SPX and all other US features are down after trade deal optimism systematically got unwound by the hour, if not minute, moments ago the Global Times' Business Source group said that that China will release an "unreliable entity list" soon, which includes relevant US entities.
SPX future was down at mid-day and it went further down after Being threats publication of new entity list two hours after Wilbur Ross said that "absent a deal by Dec 15, the US fully expects to hike tariffs on Dec 15" that deterioration the likelihood of a phase one trade deal.
Market was overbought by all accounts such as RSI, StocH, valuation, weak earnings and negative EPS, week ISM manufacturing data, slow down in growth in Europe, India recession, Chines 6 major banks default to name the few.
So, as investor you need to ask why market rallied without any pullback from Mid Oct in absence of any data, even defying the natural rather of pull backs and correction that is normal even for a genuine bull market. There are many underlying reason, here is a few simple one:
Market makers and Wall Street Hedge Funds are/were aware the high stock valuation can not be sustained and this vertical rally can not continue on low volume without investors participation. So, they have pushed the market 6.7% above the last correction to cushion the % fall. It is a simple mathematics. So, the next major correction would bring the market down to the SPX 3000 level which was already too high.
However, they underestimated one caveat. FEAR is more powerful than greed. VIX has been crushed for month and it is now a spring loaded with fear. The drop in the US equity market will be much sever for this one reason alone. I can sight many macroeconomic reasons.
Why Short positions are good for the Market health and why they need to be explained:
Short positions are justifiable and contrarian investment positions. Shorts and Bears help to keep the market balanced and breathe a volatility which is essential for day traders, swing traders and keeping excessive greeds in check. Many wall street bullish funds hire bearish analyst and macro economics expert for the same reason. However, unlike a Long position, short positions need to be explained because they are contrary to the prevailing trends. Short positions, require a lost more research than Long positions and they work when the expose the truth behind excessive animal sprit (greed). in 2019 and notably since Mid Oct the greed has gone unchecked because of overoptimistic news and denial of bad macroeconomics and even earnings. LET ME BE CLEAR: THIS IS NOT GOOD FOR THE HELATH OF THE MARKET. Many bears and short traders got burned even with very good setae and entry signals. Why? Because big hedge Funds have changed the market dynamics. Just look at the 200 EMA on SPX, it is behaving like a 9 days EMA going up in vertical mode. Many technical indicators are broken and became unreliable, not because they are wrong, but because the behaviour of this market rally is ODD. So, as an investor or even short term Bull or Bear trader you need to ask question. Trading is a technical art not gambling. So it pays to pay attention and don't just buy stocks because everything is going up. This rally will fail spectacularly because of a force in macroeconomics called "Market Equilibrium " that cats as the final Judge, Jury and execution of the Market
Short positions are justifiable and contrarian investment positions. Shorts and Bears help to keep the market balanced and breathe a volatility which is essential for day traders, swing traders and keeping excessive greeds in check. Many wall street bullish funds hire bearish analyst and macro economics expert for the same reason. However, unlike a Long position, short positions need to be explained because they are contrary to the prevailing trends. Short positions, require a lost more research than Long positions and they work when the expose the truth behind excessive animal sprit (greed). in 2019 and notably since Mid Oct the greed has gone unchecked because of overoptimistic news and denial of bad macroeconomics and even earnings. LET ME BE CLEAR: THIS IS NOT GOOD FOR THE HELATH OF THE MARKET. Many bears and short traders got burned even with very good setae and entry signals. Why? Because big hedge Funds have changed the market dynamics. Just look at the 200 EMA on SPX, it is behaving like a 9 days EMA going up in vertical mode. Many technical indicators are broken and became unreliable, not because they are wrong, but because the behaviour of this market rally is ODD. So, as an investor or even short term Bull or Bear trader you need to ask question. Trading is a technical art not gambling. So it pays to pay attention and don't just buy stocks because everything is going up. This rally will fail spectacularly because of a force in macroeconomics called "Market Equilibrium " that cats as the final Judge, Jury and execution of the Market