November Turns 1

Post Election Brief

"Jetzt haben wir den Salad", the Germans say, which translates as, "Now we've got the salad". Trump is president-elect. Family harmonies still ruptur over lunch discussions, as to how the US got itself into hot soup but - like it or not - they will have to eat it. 

When opinions become too one-sided before an event, the chances of an unexpected outcome are high, - and I did warn about it just last Monday, 

Volatility revisited


CBOE BREXIT TO TRUMP, source: chartnexus
To follow through here the updated chart of the volatility that I talked about before the election.

The pale arrows in the orange oval indicated my expectations. But they were thwarted. Volatility fell far lower, almost touching the trend line drawn from previous lows, thus acting as a support line. 

We are at an important juncture time-wise, despite the confusion in the markets. If market participants continue to respond as panicky as they did all last week then it is possible that Scenario 1., a full retracement to the levels during BREXIT, will come into play. Equity markets will then correct by more than 8%.  If however, indecision prevails as in Scenario 2., then a return the resistance level of 61.8% Fibonacci is likely, accompanied by a few months of crisscrossing direction changes dragging markets (ALL ASSETS POTENTIALLY) lower,  It would create a most frustrating investment time when only short term tactical strategies could perform. Could, not would.  Scenario 3. is a possibility in line with historical rallies after a US presidential election, also referred to as the honeymoon period. But this would mean breaking the present trend line, I drew from last low in September. In the current environment, I consider this the most unlikely scenario.

Stock Market Set Up

Most regional markets are in longer term down trends. The blip to a short-term peak in September has not really changed the picture. Question remains, why these markets run down while the US indices have run up? I previously outlined the next moves in equities. Actually, that outline is still valid for most part. 

US indices,7 days to 11-11-2016, source: Yahoo ! Finance

A 3-day chart of US indices + CAT shows up the volatility, not just among indices but also with one of the leading stocks. Especially since Thursday, markets diverge with a strong bearish tinge. 

US indices,3 days to 11-11-2016, source: Yahoo ! Finance
The 7-day view shows the big diverging move early on Friday. Other indices also diverge, presumably as a result of investors speculating on which policies the new President will pursue first. Some say, healthcare providers will be impacted negatively if he starts dismantling Obamacare. 

Some think, deregulation measures for banks may provide a leg up for the financial services industry, and another chance at a bigger bubble! Defense stocks, too, are in the spotlight. No one can yet quite foretell how America's new trading style, its economic and military protection measures will affect financial markets.

In truth, this type of investment strategy is patch work of the weirdest kind, as it disregards how industries are connected to each other, how assets relate and currencies fluctuate. What will set a new direction is a) a decision on interest rates, next month; and b) a possible policy "steal" by Mr Trump to undermine the Federal Reserve. He said, he "don't like HER"...

Before that, I expect unruly financial markets, globally.




Comments

Post a Comment

Popular posts from this blog

Financial Markets Out Of Sync Part I

Image
click here for  Financial Markets Out Of Sync Part II In my last post, I reintroduced my model . How else can I prove that my work carries benefits? Soon, I will elaborate on the model attribution, its strategy, and the reasoning behind the tactical changes over time.   Today, it's all about WHERE WE ARE RIGHT NOW with the markets. Last week, I said, global equities are getting out of sync. Now we can show how disjointed the markets have become. The information may help the experienced investor, though everyone wants direction and targets for future market moves. I will do so in this report, valid for the coming weeks, covering equities, commodities and currencies, each asset class in a separate blog post. It's an extra chance to adjust your positions accordingly, if you think my mumblings make sense.  Part 1 EQUITIES - USA and Canada equities I will show charts of Northern American, European, and Asian indices. You will note the divergence, and the red fat ar
Read more

A Turning Point in the Making

Image
The WOW-factor to be had from combining technical analysis of the financial markets and the time cycles once again managed to make my hair stand on ends! Last night's losses in the US stock markets came when Mr Average least expected it, - and the size of the step down mirrors the step up on July 7 th . It also means that the pull back is a very short term affair, as the one day move has retraced almost 50% of the advance in the DJIA . What becomes clear from the chart that the most recent advance, commencing July 5th, was doomed to fail as soon as it would enter the Ichimoku Cloud (blue shaded cloud form) at a point, where the formation was very dense. It is exactly the reason, why I recommended to remain on the sidelines during this hapless endeavour. Now that we are out of the cloud, the immediate downward pressure will ease. How much more downside is left? Where are the potential support levels? The 50% retracement for the short term move in July would be 10,040 1
Read more

Financial Markets Out Of Sync Part II

Image
In continuing our short-term assessment of financial markets, today's report covers European ind ices.  If you want to check back on US and Canadian indices in Part I, click here . Last Sunday, I concluded that a new leg down in equities has started. It should reach a first significant low point around April 18, +/- 3 days. The sell-off could be strongest in large and mega cap stocks. Can this be confirmed by the cycle research in European indices? Part II - European Equities I indicated earlier that European equities have been correcting since last April.   1. EuroStoxx 50 EUROSTOXX50, a 1-year view: a 1 year correction that has more downside to come. DATA SOURCE: chartnexus In this chart I want show you how the price moves formed, where we are at now, and the outlook for the next few weeks. The peak in April 2015 is very prominent. Visually, it is also the starting point of the downturn. Focussing on the left half of the chart, please observe how this gradual d
Read more