Market Lab Report – Premarket Pulse 11/27/15
Major averages were flat to mildly higher Wednesday on lower, pre-holiday volume. Chinese shares plunged 5.5% overnight as Chinese authoritiesâ investigations into two major Chinese brokerages over suspected violations drove shares lower. Chinese authorities have been cracking down on market participants through actions ranging from targeting âmaliciousâ short sellers to arresting star fund managers. The Shanghai Composite Index, which fell more than 40% from peak to trough during the summer, is now up more than 20% from its August lows. While it is expected that the Federal Reserve will hike rates in December, perhaps it will just be a one-off, token rate hike despite the four rate hikes in 2016 as predicted by Goldman Sachs. Legendary futures trader Ed Seykota’s view on the cradle-to-grave of the life cycle of governments is expertly discussed in his book “Govopoly on the 39th Day” which is monopoly by government sanction. The 39th day is the day before the end of current government. The analogy he uses is duckweed in pond ecosystems. It doubles each day, so goes unnoticed until it gets too big to fix, so by day 40, it suffocates all remaining life in the pond. Seykota writes as follows: “The official unemployment rate does not include people who feel discouragement and stop looking for work. It also includes people who work in non-productive and non-tool-making jobs. You might consider a chart of employment in tool-making industries or employment in manufacturing [which has been on the decline for many years.] Ultimately, prosperity depends on tool making, the natural work of the free-competition sector. As the Govopoly system assimilates the free-competition sector, tool making slows and prosperity falls. In the 39th Day, real estate prices make new highs – particularly around the seat of government. Eventually most prices rise as production falls and as people lose faith in fiat currency and scramble for hard assets. At this moment, we have the Fed unable to contract money supply for fear of setting off a general collapse. Also, the Fed cannot raise rates, for the effect that might have on the federal deficit – and for fear that banks might get back into the lending business – and support monetary inflation. So the Fed continues to try to hold it all together by paying banks to sit on excess reserves. Meanwhile, a rapidly increasing regulatory culture prevents small business from competing with the Govopoly system, so we have a general atrophy of the entrepreneurial class – and those whom they employ. Either way, you might look for assimilation to continue, for the middle class to continue to sink into poverty, for the appearance of widespread discontent, motivating various forms of bailout, and for the creation of even more fiat currency. You might notice the new crop of politicians do not talk much about any of this – preferring to divert attention to other areas, such as menstruation and curiously clean disk drives.” Â Today’s shortened session closes at 1 p.m. EST. Chinese social networking platform WB had a pocket pivot. Earnings and sales are soaring, group rank 1. Financial services company EEFT just cleared enough volume for a pocket pivot. Earnings are strong, group rank 24. EEFT bounced off its 50dma the prior day.