1. Post Brexit US equities have been in an easing induced rally, with the Fed delaying hikes, BOE easing and RBNZ/ RBA also easing - this encouraged US risk markets to set new highs - with 7 of the last 9 weeks strong closes higher.
The run over?
1. The last 2wks have closed flat but hhave remained rangey indicating the market has low conviction to break higher given the 7-bull weeks which saw 10pt+ increases, and we now look to have formed another price ceiling at 2188 0.5% up from the previous ceiling at 2188.
2. There is little reason for the run to continue, price action momentum is exhasted, the Fed is doing its best to be hawkish and the US election weighs ever nearer - not to mention US data e.g. GDP comes in lower indicating business conditions may not be the best domestically and easing in international markets looks to be all but fully priced with the FTSE now pulling back from its own hithw- so the move lower from here makes sense,
3. History on the markets side? historically Aug SPX has never closed below July and has been the traditional bull-run month, so my bet is that we will remain range bound for another 2-33wks (possibly one more 0.5% move higher) then the 10-15% pullback will begin in the first week of September as Traders square end of month profits in August end beginning the selling cascade, and the possible NFP beat steepens US rate hike expectations and the tightening puts further added downside pressure on the market.
Trading Strategy - Short SPX @2188; Short FTSE100 @>6900:
1. I like to be short SPX and FTSE from here with TP at 2075/2000 and 6440/6000.
2. Hedges include being long individual equities - i currently hold Apple longs from 105 and FB longs from 122.