Let’s not kid ourselves here — on just about every front, last week was dreadful.
Chris Irvin noted in his SPY the Market report (available to MTI students) this weekend that “The S&P 500 (.SPX) suffered its worst five-day opening to a year on record going back to 1929 and the Dow (.DJI) notched its worst start to the year on record dating back to 1897.”
On CNBC this weekend, one technician, Rich Ross of Evercore ISI said that “continued weakness in the yuan should weigh on oil, U.S. transports and U.S. equities. Some have even argued it could spark a global currency war, as economies move to devalue their currencies in order to compete with cheaper Chinese goods.”
Ross added, “if the S&P 500 breaks below its key support level of 1990, it could retest the lows of 1900. ‘Even if there’s a bounce, fade all rallies’ said Ross.”
Ok, so that Must be All, Right
Irvin also spoke to students about how one advisor he trusts, Art Cashin, is wary about the positive numbers posted in last Friday’s Non-Farm Payroll report. Cashin analyzed the data and reported on CNBC, “Not to be a wet blanket, but that jobs number is a little suspect. If you look at the household survey: 485,000 [and] 35 percent of those went to people under the age of 19. Another chunk went to people over 55; only 16,000 out of 485,000 jobs went to people between the ages of 24 and 55.”
Irvin explained that the most important effect of the unemployment report is its continuing impact of the U.S. Fed’s decision to steadily increase interest rates. If Americans are still underemployed, as Cashin suggested, then raising rates could lead to inflation ahead of the curve able to withstand it.
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