If Floyd Mayweather needed to rationally, consciously evaluate each threat before responding, he unquestionably would have gotten his ass kicked last night. Sometimes we process the world far better in an implicit, subconscious mode rather than in an explicit manner. And, it is on this level that I state unequivocally, the market looks and feels like crap. This is not to say there isn't any data to confirm this bias; deteriorating market internals point to a shift away from risk. P/C ratios continue to rise and the VIX appears to be in a nascent uptrend. The 2-10 is bull flattening as the curve ratchet backs growth and trumpflation expectations, while the dec17/dec18 Eurodollar curve adds confirmation. As John Hussman recently stated, "The problem is that if interest rates are lower because likely future nominal growth in deliverable cash flows is also lower, then no valuation premium is justified at all." Hence, the persistent slowing in the rate of potential and actual U.S. real GDP growth.

Could there be a productivity boom as a by-product of tax reform, and the tax advantaged repatriation of U.S. corporate earnings held abroad? Perhaps, but believing Gary Cohn's assessment of the viability of tax reform seems naïve to me. He was probably given an "aliyah" at Emanu-El this Shabbos, for his comments that ramped ES to 2450 last week. Chances are his buddies exited their longs and shorted into the rally. Zei Gezunt and Gut Voch, Gary! Having money is a good thing, but having power over money is even better. Which is of course, the reason why the market is where it is today, and the best reason why it could be higher tomorrow.

If one were to believe everything one read in the media, one would believe that Conor McGregor actually stood a chance to beat Mayweather. One would also believe that the "doom-and-gloomers" are as ubiquitous as the young boys in "daisy dukes" sauntering down 8th Ave. in Hell's Kitchen. Granted, the usual perma-bears like Stockman and Rickards et al are touting financial disaster, along with the guys with real street creds like Dalio, Gundlach, and Hussman. But, if one were to look at the chart of the Rydex Total Assets Bear Index Funds, one would not think market sentiment is overwhelmingly bearish

As it were, the bulls are like Mayweather, and the bears are like McGregor. The bulls are always going to be favored, but in this case I'm betting on the underdog. Near term, the market is going lower, with a retest of 2425 in the imminent future. The 2400 level offers up obvious support thereafter, yet the minimum target to the downside is 2375. The inevitable rematch however, will probably see the favorite regain it's title once again.





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