Last week, I noted that the U.S. markets had pulled off the Houdini of a strong technical bounce in the face of an ever-tightening fundamental stagflationary squeeze. As it has now turned out, this may be one of the shortest bounces in recent stock market history.

The technical bounce got absolutely crushed by bad news from the bell weather General Electric, which suffered one of its worst one stay stock price losses in its entire history on missed earnings and lowered guidance. Given that GE is almost its own ETF for the U.S. economy, this news hit the markets very hard.

Where does this leave us? From my macro perspective, the U.S. markets remain in a downward trend that will be very difficult to reverse and even more difficult to trade on the long side. Cash continues to be a good place to park your bucks – unless you are really good at picking biotech stocks, which are largely outside the business cycle bear hug.

More broadly, I continue to be amazed by the parade of ominous signals emanating from seemingly all parts of the globe. Oil topping $112 bucks and $4 a gallon summer gasoline on the horizon. Airlines dropping like Chapter 11 flies. Spain forced to import water because of record drought. A billion of the world’s poorest facing starvation as food prices spiral upward and many food-producing countries slap on export restrictions. Iran moving full speed ahead on uranium enrichment. Rising risk spreads signaling a resurfacing of worries over a world credit meltdown. Mugabe thugs in Zimbabwe making a mockery of democracy. A young punk Iraqi mullah studying Allah knows what in Iran unleashing yet another wave of violence killing U.S. soldiers and exposing the surge’s feet of clay. Tens of thousands of high-paying Wall Street jobs turned into pink slips.Las Vegas dying on the recessionary vine. Consumer sentiment at a 26-year low. It goes on and on.

QUICK TAKES

1. Yet more hate mail from the Obama-ites over my latest oped on the “unity ticket.” Click here to read it. It’s damn comic irony that these Obama zealots hurl the worst sort of epithets my way in praise of a candidate they describe in the same breath as a facilitator, unifier, and master politician. And by the way, if you want to ready my memoir about being in San Diego politics, click here. It’s yet another freebie from yours truly.

2. Now here’s some more stuff for you Obama-ites to chew on: John McCain just absolutely crushed both Hillary and Barack on American Idol. Each had 60 seconds to address the largest TV audience this side of Beijing. McCain was just very warm and funny and loose. Meanwhile, Barack eyes darted back and forth like a hamsters as he read his teleprompter – lose that thing Dude and start speaking from your real heart and not the scripted one. As for Hillary, she was, in Randy Jackson’s lingo, “just all right dog. Nothing special.” And you don’t think this matters? Guess again. If McCain gets charisma, the Dems are up the creek without a war hero.

3. It’s tax week, and America’s pain is going to be considerably amplified as people try to pay the IRS out of dwindling bank accounts. Look for that to show up in the May economic data as yet another bearish force.

“Any trader or investor who ignores the power of macroeconomics over the world’s
financial markets will, sooner or later, lose more than they should—and if they are
trading on margin, perhaps more than they have.”
 -- If It's Raining in Brazil, Buy Starbucks

The Market Edge Market Summary from www.marketedge.com 

CONTACT INFORMATION
Peter Navarro
Irvine, California USA
Email  |  Website

DISCLAIMER: This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling, or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The authors express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The authors may or may not have positions in the financial instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future performance.