We Might As Well Ask An Arhat About the Market

May 22, 2018

Mish’s Daily

By Mish Schneider

12-13th Century Chinese Arhat-one of 18-Enlightened Being.
From the collection of Arnold Lieberman.

Arhat, meaning “one who is worth,” has reached the state of Nirvana and is free of worldly cravings.

Noted less for compassion and more for intense powers of spiritual concentration, Arhats are regarded as superheroes.

So, who better to ask about the state of the market than a superhero, without compassion, who can intensely concentrate and cares little for worldly possessions?

After all, asking “experts” will yield two distinct yet opposing opinions.

Some believe the market will power to 30,000 in the Dow.

Others believe the market will have a 30% correction very soon.

Some believe that the current administration will successfully navigate the Middle East, Korea and China.

Others believe they are hawks, who are in way over their heads.

Considering I personally do not know anyone free of worldly cravings, or all that enlightened for that matter, I sat down with this ancient Arhat, seeking answers.

One thing he told me-if interest rates, which look like they can go much higher, do so, it will come down to a matter how fast they rise.

The faster the rise, the more dangerous to equities. Whereas a slower rise can interpret as good for economic growth expectations.

We talked about oil prices. Although the problems in the Middle East and Venezula can impact production levels, OPEC will not necessarily adjust current ouput targets.

USO, the US oil fund ETF, hit major resistance at the 200 week moving average.

A weekly close over 14.66 will look more bullish, which will further impact household’s wallets, after an already 20% rise this year.

Arhat told me that trade talks with China, delicate at best, are based on a “shock therapy” approach of imposing $150 billion worth of tariffs on Chinese goods, should the US and China unsucessfully come to terms.

Arhat could care less for material goods.

But he understands that ‘Made in China,” needs to be replaced with cheaper American goods. He has little faith in the US’s ability to lower the cost of goods, given corporate lobbying dominance.

Arhat was well aware of the meeting with the President of South Korea and Trump.

His only comment?

Notorious bravado regarding the threat of war, both Kim Jong-Un and Trump are pretty darn far from enlightened.

I begged him to tell me more, especially about my theory of potential stagflation, but my pleas fell on non-compassionate ears.

What I was left with, is that even ancient, enlightened superheroes lack confident answers in what’s next for the world and the market.

Yet, we do know this-price speaks to us.

The Russell 2000 (IWM) made a new all-time high at 163.33 and sold off hard. As a possible reversal pattern, a gap lower, if not filled, will hurt the bulls.

Transportation (IYT) broke the critical level of support at 195.

Granny Brick and Mortar Retail (XRT), failed 46.00.

Semiconductors (SMH) coud not close over 107.25.

As far as stagflation-keep watching for the Modern Economic Family to stall and commodity prices to rise.

If that does indeed become a trend, many people will have less wordly goods, without the enlightenment.

S&P 500 (SPY) 270 pivotal. 272 nearest support to hold. 274 resistance tried to clear, but like the rest of the indices, failed from there.

Russell 2000 (IWM) 160 pivotal support. A nasty reversal but at least on low volume. A gap below will bring some panic selling unless it can close above 161.63, today’s low.

Dow (DIA) Tried 250 but failed. 245 support to hold

Nasdaq (QQQ) 166.50 needs to hold with 169.50 pivotal resistance to clear-got right there yesterday and within 5 ticks from it today.