Trading the Indices on Fundamentals

Both the US & EU had an up day, in the US Bank reporting was better than expected (CITI had a 5% turnaround on its figures) and the EU got a boost from the possibility of an agreement on BREXIT, not that the agreement is exciting, but that any agreement could end the political standoff. The CAC reached an all-time high and the DAX got a nice boost, ironically, the FTSE was down, just to remind traders that markets are unpredictable. In all EU outperformed the US. As for the trade issue in the US, China has poured cold water on Trump's claims of a great deal, calling it a truce rather than a deal at all, also contradicting Trump in his claims that China agreed on new purchases, Chins simply said more talks are necessary. Market players put such a high "factored-in" premium on trade that no deal is likely to push markets up further and in fact, is likely to cause a "sell the fact" scenario. How many more times will Trump be able to play the markets with unfactual claims? (or perhaps he's so vain that when he looks in the mirror he sees a God-like figure that can do things by whishing them)
 
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I predict with 100% certainty, that starting tomorrow, there will be at least one tweet with Trump WHINING about Powell and the FOMC between tomorrow and Oct 31st.

Bet on it boys! 0.5:1 odds for, 200:1 odds against!
 
EU Outperformed the US again on Wednesday, EU was up 0.4% while US stocks were little changed, struggling to factor in weak retail sales, good reported earnings and warnings of lower future earnings. The sagging retail sales data was enough for some economists to lower their economic growth expectations to 1.5% for the third quarter and say that 2020 may be lower still. A rather mixed bag but with more bad than good for next year, in particular, US retail sales unexpected decline was taken as a sign that the consumer economy (representing 70% of the economy) could be cracking.
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I remain net short in the US and long in the EU. I also bought some additional VIX at 13.7 to bolster my hedges.
 
Charlie Jamieson, co-founder of JCB, said:

With the trade war raging on and geopolitics flaring, our central scenario remains that further declines will materialise into Q4 2019 and H1 2020. Global purchasing managers indexes (PMI’s) continue to fall, European data has re-accelerated lower, South East Asian export data continues to slide whilst US consumer confidence and spending is all in decline. That doesn’t bode well for the global economy and we will likely remain in a rate cutting environment for the balance of 2019, with the US Federal Reserve (the Fed) likely to play catch up to other Central Banks who have led the easing process to date.

Looking ahead, markets face a large series of event risks in the near term that combined with a weak macro pulse, suggest material volatility may lie ahead in a repeat of the fourth quarter last year.

Full report here:
https://www.livewiremarkets.com/wires/severe-risks-ahead-for-markets
 
There appears to be a notable lack of interest in Trump's possible impeachment. This possibility is not covered by any market analysis I come across nor is anyone speculating on the impact it might have on the trade negotiations. Has Trump become insignificant? According to Pelosi, Trump will be gone by Thanksgiving, there are also moves to blacken the VP, if all goes to the Dem's plan, Pelosi will be President, God help America.
 
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"The primary effect, the apparent one, is always the myth. That's the temporary effect that occurs when we treat the symptom instead of the cause. The secondary effect, the longer-term, more gradual one, is what becomes, more and more, the actual reality [...] In markets, longs push up markets with their buying. This is the Primary Effect, the immediate and obvious one. The Secondary Effect, the more lasting one, is exactly the opposite. That is, it is the longs who ultimately drive down markets. When sentiment has gotten very bullish about the prospects for some market, the long positions build up over time. At the moment when everyone who's bullish has taken their position, there's no buying pressure left; everyone's just waiting for the market to go up. Thus the slightest selling pressure is able to drive it down. And as the market starts down, it is the longs who proper it down further, as they gradually and then more and more are forced to change mind and sell [...]" Jim Sloman
 
FXtrader8911 said:
The resilience of markets continues to surprise me. The US has the excuse that's there's nowhere else to go, but EU, UK & HKG are also holding up... particularly the HSI, HKG is on the verge of martial law and could well lose its autonomy, it's reported many multinationals and expatriates are leaving, despite all, the HSI is holding. Baffling! Germany is in recession with manufacturing (thus exports) in serious contraction but the DAX is holding. The UK had a political circus bigger than the US, it's even dragging the queen into its mess, but it's holding up also. Lastly, the US Small Caps, supposedly immune to the trade saga, is the worst performing index. Is there any logic to this determination not to have a correction anywhere? Do tell if you have a view.
More...

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Yesterday's EU announcement that a BREXIT deal had been made sent the bots wild but it was a yawn for the humans. Westminster almost immediately said the deal was not good enough and demanded Johnson postpone the 31st deadline. It just goes on and on like the US trade deal. Personally, I agree with Johnson, end it one way or the other on the 31st, the uncertainty is causing more damage than a no-deal BREXIT ever could. The no-deal doom & gloom scenarios are BS, the UK is better off out of the EU and the Irish border is up to what the Irish want, make it hard, make it soft, make it transparent... as if the EU is going to go into Irland with the military to enforce their silly rules!? The border is an issue between Irland and the UK, who cares if the EU disagrees. As far as trade goes, the UK is the buyer of EU goods & produce, emposing tariffs on the UK had limited effect and UK is free to buy what they need anywere.
 
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