Fellow fun lovers. I am down with a nasty viral infection; so today will short and sweet and nothing tomorrow. Hopefully I am back on track Monday.
The technical picture became a bit more confused yesterday. Certainly not for the stock crowd though breadth continues to be weaker than the pin actin suggests. The Treasury and GLD drifted lower (stronger economy/higher rates), while the dollar did the same (weaker economy/ lower rates). Bottom line: the indices are technically strong and point to higher prices/stronger economy/higher rates. Other indicators not so much so.
Overseas, the November Chinese manufacturing and nonmanufacturing PMI were ahead of forecasts while the final November EU manufacturing PMI was also higher than anticipated.
Of course, at the top of everyone’s list is the senate tax reform bill. However, there has been selective interpretation of related news events. For instance, Senator John McCain said that he would support the bill. The fans went wild, stock prices spiking.
Then the senate’s joint committee on taxation, issued a report that said the proposed tax cuts would only generate $458 billion in increased revenue. In other words, the $1.4 trillion in tax cuts would result in net addition to the deficit of $1 trillion. Don’t get me wrong, I don’t have any more faith that one group of eggheads with their model are any more likely to be right than another group of eggheads with their model that said the tax cut would pay for themselves. But that is the point, we are dependent on the outcome of a standoff between two groups of morons. Well, needless to say that report did comport with the ‘everything is awesome’ narrative. So investors took sides, decided that the senate committee was the bigger group of morons and therefore should be ignored.
Here is where we are at this moment (medium):
Bottom line: there is nothing in this senate to commend itself to taxpayers or investors. We are now in the dreamweaver phase of the market, which can last longer than most rationale people would never expect. Just be sure you have built your cash reserves.
Yesterday’s US data were upbeat: the November Chicago PMI and weekly jobless claims were better than expected; October personal income was above estimate, while personal spending and the PCE price indicator were in line
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