Risk Off, Gold and Zombies

August 13, 2017

Weekly Market Outlook

By Keith Schneider


blankGlobal equity markets had a hiccup last week, precipitated by President Trump’s (aka the Twitterer in Chief) tweets, threatening both North Korea and Venezuela, saying the US military is “locked and loaded” and ready to attack if provoked.

Those tweets stopped what was looking like a market melt up dead in its tracks, and unlike other tweet storms that ended being buy opportunities, accelerated to a nasty selloff- leaving the market vulnerable to further declines.

US stocks declined -.85 to -2.69% on the week, but you can tack on another 1 % to those numbers from the intraday highs. Interesting to note, volatility (VXX) that has been sitting at its lowest level ever jumped over 20% for the week, and on Friday ran up into the close (despite stable to positive action Friday afternoon in equites).

When I awoke Saturday morning, I picked up my phone to see if things had calmed, but was disappointed to read that Trump, unhappy with Beijing’s promise to defend North Korea in the event of an attack by the US, tweeted that he wants to investigate China for unfair trade practices and     threatening a trade war with China.

After consulting with a Ouija board, a tarot card reader, many economists, and my charts, they all agree that a trade war with China will not help global trade, corporate profits, or corporate valuations.

A nuclear exchange with North Korea could also damper consumer sentiment, so the shift to gold and haven assets picked up this week. The strongest assets were consumer staples, utilities, bonds and gold.

Guam’s Office of Civil Defense handed out leaflets for handling nuclear fallout with instructions like” Lie flat on the ground and cover your head” or “take a shower with lots of soap and water to remove nuclear contamination”. With such specific instructions, I’m sure residents of Guam feel secure with such a good plan in place. The big debate among survivalists is what to own, Bitcoin or Gold, in the event of a zombie apocalypse caused by nuclear war. I wonder if the survival kit contains a bit of both.

My old office neighbor, Ray Dalio, likes gold now and we agree as it seems undervalued. Forget about under armor and yoga pants: think about outer armor, hazmat suits, and the yellow relic.

Last week in this column, we were screaming that our risk indicators were shouting “sell.” Another clue that a sell off was imminent was that our real motion/momentum indicators were showing a loss of altitude in some key US Stock indexes and high yield debt, and real strength in gold and volatility.

Check out this week’s video for more on the current market conditions and how our Real Motion indicators gave us a heads up and what they are reading now.

To learn more about the Real Motion indicators discussed in this week's Market Outlook go here.

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