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Gene Inger: The Inger Letter November 3, 2016

Gene Inger

Gene Inger


Defensive stances across the Board - remain appropriate for investor portfolio structures, as tough as that is for the impatient eager to get into the game anew and given year-end strategies often contemplated about this time of year. Our multi-month historic, unprecedented uncertainties confronting markets, persist; as that matters. (Holding a home-run Dec. S&P short-sale guideline from 2167 without a stop, makes this point.)


Regardless of politics there's unfinished business on the downside, with respect to both equity and credit markets; not to mention volatility in Oil and Dollar markets too (both of which were projected to rise and have a pullback as has just occurred). Fund flows (so-called 'smart money') for sure telegraphed an affirmed technical backdrop for weeks and months (it was not just narrow and neutral; it was rotation to hide distribution as we evaluated consistently in noting unsustainable low-volume rallies).

As far as the growing divide between the electorate and Washington; as is more clearly depicted to the average voter who may long have been a bit suspicious about politicians, at least slightly aware as to the depth of misdeeds (corruption if one wishes to call it); as well as patronage: well I don't envision this necessarily leading to a Constitutional crisis some see; although if it gets that far of course that's not bullish either. 

Rather I see the public as no longer 'hoodwinkable' by politicians as for so long were 'spin doctor' presumptions. Most issues said to 'poison the well' now, are actually issues already known (often for years); (more). 

(Redacted) matters, as regardless of how the Election goes; underlying fundamental and economic concerns will persist. Thus even if we get a 'relief' rally (presumably from lower levels) after the vote's digested; one suspects unfinished business remains, given the Election (reserved for subscribing members) wasn't the main event with respect to assessing price/value market relationships, not to even mention the credit market (which I delve into tonight's Video #2, reviewing the FOMC statement). 

(Redacted comments about the shift in attitudes within two days by both AG Lynch and President Obama. Do they know what lies in the wings?)

All of this has stock and credit market meaning. (Balance for members.)

Technically . . we warned that S&P 2110-20 was last-ditch support as the process evolved; as that once we got our close (said confidently this week a few days ago) under 2100; we'd find a temporary rebound; with such reprieves failing as prices resuming declines to lower levels. That's an ongoing 'process' for both the 'Cash and Futures' as far as the S&P.

During this entire distribution it has resembled (for months not merely as political antics took center stage) more rearranging Titanic's deck-chairs than a sensible defensive strategy of protecting investment assets (my favorite phrase: 'worry more about the return OF your money, more than the return ON your money' at such times of extended markets). 

The push into technology hasn't worked for managers pressing that idea any more than chasing Oil stocks last week; or even a Facebook, Fitbit or Qualcomm (strategy of how and when one buys these is discussed). 

It is a reason I was encouraged (from a bearish viewpoint) that analysts immediately (day-after-day) mostly encouraged buying dips in so many stocks, which I contrasted to 'catching falling knives'. (What do I see?) 

In-sum: you know our stance; our ongoing current 'live' guideline short from December S&P 2167, and belief (now achieved) that 'Cash S&P' would crack 2100 this week on a closing basis; (next stage outlined). It is a a work in-progress as S&P now enters high ends of that vacuum.

If you want to toss-in 'Constitutional' risk because of the shambles that Washington seems to suggest as so much unravels; well, that's more a flock of 'Swans' than a single issue Swan. (What I'm expecting is likely.)

Misc. items of note: China's firming rates and ballooning debt; a new Deutsche Bank / ECB  concern; Tehran newspaper saying the Ayatollah ordered their 'Guard' to infiltrate personnel into the United States next year (political hot potato if that story's circulated; though if true it should be); and riots in Caracas as Venezuela runs out of money. 

Worrisome in the USA: the recurring polio-like disease that's effected a number of young kids in 33 states. It resembles a disease called AFM, or Acute Flaccid Myelitis; similar to Polio. Can be 'viral' in epidemiology; though the source of this outbreak isn't clearly linked. We read the CDC warning. Enormous ramifications if not isolated and understood.   

Bottom-line: the turbulence experienced by markets is more like 'light chop' than a fasten-seat-belts and brace situation, so far. But the market radar says we've entered a cluster of forecast storms (forecast follows). 

We consistently hold short December S&P from 2167 for a few weeks. 

Daily action - watches financial markets breach technical levels we've warned of, and which are significant, particularly for the S&P 500. Both a broader NY Composite or especially the Russell 2000; telegraphed this as forthcoming. Meanwhile the temporary strength at the time for a combination including Oil and some techs, gave an illusion of strength in those preceding couple weeks, which was delusional as assessed.

(Redacted discussion.) It set-up a potential 'trap door'. For many stocks (pharma an example) the 'keyhole exit' referred to, is behind; although the heart of decline (for others particularly) lies ahead. 'Nowhere to hide' is an operative term 'they' (there is 'a' they) won't embrace; but that's of course how you get a liquidation phase and eventually a capitulation. 

After great gains a couple months back from our then (over 2180 Sept. S&P short-sale guideline); we moved to a present short-sale guideline from December S&P 2167, (more for regular ingerletter.com members including risks of societal disequilibrium and 'known unknowns'). 

The market is sort of on (or just below) the 'brink' if you will; while we're hopeful the Nation doesn't also have to contend with protracted perilous economic and social conditions that could (but must not) rip things up beyond what some call 'swamp draining'. What we want is not entirely an exorcism, but skilled surgery to right the ship; to repair the damage, and perhaps hold some of the watertight doors sufficiently together that iceberg damage will not be catastrophic for a proverbial 'ship of fools'. 

(Redacted political interpretation for subscribers); then after dust settles, for the US to embark on attempts at a 'Manufacturing Renaissance' I've long called for, within context of renewed technical innovation, domestic growth, and optimism; empowering rekindling of the American Animal Spirits as characterized growth times in our volatile but great history.

Conclusion: our destiny is to survive and to eventually prosper; beyond the macro-economic, debt-encumbering, over-leveraged, and politically insane chaos of the moment. Perhaps it will have a maturing legacy for the markets and even for large parts of our citizenry. For stocks for sure the extent of the unwinding (redacted); but a distribution preparing for it has been historically long; implying a significant adjustment prior to new attractive levels being achieved for general investing. 

For now holding short from Dec. S&P 2167; with intraday trading ideas provided for those who wish to fade rallies, and even anticipate the S&P interim rebounds within the bearish context. Enjoy the decline and pray for the Nation! Oh, and by now where possible, I'm sure everyone voted already. Who in the world wants to deal with that next Tuesday.. 

And if there's a single vote that's interesting; it's San Francisco, where it may become only the 3rd City/County in the Nation to pass a measure to lower the legal Voting Age to 16. Now that's a focus on youth and the power of millennials, who will then become the 'older crowd'.    

Prior highlights follow: (entirely redacted as in fairness to members) 

The process of an 'epic unwind' has been telegraphed and continues evolving despite periodic efforts to resist what we think is an inevitable drop of significance. It's been set-up by months of forecast patterns.

Enjoy the day (and join us!) 

Gene

Gene Inger

www.ingerletter.com