We're in the week that traditionally Santa's rally begins. Sales of tax losses usually end after the 15th of this month, so the coast is clear. At the same time, no one has forgotten the slaughter in the stock markets, which began at the same time last year. Well, do you believe in Santa and his rally in 2019?
Yes, I was an obedient child during the year and I believe Santa will give another gift to my wallet…
The second half of December is usually associated with stable seasonal demand for risky assets, especially given that the market cleared three significant overhanging clouds (UK elections, USMCA, US-China tariffs). China and the US have reached a first-phase deal in which the US will suspend tariffs in December and cut tariffs from 15% to 7.5% of the September list.
Looking at the rest of the world, we see that the OECD's leading indicator confirms current stabilization. After 21 months of delay, the composite leading indicator returned to recovery, which has been historically positive for risky assets.
The bearish scenarios and fears of recession were a large part of the investment markets throughout the year, and yet the global rally lifted almost all asset classes in 2019, except industrial metals, EUR and CHF. Looking at all mentioned above, the optimist in me suggests that the risk appetite among investors is likely to remain high despite the expected deviation in the trade talk story.
The pessimist in me says that there is no way after a whole year of growth that we will not see a retreat and Santa will not help us…
However, in a realistic view, a restricted deal means limited risk as investors become cautious, ultimately viewing Friday's partial deal as a short-term installment rather than a clear path to lasting and complete resolution of the trade tensions. In addition, the victory of Boris Johnson only brought more hope, but it did not draw the clear path of Brexit and the light in the tunnel is far away…
At the same time, US stock market is overbought, which means it is vulnerable to a fall if bad news hits us this week. If the momentum of the stock market turns, smart money with big profits, especially hedge funds, may want to sell to lock in the profits. And such sales can accelerate the downward momentum. Looking ahead, this is a scenario that requires cautious attention and investors should be vigilant.
Traders will now be forced to consider the prospect of the second phase of the trade deal and what will happen next. But for now, they might be just as happy to put the trade in the rearview mirror for a few weeks and to focus on economic data.
The structure of the calendar this year leaves this week as de facto the last week of the year. And this is what makes it harder to explain intraday movements. We are about to see…
In conclusion, I'll just say - don't be fooled, these stock markets are mostly controlled by the momentum crowd. Buying is not because of better earnings, better economy or better geopolitics, but because of the upside momentum. Keep in mind that sometimes the crowd is unshakable and can turn up for a penny.
Technically, the S&P 500 starts the week by jumping to the $ 3,200 level. This level is, of course, a psychologically important figure, so that in itself was a sensible event. In addition, we also had an ascending triangle on daily chart that was broken up and in fact the price hit our longer-term goal.
Now when that it has been reached, nothing is clear except that there is an obvious bullish pressure underneath. We prefer to Buy on the falls at this point, and I would not be surprised to see the S&P 500 drop to 3,100 before I weigh up.
Many experts call that the next bullish target is $ 3,250, and another 50 points from now until the end of the year would certainly not be a big challenge. We believe that short-term pullback should be seen as potential buying opportunities. Especially given that so many money managers outside have to pad their results for the year. After all, this is a market that has a direction and of course it is an upside trend. But remember that there is quite a bit of market noise.
What is your opinion? Do you already close your positions before the holidays or are you looking to capture the last moment?
Yes, I was an obedient child during the year and I believe Santa will give another gift to my wallet…
The second half of December is usually associated with stable seasonal demand for risky assets, especially given that the market cleared three significant overhanging clouds (UK elections, USMCA, US-China tariffs). China and the US have reached a first-phase deal in which the US will suspend tariffs in December and cut tariffs from 15% to 7.5% of the September list.
Looking at the rest of the world, we see that the OECD's leading indicator confirms current stabilization. After 21 months of delay, the composite leading indicator returned to recovery, which has been historically positive for risky assets.
The bearish scenarios and fears of recession were a large part of the investment markets throughout the year, and yet the global rally lifted almost all asset classes in 2019, except industrial metals, EUR and CHF. Looking at all mentioned above, the optimist in me suggests that the risk appetite among investors is likely to remain high despite the expected deviation in the trade talk story.
The pessimist in me says that there is no way after a whole year of growth that we will not see a retreat and Santa will not help us…
However, in a realistic view, a restricted deal means limited risk as investors become cautious, ultimately viewing Friday's partial deal as a short-term installment rather than a clear path to lasting and complete resolution of the trade tensions. In addition, the victory of Boris Johnson only brought more hope, but it did not draw the clear path of Brexit and the light in the tunnel is far away…
At the same time, US stock market is overbought, which means it is vulnerable to a fall if bad news hits us this week. If the momentum of the stock market turns, smart money with big profits, especially hedge funds, may want to sell to lock in the profits. And such sales can accelerate the downward momentum. Looking ahead, this is a scenario that requires cautious attention and investors should be vigilant.
Traders will now be forced to consider the prospect of the second phase of the trade deal and what will happen next. But for now, they might be just as happy to put the trade in the rearview mirror for a few weeks and to focus on economic data.
The structure of the calendar this year leaves this week as de facto the last week of the year. And this is what makes it harder to explain intraday movements. We are about to see…
In conclusion, I'll just say - don't be fooled, these stock markets are mostly controlled by the momentum crowd. Buying is not because of better earnings, better economy or better geopolitics, but because of the upside momentum. Keep in mind that sometimes the crowd is unshakable and can turn up for a penny.
Technically, the S&P 500 starts the week by jumping to the $ 3,200 level. This level is, of course, a psychologically important figure, so that in itself was a sensible event. In addition, we also had an ascending triangle on daily chart that was broken up and in fact the price hit our longer-term goal.
Now when that it has been reached, nothing is clear except that there is an obvious bullish pressure underneath. We prefer to Buy on the falls at this point, and I would not be surprised to see the S&P 500 drop to 3,100 before I weigh up.
Many experts call that the next bullish target is $ 3,250, and another 50 points from now until the end of the year would certainly not be a big challenge. We believe that short-term pullback should be seen as potential buying opportunities. Especially given that so many money managers outside have to pad their results for the year. After all, this is a market that has a direction and of course it is an upside trend. But remember that there is quite a bit of market noise.
What is your opinion? Do you already close your positions before the holidays or are you looking to capture the last moment?
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❓ If you got questions: t.me/Semkov
💰 PAID SIGNALS AND ANALYSIS: t.me/Semkov
💡 If you want to know on what basis we make our entries, get in here: t.me/trendlinefreetrade