DAVOS Boom And Bust
This is the closing market review for January 16th, 2024:
For some reason, Davos has been the locus of crash multiple times over the past several years:
In January 2016 global markets crashed due to the December Fed rate hike and China meltdown. In 2018, global markets melted up into January and then imploded in February when the Trump tax cut took effect. In 2020, global markets melted up on the basis of the Fed "pivot" and then famously crashed in February. In 2022 markets crashed in January to begin the 2022 bear market.
Here is the pattern: 2016, 2018, 2020, 2022...2024?
Ok, now for today:
NYSE breadth started the day the worst since October and then deteriorated all day - at the lows of the day it was the worst since the bank run last year. U.S. stocks rallied into the close in another sign of BTFD complacency. So far, this sell-off is starting out eerily similar to the one in January 2022. A slow and steady step down into the abyss.
Nvidia continued its melt-up to new all time highs.
AMD sky-rocketed, but remains short of all time highs set in December 2021.
Notable new highs, aside from Nvidia: Microsoft.
As far as notable new lows, Chinese stocks once again got monkey hammered last night in Asia and today in the U.S. In the chart below we see the total disconnect between U.S. markets and China's markets, to an extent we've never seen before. In every other Davos crash listed above, U.S. markets were in synch on the upside and downside with China.
Not this time. For the past year since 2023 Davos, Chinese markets have been one way down and U.S. markets have been one way up. In addition to the Magnificent Tech melt-up, or more likely due to, this is becoming the biggest risk to markets.
This was the headline last night in Asia, preceding the overnight selloff:
Bloomberg: January 15th, 2024:
If you look at the chart below all the way to the left, that spike and crash in 2015/2016 was the last time the Chinese government pledged to support stocks by every means imaginable.
In the event, the Shanghai Composite dropped -60% top to bottom (not shown) and it took global markets down with it. Shocking to say, the S&P 500 did not make a new high at that time.
SPX -18%.
Other markets today:
Bitcoin bounced off the 50 dma during the long weekend, and has been camped at critical support for several days.
Oil is in a tight coil due to tensions in the Middle East versus the ongoing meltdown in China.
Bond yields rose today (t-bonds sold off), which is another bizarre combination for Tech stocks to be rallying.
The $USD was strong today relative to most other currencies which is deja vu of 2016 when the $USD crashed the Chinese Yuan and Emerging Market currencies.
Gold down ~1%.
