn and go to lunch because we’ve observed for decades that the Fed just follows the rates set on the freely traded Treasury market. The yield on 3-month T-bills has been flat since early November, so it’s no surprise that the Fed kept its rate flat as well.

And, look, we’re talking about the U.S. because of the rate decision yesterday, but you can do this with any country. If you’re the kind of person who has fun looking at financial charts, well you can have a whale of a time pulling up a chart of any central-bank-set rate on the planet and comparing it to a chart of the yield on freely traded short-term government debt for the same country. You’ll find time and time again that the central bank is a market follower, not a market leader. The market’s in control, not the Feds of the world.

A cactus with sunglasses would direct the course of interest rates just as effectively as a central bank—actually more so because the cactus is cheaper.

Happy surfing, Elliott wavers. Let’s talk again tomorrow.

Using central banks to forecast the markets? That’s putting the cart before the horse. For analysis of global rates, equities and more that puts the horse before the cart, click the link in the show notes.

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President Trump is planning to sign the USMCA today. The agreement replaces NAFTA. And, of course, Phase 1 of the U.S.-China trade agreement got signed a couple weeks ago. Now for the better part of two years, the media’s blamed just about every bout of market volatility on global trade tensions, yet now that we have two major international trade agreements, volatility in global equities is back.

https://bit.ly/37DUvi2

We had a significant day in the stock market yesterday. U.S. equities down. We saw the strongest downside breadth on the NYSE since August. Wow. VIX had its highest close since October. The Dow shed 453 points, closing down 1.57%, as did the S&P which snapped its 70-day streak of closes that were within one percent of the previous session close.

https://bit.ly/2RCqJVD

Alright, let’s talk Tesla. The stock tripled over the past eight months. It’s market cap eclipsed GM and Ford combined. Now, was it the Cybertruck? China? Elon Musk’s striptease? I mean, surely there’s someone out there who thinks it’s because he smoked pot on Joe Rogan’s show.

https://bit.ly/36rG937

From its high a couple weeks ago, oil’s down 14%, about 6% this week alone. The narrative in the news is all about oversupply, coronavirus fears. Learn why that approach is all wrong…

The Hang Seng Index in Hong Kong has seen some big moves this week. From Monday’s open to Tuesday’s close, the index fell 4%. Coronavirus got the blame, but the market’s plunge had nothing to do with the virus.