As we kickoff 2018, it’s “getting pretty close to euphoria.”
Getting Pretty Close To Euphoria
January 9 (King World News) – A portion of today’s note from legend Art Cashin: An Old Friend Reintroduces An Old Topic – Perhaps inspired by this string of freezing temperatures, our old pal, the ham radio operator pointed us back to the sunspot numbers, or more accurately, the lack of sunspot numbers.
Longtime readers will recall that several years ago, we reviewed the Maunder Minimum, an unusual paucity of sunspots in the period from around 1600 to 1750. Temperatures fell so low that it was nicknamed the mini Ice Age.
A key section of the report my pal attached, read as follows:
No sunspots appeared from December 27, 2017 until January 4, 2018. As solar cycle 24 declines to a minimum over the next two years we should see longer and more numerous periods of no sunspots. On January 4, the daily sunspot number was 13, indicating 3 sunspots in one sunspot group, although Spaceweather.com reported no sunspots on that day.
On January 4 Spaceweather.com reported a stream of solar wind should reach Earth on January 8, triggering some geomagnetic unrest, but nothing severe.
Over the recent reporting week (Thursday through Wednesday) the average daily sunspot number declined from 17.4 to zero, while average daily solar flux went from 74.6 to 70.4.
We are currently in sunspot cycle 24 and have recently crested (a sunspot cycle runs approximately 11 earth years).
Cycle 24 crested at about half the height of Cycle 23, which itself crested lower than 22.
At any rate, my friend suggests it may be time again to follow the influence of sunspots on the weather and maybe on the markets. (Yes, there’s a theory about that too.) Put on your aluminum hat and get in line.
Overnight And Overseas – In Asia, stocks had modest to moderate rallies. Tokyo had another solid rally while Hong Kong, Shanghai and India were up a bit more modestly. The Tokyo rally was all the more impressive given a possible shift by the BOJ. Here’s what our eagled-eyed friend, Peter Boockvar over at the Bleakley Financial Group wrote on the topic:
We have no idea yet whether this is a signal or just a logistical thing but the BoJ overnight very modestly trimmed its purchases of longer dated JGB’s. With maturities between 10 and 25 years they cut by 10b yen (only about $90mm) to 190b and for those longer than 25 years they also cut by 10b yen to 80b yen. Maybe, only maybe, was this a sign that they very slowly want a steeper yield curve and at some point want to alter the parameters of its yield curve control. We’ll soon see though and the yen is stronger and JGB yields went higher in response although the Nikkei was higher. The 10 yr JGB yield was up 1 bp to .7%, the highest since the end of October and the 40 yr yield was up by 2.5 bps and back to 1% for the first time in a month.
As Peter notes, there was no carryover into Europe in either bonds or stocks. In equities, there are solid rallies in London, Paris and Frankfurt.
Among other assets, gold continues to struggle with nearby resistance. WTI is a tick or two above $62. The euro is down a bit against the dollar and yields are a smidge higher.
Consensus – Futures hint a slightly better opening. Several relative strength indicators are at record levels. Getting pretty close to euphoria, I think.
Stick with the drill – stay wary, alert and very, very nimble.
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