Year of the Brown Earth Dog Bites the Market

February 2, 2018

Mish's Daily

By Mish Schneider

blankI did not want to bring up the new Chinese Astrological year, still 2 weeks away, until it got closer.

However, since the prophecy of it is now eerily accurate, the time to point out certain potential trends is nigh.

Officially, the Chinese New Year begins February 16th.

Please note that using prophecy as a trading plan makes little to no sense.

However, using prophecy along with technical and fundamental analysis combined with a consistent trading plan, by all means.

The following are statements made by Raymond Lo, an expert in Chinese Astrology. His analysis has been spot on since I started paying attention to him 4 years ago.

“The year of the earth dog, could be a turning point in human history. In the five elements system, fire is happiness and optimism, which prevailed in the previous years of fire monkey and fire rooster.

However, when the year of Dog arrives, the fire enters the grave, hence it brings a setback to optimism.  This in turn, will cause a setback in the economic atmosphere.”

I like to say, given the collective consciousness theory, how can over 7 Billion Asians be wrong?

Lo goes on to say, “The Dog year will bring decline in economic growth and activities leading to longer-term setbacks of the stock market and more economic crises will come up.  As there will not be return of fire year until 2025, we expect a long lasting bearish market ahead.”


Now, it’s not all bad.

Lo also says, “The heavy earth element of 2018 is expected to bring prosperity to wood industries and fire industries; this is because wood conquers earth, so the earth element is a symbol of money to the wood industry, which includes fashion, media, paper, books, education and environmental industry.”

I will research certain applicable stocks in the coming weeks.

Technically, after last week’s sell-off, 4 of the 6 Modern Family (Retail XRT, Semiconductors SMH, Biotechnology IBB, Russell 2000 IWM, Regional Banks KRE and Transportation IYT, remain in bullish phases.

The Russell 2000 closed in an unconfirmed warning phase. We consider it a weak warning phase with an upward slope in the 50-daily moving average. We also need 2 closes below the 50 DMA to confirm.

Retail, closed right below its 50-day moving average. Likewise, the slope is positive, and we need a second day confirmation.

Retail and the Russell 2000, if confirm their warning, is not a good sign as the small cap index represents manufacturing in the U.S. Retail, a huge component of GDP, measures consumer confidence.

Transportation, sitting right on the 50-DMA, if that confirms a warning, then we can surmise that the movement of manufactured goods is declining.

As I’ve been stating for months, my number one concern is the rising rates and falling dollar. Rates rose over 3% and the dollar broke a long-term uptrend.

If the Federal Reserve loosens monetary policy, inflation can get ugly. If they tighten, considering the enormous balance sheet, they run the risk of triggering stagflation.

I will write more about the Earth Dog and the implications for the 2018 market in the coming weeks.

In the meantime, I leave you with this:

A fascinating cog in the whole Brown Dog theory wheel, is that Trump is born the Year of the Dog. More on that as well in the coming weeks.

S&P 500 (SPY) 271 is the 50-DMA. I expect perhaps a bit of digestion with 275 a decent support level.

Russell 2000 (IWM) 154.21 is the 50-DMA. Watch where this closes

Dow (DIA) 250 is the 50-DMA.

Nasdaq (QQQ) 164 has some support. Under that, 160. Resistance is 168.50

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