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Hong Kong tensions rattle world stock markets, oil tumbles

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But we begin tonight with the latest flare-up in China Beijing announcing new security measures against Hong Kong sending the Hang Sang Towards. Were Day in almost five years the move escalating tensions with the United States with President trump threatening quote unquote strong reaction to that crackdown. So does China become bigger headwind for the markets as we head into the summer painting. Adjarian what do you say? Yeah you know Mel. It seems like there's always a different story every single day. That seems to lead us either up or down right on literally every day whether it's earnings one day that we focus on that the employment numbers the next day China one day the virus of course and somebody having sort of a vaccine of some sort or another is always something leading the market. So what I was encouraged. Today was the news yesterday and today about China and the US and some of the issues that we're going to be facing probably going forward. It seems to me like we've shaken that off pretty well. It's been pretty impressive. Ability of the markets just say you know what because we could have very easily slid down today and ben down four hundred points going into the weekend like we were a Friday or two ago? So I was very encouraged by that. I continue to watch the volatility index of course extremely close and I'm encouraged by the fact that we aren't seeing huge spikes anymore and we're seeing this contracted movement I think that's a much healthier environment and by the way. I think that everybody wants to focus on the big five. It's not the big five. It's biotech there's a lot of different areas of the marketplace that are giving us a foundation. I think four more upside to come in the future either shaking off the worries about China or just not coming to grips with reality. Jeff Mills what do you make of what is going on with China? I mean what's also interesting? Is that the Communist. Party has abandoned giving growth targets which they normally do Some say that that could show that Xi Jinping. Maybe a little bit on his back with that he's he's feeling a little bit cornered here because growth in China is slowing down and he needs to take control over Hong Kong before what could be a losing election for the Communist Party in September. Yeah look I think. It's indicative of the Global Growth Picture. I mean China withdrawing its growth forecasts we're seeing with a company earnings here in the US. So and I would expect to see more tensions with China quite. Frankly think you're going to see more bills. Come to Congress via unanimous consent. I think it's unpopular to try to block those bills. Now if you look at the dollar one relationship for example I know there are other things going on but it looks a lot more like it did pre-trade deal than it did after the trade deal so I think could be sniffing out some problems there and really the bullish narrative right now. I think is massive fiscal monasteries. Monetary stimulus reopening progression. All of these things. I just don't know in combination if that's going to be enough to drive earnings enough to justify the market where it is right now if you look over the past twenty years the correlation between the S. and P. Five hundred and Ford. Eps estimates is point nine since the bottom on March twenty third. It's been the mirror image of that. It's been negative point nine. So the market's been going up. Earnings estimates have been coming down. And I don't know that the economic environment is such that we're going to see a massive recovery in earnings estimates and we've also talked about the pain trade being higher and I was in that camp a couple of weeks ago. I think we're moving away from that. The put call ratio extremely low. It's actually below point five three right now. The last time that happened was January twenty eighteen than earlier this year. We both we all know what happened. Following both of those instances and then also you're finally starting to see money flow out of money market funds and now the head at the headwind of the two hundred eight moving average. I think there's a lot of things against the market right now. I wouldn't be surprised. Frosted traits were sideways down from here. That's a lot for bear to chew on My Co. you agree with what Jeff Mills is saying. Do and also some of the things that Pete was saying as well. I mean a couple of things that we can look at the markets forward. Look at what we can expect over the coming months. The vix index which basically is a measure of the market's expectation of forward volatility. Actually dropped a little bit today. Even despite this news at you're coming out of China but the important thing is that China News. This is coming after day after day. After day it's steady drip of just sort of increasingly negative sentiment on the China Front so. I don't think that we should have anticipated. Necessarily the market was going to sell up eventually. Investors become a little bit anesthetize when you can continue to hear the same bad news. It doesn't have sort of the shock and awe that's going to drive the market lower instead. I think basically what Jeff is talking about is what we should be paying attention to which is what do we really think. Eps For for a lot of these larger companies. It's GonNa look like some of them obviously are more immune to what's going on but others certainly are not their big swats of publicly traded companies that are GONNA be facing considerable pressure for some period of time. And we've had quite a bounce off the bottom and I actually kind of feel you have the opportunity. You might be wanting to pair some of those positions a little bit here. I can completely see the bear case at the same time Brian Kelly. We know that companies are are in for tough road ahead at the same time. I think that the reopening of America has happened probably faster than what a lot of people think. And I'm not talking about a complete reopening of course but all fifty states on some level have reopened at to some degree and I would think that that's probably a lot faster than what many people thought just a couple of months ago when we were sort of in the depths of this pandemic. Yeah I think that's probably right and I think also the fact that we're unsure how people are going to react when things reopen so when you start to see beaches reopened you. Start to see parks reopen. And they're crowded again. That's a different story but to me if I look at the market here we're talking about China and we're talking about the reopening and recovery from this vaccine so the bull case here is that the Federal Reserve's going to pump enough liquidity GonNa buy enough corporate bonds that companies can ride out the storm however long that takes the bear case. Is We get some kind of second wave? And or we have a serious kind of trade dispute or D. Globalization going on with China to me globalization. Argument is a lot is worse. I don't know if it's worse than the virus necessarily but it's probably a longer term headwind for the market so that's where we are. Those are the bulletin the bear cases and pizza at the beginning to show every day. There's something else driving it. The markets trying to decide investors are trying to decide and we're at a decision point in the mocking so to me if I look into the next couple weeks. I think that's going to determine what the next six months look

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