The Trump That Tweeted Wolf


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Rabbie Gill

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The Trump That Tweeted Wolf

Market sentiment is shifting. Tariffs on, tariffs off, tariffs delayed, new talks, talks cancelled, retaliation, no retaliation. Prior to this week, markets had large knee jerk reactions of 2, 3, even 4% moves to Trump’s tweets.  However, this week Trump’s tweets didn’t move the markets as much, the reactions appear to have become much more muted.

Trump’s tactics remind us of the boy who cried wolf one too many times. TRI’s concern is that the big bad wolf is not just the trade war, but more importantly the downturn of the global business cycle. It appears many investors are ignoring the message economic indicators and asset prices are flashing across equity, interest rates, commodities and currencies. TRI believes the trade war is exacerbating the downturn in economic cycle, not its cause.

Investors have now priced in much of the trade war drama and timing of resolution with a high uncertainty premium. In best case structure and timing of any resolution is far from clear, besides the fact the global supply chain is drastically changing.  Markets are now looking through the trade war challenges and will be focusing on economic growth prospects. Let’s see what the economic indicators and TRI Cycles and Trends are telling us.

The S&P 500 is on short-term bullish signal, but the higher degree weekly and monthly trends are bearish. The August monthly close completed a monthly swing high and a turn down in the TRI Cycle Turn Indicator. This means the S&P500 has likely topped for the year and monthly cycle will now complete the down phase into the Nov 2019 to Mar 2020 time period. TRI is targeting S&P500 to move lower into the 2,200 to 2,400 level.


The S&P500’s August price action was interesting.  Prices have been range-bound and are setting up in a similar fashion to Nov & Dec 2018 (highlighted circles) where they resolved lower.

The Change in Cost of Money & Goods

The structure and phasing of the business cycle are an integral components of the TRI Investment Process. The change in the cost of money and goods are key drivers of business and consumers investment and consumption decisions. Albeit, in a lagged manner.

That is, interest rates and price levels today impact where the markets will be 18 to 24 months from now, while today’s market levels are a function of where interest rates and prices where 18 to 24 months ago.

Source: Bloomberg

The chart above shows that the increases in interest rates and price of goods over the 2017 to 2018 period are still negatively impact economic growth and will continue to into the first half of 2020.  TRI believes these past increases will pull Purchasing Manager’s Indices (PMI’s) lower into the early to mid 2020.  Lower levels of PMI’s tend to result in lower equity market returns, lower interest rates and higher credit spreads. This is especially relevant when PMI’s drop below the 50 level.

Do Transports Hear the Wolf?

The IYT ETF, representing the Transportation Index, has underperformed the S&P500 to the upside since the Dec 2018 lows.  However, IYT has outperformed the S&P500 to the downside since its May 2019 monthly cycle high. Not a good combination for long only investors.

The IYT is on a weekly and monthly bearish trend, as it has shown several price failures at the 78.6% retracement level of the Sep 2018 to Dec 2018 price decline.  The monthly cycle peaked in May 2019, creating a left translated and failed monthly cycle advance.  The most recent weekly cycle also failed as prices broke below the Jun 2019 lows, before bouncing marginally.  Prices are likely to resolve lower as the Transports are hearing the wolf loud and clear.


Express Delivery, Not So Much

Digging further into the transport’s performance, TRI highlights the price action of a transportation bellwether: Federal Express. Fedex delivers thousands and thousands of packages worldwide daily. Fedex stock peaked in Jan 2018 and has fallen around 40% since… wow.


What is Fedex telling us? First, the global economy peaked in early 2018. Second, there appears to be more secular (long-term) dynamics that are affecting Fedex valuation. The trade war is altering the nature of the global supply chain, so investors are re-pricing to a less globalized world.

We the North

The TSX is on a daily bullish trend, but weekly and monthly bearish trend. Unlike the S&P500, the TSX did not make a new high in July.  TSX topped in April 2019, only 4 months after its previous monthly cycle low. The current weekly cycle appears to have topped as well.  TRI believes the risk are high for the TSX as it continues to bide time above the 16,000 support level. When that breaks, we the north will be heading south.


Emerging Markets

The Emerging Markets ETF has not made any progress from the bear flag set up TRI highlighted in our previous commentary. Weekly and monthly trends are bearish as lower price are anticipated.


Can Dr. Copper Hear the Wolf?

Yup, loud and clear.  TRI highlights some traditional technical analysis on copper. Copper is forming a head and shoulders topping pattern and if you look closer, since early 2018 there is a second, smaller head and shoulders pattern forming.


Cyclically similar to Fedex, Copper topped in early 2018 and has since turned down. Dec 2018 marked the previous monthly cycle lows.  May 2019 marked weekly and monthly cycle highs, which are both left translated and failed. This failure of prices, that break below the Dec 2017 lows should lead to prices testing at least the $2.25 level, if not $2.00.

Why So Negative?

TRI will bring this commentary to a close by asking… do lots of negatives make a positive?  As in negative global interest rates…

Thoughts, comments and critique is always welcome. Please don’t hesitate to reach out in confidence to


TRI Cycle & Trend Signals*

The TRI Cycle and Trend Signals are shown below.  These signals are as of market close on Aug 30, 2019.  Please see the TRI Overview document for further information.

* TRI Cycle and Trend Signals are dynamic and may change on a daily, weekly and monthly basis, without notice. The indicators are at a point in time and do not imply that the current trend will persist and should not be considered investment advice.

Disclaimer: This material has been provided solely for information purposes for the use of the recipient and Fieldhouse Capital Management Inc. (FCMI). This material does not constitute an offer or an invitation by or on behalf of FCMI to any person to buy or sell any security. It should not be assumed that the methods, techniques, or indicators presented in these pages will be profitable or that they will not result in losses.  Any reference to past performance is not necessarily a guide to the future and the value of investments may fall as well as rise.  FCMI accepts no liability for any direct or consequential loss arising from investments made in accordance with the attached material. The research and analysis contained in the attached material has been procured from sources which are believed to be reliable and accurate.

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