Before I get into the trade idea, I need to preface that I still believe that US equities will be going higher in the longer term. Not really for any fundamental reasons, but more so that the world is in a bad place and the US looks the best, albeit having a lot of problems. Martin Armstrong calls the US and the US Dollar the prettiest sister out of the three ugly sisters.
Also, there will be nowhere to go for yield. We know QE (or QE but not calling it QE is coming) and interest rates will be dropping to 0 because central banks are out of options. Check out my posts linked below where I talk about all these things...predictions are coming true and we are truly in the reset/crisis.
With rates at 0, we are at the 'paradigm shift' environment that Ray Dalio has spoken about. Bonds are now being traded not for yield but to sell to another bigger fool. Real Estate historically goes up once the first rate hike occurs. You do not take a mortgage out when you know rates will be dropping lower later.
Stocks will be the only place for yield and not only that, the liquidity in this type of macro environment will be appealing. You can get in and get out relatively quickly.
So onto the short TRADE idea. Markets are still being affected by geopolitical and other uncertainties. This will affect equities in the short term, but again, as a fund manager money has to be deployed. You cannot hold cash for a long time. This money will go to work and I predict it will go into stocks for the yield factor described above.
We found out today at time of writing this idea that Brexit will be delayed until January.
I have mentioned how Brexit will likely not happen. It will keep getting delayed and we may very well see a re-vote. There are 3 reasons why Brexit will likely not happen:
1) The British politicians who are part of the European Parliament lose their 6 figure jobs and pensions. Not in their best interest to leave.
2) There will be a European economic/debt crisis. The German taxpayer will not be able to bail out Europe all by themselves. The British tax payer will be required to help.
3) Most importantly, Brexit sets a precedent. European nations like Greece, Spain, Italy and Portugal may get inspired by a deal.
Anyhow, the charts are setting up nicely for a move lower. We have been in an uptrend, with higher highs and higher lows, and then price began to stall at a resistance/flip zone or in some cases near all time highs.
For the SPX, we are seeing an exhaustion it appears. Would ideally like to see a break below this flip zone with a pattern like a head and shoulders.
The Nasdaq already had the break. Would like to see a retest with a confirmed lower high and lower low. Nice strong break.
The Nikkei is showing signs of a trend exhaustion here. Need to see if we get the break.
The China 50 already had the break. Awaiting for another swing (lower high).
The German Dax is at a crucial resistance/flip zone that you can see on the daily chart. Showing signs of exhaustion and potential reversal here.
We should cover the FTSE as well, but honestly, no real good pattern/set up for me on the lower time frames. The Daily still has a crucial level below.
Also, there will be nowhere to go for yield. We know QE (or QE but not calling it QE is coming) and interest rates will be dropping to 0 because central banks are out of options. Check out my posts linked below where I talk about all these things...predictions are coming true and we are truly in the reset/crisis.
With rates at 0, we are at the 'paradigm shift' environment that Ray Dalio has spoken about. Bonds are now being traded not for yield but to sell to another bigger fool. Real Estate historically goes up once the first rate hike occurs. You do not take a mortgage out when you know rates will be dropping lower later.
Stocks will be the only place for yield and not only that, the liquidity in this type of macro environment will be appealing. You can get in and get out relatively quickly.
So onto the short TRADE idea. Markets are still being affected by geopolitical and other uncertainties. This will affect equities in the short term, but again, as a fund manager money has to be deployed. You cannot hold cash for a long time. This money will go to work and I predict it will go into stocks for the yield factor described above.
We found out today at time of writing this idea that Brexit will be delayed until January.
I have mentioned how Brexit will likely not happen. It will keep getting delayed and we may very well see a re-vote. There are 3 reasons why Brexit will likely not happen:
1) The British politicians who are part of the European Parliament lose their 6 figure jobs and pensions. Not in their best interest to leave.
2) There will be a European economic/debt crisis. The German taxpayer will not be able to bail out Europe all by themselves. The British tax payer will be required to help.
3) Most importantly, Brexit sets a precedent. European nations like Greece, Spain, Italy and Portugal may get inspired by a deal.
Anyhow, the charts are setting up nicely for a move lower. We have been in an uptrend, with higher highs and higher lows, and then price began to stall at a resistance/flip zone or in some cases near all time highs.
For the SPX, we are seeing an exhaustion it appears. Would ideally like to see a break below this flip zone with a pattern like a head and shoulders.
The Nasdaq already had the break. Would like to see a retest with a confirmed lower high and lower low. Nice strong break.
The Nikkei is showing signs of a trend exhaustion here. Need to see if we get the break.
The China 50 already had the break. Awaiting for another swing (lower high).
The German Dax is at a crucial resistance/flip zone that you can see on the daily chart. Showing signs of exhaustion and potential reversal here.
We should cover the FTSE as well, but honestly, no real good pattern/set up for me on the lower time frames. The Daily still has a crucial level below.
