Overdrugged, Late Cycle

The crowd is catching up to the brutal realities of the current market.  Earnings blowups are coming in fast and furious, yet the US macro data is still coming in relatively strong.  Everyone sees the weakening global economy but they think it will not have a big effect on US corporate earnings. 

What gets lost in the day to day happenings is the bigger cycle, which is clearly overextended and drugged up on uppers (too late rate hikes from Fed, ECB/BOJ overdoing QE, and Trump tax cuts and budget buster spending deal in 2018).  You cannot expect an economy with low population growth and no productivity growth to have an organically high growth.  All this stimulus justed ended up building excess capacity, malinvestment, and bubbles.  The symptoms are most obvious in China because they are the ones who have overdosed the most on the equivalent of financial methamphetamines for the longest period of time. 

The big picture gets lost over overblown, relatively meaningless trade issues between US/China which are easily blamed for everything bad that's going on, when the problems are much more deep rooted and more significant. 

Despite all this, in the short term, there are too many events that will eventually be settled over the next few weeks (Fed meeting, tech earnings, trade talks) that could be a catalyst for a fake out relief rally that would be a beautiful short selling opportunity.  Those who are short now will eventually get paid in the spring, but they may have to face some short term pain once all these uncertainties get removed. 

Ironically, removing the excuses like the trade war and the Fed will only leave investors realizing how bad things are when the markets go down after a trade deal and after Powell talks dovish. 

AAPL earnings are after the close, and Fed meeting is tomorrow, which would be meaningless were it not for Powell's press conference.  AAPL has already let the cat out of the bag, so earnings should be a nonevent/slight positive, and I think Powell has been scared stiff on talking tough after the last meeting, so he'll probably be as dovish as possible to placate the markets. 

To sum it up, I expect a last gasp rally in the next 1-2 weeks, and then choppy trade for a few weeks before the downtrend returns with a vengeance in March/April.