Trading the Indices on Fundamentals

[FXtrader8911]

I went long in Sep MNQ. China CPI at 9:30 PM ET, might have an impact.

Is that why you bought the NDAQ at 7,850?

Gutzy move to go long at just 20pts below an all-time high, year end target for NDAQ is 7,588 so you might have a long wait to get even 20-30pts out of that trade.... but the rollover cost & contango will kill you during the wait

 

[Overnight]

Is that why you bought the NDAQ at 7,850?

Gutzy move to go long at just 20pts below an all-time high, year end target for NDAQ is 7,588 so you might have a long wait to get even 20-30pts out of that trade.... but the rollover cost & contango will kill you during the wait

Didn't take long at all with Powell being Mr. Dove.

 

[FXtrader8911]

Well I'm happy for you (I assume you got out of the trade with Powell's gift of 50pts and are not greedily aiming for 100pts)

Indeed Powell surprised me, I expected him to spoil the party as he did in Oct & Dec just to stick the finger at Trump, but he capitulated instead, used common sense I though he did not have. In Oct he used the same good employment number to argue the need for raising and on "auto-pilot" at that, in July the good number was a reason to cut... Well, one must conclude the bozo really knows nothing and hasn't a clue on what to do but as long as he listens to old times such a Bernanke & Yellin, he looks less dangerous than he was 6 months ago... but..don't get complacent, the guy has an ego and could at anytime let ego overpower the Fed's mandate (which he also does not seem to know what the mandate is)

 

[Overnight]

...In Oct he used the same good employment number to argue the need for raising and on "auto-pilot" at that, in July the good number was a reason to cut... Well, one must conclude the bozo really knows nothing and hasn't a clue on what to do but as long as he listens to old times such a Bernanke & Yellin, he looks less dangerous than he was 6 months ago.

Yes, I got out. But to the point quoted above, I belive I read that he is kind of admitting that employment numbers now no longer are a predicator of inflation expectations. He basically admitted the Fed has lost it's foresight. Low unemployment is no longer a good predictor of inflation.

Bold statement by him I think.

He's admitting that they have been WRONG!

 

[Overnight]

And no, I'm not going to work an overnight long trade here. Asia and Europe will love Powell's chit, but not tonight for me.

$400 per day. I need to focus on that first. F the rest.

 

[FXtrader8911]

I think that reporting, starting on the 15th, will mostly disappoint and might be the trigger to get markets to move lower (PE is kept high due the buy-backs but profits will give the true picture).

Overnight we saw the bots at work swinging markets by 180pts (DOW) on every sentence coming from Powell's mouth. US markets did close near their high while the Europeans closed before the final rally in the US and are likely to open with gap up. The NDAQ was a siprise with its srtong rally that brought it to an all-time high at the colse but overall most price action was knee-jerk, I do not think anything Powell said will make a lasting trend, .25% was already priced in and this is what the Fed is likely to give. I remain with the view that reporting will be the deciding trigger to go higher or start a sell-off, the latter being the more likely. I remain net short US & net long EU.

 

[FXtrader8911]

If we were to average the 4 main US indices we'd see rather flat sessions this week indicating a lot of rotation is taking place, there isn't much net buying. When the quarter started, analysts expected earnings to be basically flat, however, as reporting dates drew nearer, a number of U.S. companies lowered their second-quarter earnings forecasts, of the 114 companies that have issued earnings guidance for the period, 77% have issued negative forecasts, according to data from FactSet, this has caused some repositioning.

The uncertainty around trade and global growth causing some capital expenditure and other expansion plans to be put on back-burners or even shelved, earnings are estimated by analysts to have declined by 2.9% year over year in the second quarter. PE ratios are rather deceiving as there has been a lot of buy-back, profits will tell the true story i.e. reported figures and forward guidance will be market movers

In all I remain comfortable in being net short in the US for now.

 

[FXtrader8911]

....

 

[FXtrader8911]

Well, I'm about at the point were I have to admit defeat. Markets do indeed have the ability to do what they need to do to prove the largest number of people wrong. 3 of the 4 main US indices broke all time highs this week and the Europeans went the other way... exactly opposite to my positions. Doesn't make much sense as China trade is at a flashpoint again with Trump unhappy with China breaking the deal he said he had at the G20, inflation figures could make the Fed change course on the cut and 77% of companies reporting next week have issued a profit warning... is it all buy the rumour and sell the fact? I guess we need to wait till month end to find out, the last time US markets broke the all time high, it was followed by a 5k DOW point drop, this time round we also have the inverted yield curve signaling a broad-based slowdown if not a recession.

I'll be waiting till the Fed announces its decision of the July meeting, by then a good number of companies will have reported also. If markets continue to rally during these 2 events then I have to admit defeat and lick my wounds for having the strategy to be Short US & Long EU. Luckely I remained hedged with VIX shorts at 20 which will offset a good portion of the losses if the US shorts need to be cut, however, my initial call was for a serious correction by Sep, if there is no decisive melt-up at this point, I might just trade the day but keep the Shorts in place till Sep.

 

[FXtrader8911]

The below article by Ms Rooney encapsulates the current situation:

Kate Rooney | CNBC Markets Reporter

Stocks ended on a high note this week after Federal Reserve Chair Jerome Powell assured investors the Fed is ready to act to cut rates, and if needed, defend the U.S. economy from trade war and global growth impacts. But earnings season could throw a wrench in the historic market rally.


Major S&P 500 companies from J.P. Morgan to Microsoft start rolling out second-quarter earnings next week. Slowing growth and the trade war’s tariffs may start showing up in corporate earnings, making them the latest risk to the market rally, CNBC’s Patti Domm writes in her week ahead preview. Citi kicks things off Monday, followed by other major banks and Netflix, the first of the so-called FANG stocks to report, on Wednesday.

While some analysts expect earnings to cause bumps, the bigger catalyst for markets would still be any developments in the trade war, Domm reports. So far, Washington and Beijing declared a truce at the G-20 meeting in June — but we’ve seen no real public progress in the talks since. The market is also on data watch, with investors eyeing any reports that will provide clues on whether the Fed will pull the trigger on an interest rate cut. Powell told Congress that retail sales are one of the key reports he will be watching. Sales data for June is expected Tuesday morning.