Bitcoin Kisses $16k as the Broader Market Rests

Investors continue to ask - “What is going on?”  Stocks remain a bit listless - but Bitcoin continues to rally - breaking $15k overnight  - causing the media to get all worked up.....Yesterday Tech rebounded a bit  after getting slammed while the broader mkt appears to be a bit exhausted, financials leading the way lower as the lack of clarity over tax reform debate rages on.....
 
Since the senate passed their version of a tax reform bill last week and has now sent it to the conference committee - the Mkts have turned just a bit more cautious sending the broader mkt into a slight corrective phase.  The banks taking the heat yesterday as the nervousness builds concerning what the final product will look like.  
 
Next up - some analysts/strategists are now trying to turn the tables a bit - suggesting that investors are getting all worked up about the pending collapse of a spending bill - the current one  expires on midnight Friday - leaving the gov’t with no money to pay bills....causing a gov’t shutdown.....something that I will say is not going to happen....they will kick that can down the road (again) and extend the current spending bill for another 2 or 3 weeks so they can get back to trying to finish tax reform.  In fact - headlines today tell us that Donny is about to meet with a bi-partisan group of congressional leaders to hammer out a 'long term' spending bill (deal) - but while that is taking place - ALL expectations are for Congress to vote on another 'stop gap' bill to avoid a gov't shutdown on Saturday morning..... It’s all smoke and mirrors really....
 
Now that being said - the Mkt is a bit tired, investors have pushed the envelope about as far as they can under the current circumstances...it's time for the eco data points and policy to kick in to justify what investors have been expecting.......If that does not happen then investors will force a re-pricing of assets - but that re-pricing will be more than the current 2% move......in fact - that 2% move is nothing more than a pimple on your bottom....in the bigger picture..... so there is no cause for alarm just yet....look - the mkt was up 19% ytd - it has sold off about 2% in the past week.....that is not an issue at all - in fact the mkt could sell off another 7% and still be within the normal range of trading - you see any downside move that is between 0% - 9.9% is considered with the ‘normal’ range of trading, between 10% - 19.9% - it would be considered a correction and greater than 20% puts us smack in ‘bear mkt’ territory.....We are nowhere near any of that at all....so why all the consternation?  Now - individual names within sectors may have gotten clobbered a bit more - we saw that in some of the tech names last week -  and those are the ones  that will demand investor/trader attention - but broadly speaking - there is nothing to worry about - yet! 
 
There are no eco stats today that will make a difference one way or the other so do not look for a catalyst today....but tomorrow may provide some further insight into the state of the union.....Non Farm Payroll is due tomorrow...and if yesterday's ADP report is any guide - then we can expect just what we are expecting....200k new jobs.....Unemployment to remain steady at 4.1% and the Underemployment rate below 8%, avg hourly wages to be up 0.3%....and none of this would be a surprise to the mkts (or investors) because it is what we are expecting....so do not look for that to be a catalyst either.....the only thing that will do is confirm the FED's next move on Wednesday....again - NO surprise. 
 
Yesterday we also got October's Trade Balance report.....and it took us deeper in the hole....coming in at ($48.7 bil) - significantly worse than the September report of ($44.9 bil).  So you ask - What exactly is the Balance of Trade (BOT) and why is it important? 
 
Investopedia defines it this way -
 
"The balance of trade (BOT) is the difference between a country's imports and its exports  for a given time period. The BOT is the largest component of the country's  balance of payments (BOP). Economists use the BOT as a statistical tool to help them understand the relative strength of a country's economy versus other countries' economies and the flow of trade between nations. A country that imports more goods and services than it exports has a trade deficit. Conversely, a country exports more goods and services than it imports has a trade surplus. The formula for calculating the BOT can be simplified to imports minus exports. 

To make complete sense, the raw number of the trade deficit or surplus must be compared to the country's gross domestic product (GDP), since larger economies may be better suited to handle large deficits and surpluses. the United States has had a trade deficit since 1976, in large part due to its imports of oil and consumer products. Conversely, China, a country that produces and exports many of the world's consumable goods, has recorded a trade surplus since 1995.

A trade surplus or deficit, taken on its own, is not necessarily a viable indicator of an economy's health. The numbers must be taken in context relative to the business cycle and other economic indicators. For example, in a recession, countries like to export more, creating jobs and demand in the economy. In a strong expansion, countries prefer to import more, providing price competition, which limits inflation."

A strengthening dollar negatively impacts the trade balance - right?  As the dollar gets stronger than US products become more expensive abroad - so exports slow while imports increase adding to the growing negative trade balance.....while a weakening dollar would have the opposite effect - and since September - the dollar index - DXY - has risen by 4.5%.....and if the dollar strengthens more - then we can expect the trade balance to get bigger - just sayin......Now this is NOT a reason to panic - it is just a teachable moment....

But what does that say about Gold?  Did you see what happened yesterday to the precious metal?  It continues to get hammered.....yesterday down $8 pts and this morning its down another $8 at $1,257/oz.....well below long term support at $1,277.....putting gold at the lows of the year....and with the FED on the path of higher rates - we are getting closer to that inverted yield curve and run the risk of deflationary pressures on the economy.  Deflation occurs when the supply of goods and services rises faster than the supply of money - so considering that the FED is looking to take money out of the system - deflation becomes a real possibility and that will cause investors to once again re-price assets......

Global Mkts are trading sideways....to slightly positive....German Ind Production missed but is not causing any alarm.  EU GDP was in line with expectations - so all good.  BREXIT talks continue and PM May is prepared to present what the 'end state' would look like before year end....Volumes around the world remain subdued and will only get worse as we move into the end of the year....FTSE + 0.17%, CAC 40 is flat, DAX + 0.13%, EUROSTOXX + 0.07%, SPAIN + 0.18% and ITALY + 0.13%.
 
US Futs are up 1 pt...it's more tax talk and for sure more Bitcoin talk.....after the crytocurrency broke thru $14k and then $15k in the same session.....and teased with $16k before backing off...  I have no ax to grind here....but this thing is up 91% since November 28th and is up 1500% since January.....Is anyone else a bit concerned here?  just think of the VOID when the buying stops....I mean - look it could keep going because the mania is such that it becomes IRRATIONAL.....but......when the music stops...
 
Oil is up 0.10 cts.. at $56.07........now recall that yesterday  - I said:
 
"Watch for the EIA (Energy Information Admin) report later today.  Will it also warn of building inventories putting further pressure on oil?  There is some support right here at $56.80 - but I wouldn't be surprised to see it test $56."  
 
And test $56 it did.....it is now in a place of neither support or resistance....so it may waffle...support is down at $54.55 while resistance is at $58 ish.   My guess is that it trends lower before teasing higher.....
 

Take Good Care

KP

Linguine and Clam Sauce - #4 

For this you need: 1 doz clams plus a container of just minced clams, onions, garlic, olive oil, white wine, s&p and clam juice. 

Start with the clams - a couple of dozen or so should do nicely (in the shell) - wash thoroughly to remove any sand from the shell.    Drain. 
In a saucepan - heat olive oil next add sliced and crushed garlic - sauté around until it takes on a nice golden hue - now add the diced onions and cook until soft and translucent.

 Next add the clams in the shell, S&P, a splash or two of white wine and cover.  Reduce heat to med....continue to move the clams around to get them to open up. If you need a more juice - feel free to add a bottle of clam juice.   (Never use a clam that is open before you cook it...capisce?)....At this time....remove some of the clams from the shell - return the clam itself to the sauce and discard shells  Always keep some clams in the shell for presentation.  Now add in the container of minced clams and let them cook with the sauce.    

Put the linguine in the pot of boiling salted water to cook for 8 / 10 mins....or until aldente.  Strain - always reserving a mugful of water.....return the pasta to the pot - add back 1/2 mug of water to re-moisten.  Toss - wait a min or two and then add the clams and the clam sauce....toss and serve immediately in warmed bowls.  You should have grated Romano cheese available on the table for your guests.   
This dish should take you no more than 40 mins...start to finish.  
 

  
Buon Appetito.

The market commentary is the opinion of the author and is based on decades of industry and market experience; however no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O’Neil Securities, Incorporated or its affiliates.