New market thoughts from Raymond James’ Jeff Saut: “War What Is it Good For?!” 04/18/17

Morning Tack: “War What Is it Good For?!”
Jeffrey D. Saut | (727) 567 2644
“War, good God y’all, what is it good for? – absolutely nothing! Say it again . . . ” . . . Edwin Starr, 1970, (War)
Back in my misbegotten youth my band played the song “War” by Edwin Starr at fraternities across the south. Those lyrics resonate to this day. In fact, as Joseph Rotblat (Sir Joseph Rotblat KCMG CBE FRS was a Polish physicist, a self-described “Pole with a British passport”) writes:
The most terrifying moment in my life was October 1962, during the Cuban Missile Crisis. I did not know all the facts – we have learned only recently how close we were to war – but I knew enough to make me tremble.
I remember those days as I sat in Mr. Hoover’s sixth grade chemistry class where he told us the United States may not exist tomorrow as Nikita Khrushev threatened the U.S. with nuclear inhalation. I recalled that feeling as I heard a governmental official over the weekend state, “Russian American tensions are the worst ever!” I don’t think that is correct, for the way I felt in 1962 was much worse than now. It was a very scary time as I left Huguenot High School that day, but the current environment does not feel nearly as bad. Indeed, President Trump’s meeting with China’s president seems to have fostered a relationship unseen in decades. As our friend Bob Hardy, of the must have Geostrat publication, writes:
China’s English language “Global Times” and the PLA Daily’s official English language publication “China Military” published three commentaries on the North Korean situation. They provide authoritative insights about Chinese assessments of the North Korean nuclear and missile programs, and the range of actions China would take. A Global Times commentary published late on April 7 was taken down within a few hours, but not before key excerpts were cached by Google. China Military followed up with an April 11 commentary referring to the Global Times commentary and clarifying four “bottom lines,” or tripwires if you will, for military intervention and assessments of the North’s nuclear weapons program. An April 12 Global Times editorial suggested China would tighten sanctions against the North. The four bottom lines are, in order: nuclear pollution and fallout from a nuclear test in northeastern China; China will not tolerate refugees; a hostile government in Pyongyang is third; and number four is U.S. forces pushing to the Yalu River. The first two are definitive, while the latter are open to interpretation. We judge the assessments on the North’s nuclear programs are points of arguments rather than firm policy (continued on page 2).
So yesterday, because there was no confrontation with North Korea over the weekend, there was a relief rally of some 183 “Dow Wow” points. The “relief rally” attempted to recapture the S&P 500’s (SPX/2349.01) 50-day moving average of 2353.27, but failed to do so. Accordingly, many chart support levels have been violated to the downside leaving us still in cautionary mode despite our belief that a trading low may be due. Regrettably, we did not get the “whoosh” on the downside our models suggested could occur early this week that would have been the perfect set-up for a tradable bottom slated for late this week, but “they” don’t operate the equity markets for our benefit! And this morning the preopening S&P 500 futures are off about 6 points at 5:17 a.m. as two more U.S. aircraft carriers steam toward the Korean peninsula. Indeed, curiouser and curiouser . . .
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