The U.S. election has world is holding its collective breath. There is so much riding on the outcome of this particular election that, for once, creating an event to shake things up isn’t in the cards.
In fact, every day it becomes more obvious that the headlines generated by statements from the people at the center of the storm — presidents, prominent legislators, advisors, trade negotiators, etc — are designed to counteract the effect of the previous day’s headline-generating statement.
It’s almost like we’re in an algorithm-dominated world or something.
No, that can’t be we have free markets.
Markets so sophisticated they are ruled by the dumbest computers.
Maybe we do need a Great Reset. But, please, not Klaus Schwab’s.
My point is simply this, we are now trapped in the event horizon of the black hole that is this U.S. presidential election. The competing agendas of the forces involved — Trump vs. everyone else — along with the very real (if heuristically adjusted) data that is sending mixed messages across the financial landscape has most financialized markets paralyzed.
Let’s start with stocks.
October’s throwing an inside bar (black arrow) after September’s crazy volatility all of which reinforces the resistance centered around the 29,000 level (orange line). There’s been no real movement at all.
Part of the market buys the Fed’s nonsense about a global flood of dollars (H/T to Jeff Snider for that phrase) and another part of it, the more important part, the eurodollar part, doesn’t.
Looks like Powell’s done a bang-up job changing the definition of inflation by still not generating any inflation expectations. Which is also why we’re getting the most mild of sell-offs in the long-end of the U.S. treasury market.
But dollar bears are out continuing to do their “Alluh Ackbar” routine with every minor downtick of the nearly irrelevant USDX and uptick in gold.
Speaking of gold.
Since peaking in July gold has done nothing but trace a step-wise retracement. It’s certainly held onto most of its gains. I’m not complaining. But to say that there’s any signal currently in gold prices is to be dreaming.
Silver’s more interesting simply because it’s more volatile. But gold threw a big one-bar reversal back in August and that still dominates the market.
Bulls and bears are fighting it out looking for a positioning advantage for when we finally get some closure on this election.
But we aren’t going to get anything consistent. One day Boris Johnson walks away from Brexit talks and odds of a No-Deal scenario rise. The next day Michel Barnier says he’s still talking with the Brits.
We couldn’t have possibly gone into the weekend on a down note for the euro-zone so Reuters (via Zerohedge), ever the globalists dutiful servant, puts out an unsourced rumor that France is willing to come down off its high horse about fishing rights in U.K. waters.
According to Reuters, the French government is considering accepting a smaller “catch” from British waters starting in 2021. If accurate, this would signal that President Emmanuel Macron is laying ground for a compromise that could clear the way to a comprehensive “Canada-style” trad deal with the UK.
This is nothing more than algo-moving garbage. Macron, as I’ve explained countless times, doesn’t want a deal with the U.K. He’s using fisheries as a wedge issue now to shore up domestic support and put the screws to Germany. Two hours later he flat refuted the Reuters story.
But it’s important that the euro stay relatively strong and the European sovereign debt market remain pegged as far negative as possible to allow the European Commission to keep offering ‘Social Bonds’ at less negative yields to try and establish a market for this crap.
Speaking of the euro.
Three weeks ago we finally got a real breakdown bar after two months of topping action where a lack of real commitment to stabilize above $1.18 took its toll.
That breakdown was the real market-driving action because it was the first instance where the market admitted the possibility of a No-Deal Brexit. And since then, as Johnson’s government has refused to budge, the EU has scrambled to manage the headlines over Brexit.
At the same time U.S. politicians keep toying with us over this stimulus package. One day Steve Mnuchin and Pelosi are close to a deal. The next day Pelosi ‘won’t budge an inch.’
And the algos go wild.
The bottom line is there will be no breakthroughs on a Brexit deal or stimulus until the election is over. Period. Everyone’s agendas have coalesced around what the U.S. government will look like on November 4th.
The Democrats and The Davos Crowd need either a Biden win or Trump having short coattails in the House and Senate races to at best gum up the works for another four years or at worst impeach Trump for wearing bronzer.
If Trump wins and has coattails, either taking back the House or nearly so, then the generational shift away from the pure corruption of the Baby Boomers will begin as the U.S. will stand just tall enough to force a Great Reset onto Europe.
* * *