View From The Hill (Jan-6-2016): Go And Expect More Pain Before Gain

Commentary

When the market delivers equity investors brutal combination punches of Volatility, Gold, Yen and Bonds, then you know something is amiss with the geopolitics. North Korea’s hydrogen-bomb announcement could not have been more ill-timed as the markets still haven’t recovered from the body blows of China’s weak manufacturing report and serious tensions between OPEC giants, Saudi Arabia and Iran. 

Kim Jong Un was the butterfly flapping its wings today and I think this time we should not be so dismissive of him.

Here’s the raw deal: If “Holy MF-NK” really has a a bomb, then it’s a game changer.  We’re not playing checkers or even chess for that matter anymore. Incidentally, North Korea never has. Instead this is Go (one of my favorite board games) and to be skilled at it, you must have a cunning and treacherous mindset, along with the ability to consistently deceive and keep your opponents off-balance. This is exactly what Kim Jong Un has done  with not only the West, but China as well. I don’t like the bastard, but I must admit it was a brilliantly played move and deserving of the utmost Machiavellian respect.

Some of you may opine that geopolitical issues are not germaine to investment market commentary. If so, I respectfully disagree. Anything that affects money in terms of risk exposure should never be ignored. No further comments…

Performance Summary

*Trends: ST = short-term; MT = Intermediate-term; LT = long-term

Market Condition

As stated yesterday, the market internals are weak and therefore the resumed acceleration in bearish momentum was more or less expected. Before continuing, I forgot to mention the obvious crossing of the 22-day moving average below the 55-day average. Considering such, today’s violation of key support levels was not a surprise either. If we get another failed rally, then our next stops before descending to Hades are 1965 and 1920 levels on the SP-500.