Trading the Indices on Fundamentals

FXtrader8911 said:
...Are they likely to change the culture that has made them an economic powerhouse on the back of other nation's innovations? Do they even have the ability to innovate sufficiently to compete on their own?
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The answer is no. They are not even TRYING. Why the hell would you make fake coffeehouses? Where's the creativity?

Abacus, gunpowder..."Welp, that's it guys, we invented some cool stuff over the past 2,000 years, and we built a huge wall. We're done now. Kthxbye."

 
The US drove both Asian and European markets upwards, itself on low volume so one can say that all markets were rather distorted and moving without much logic. Thu is a holiday in the US, without a lead, I can't be sure whether the upward momentum will be kept in other markets. Friday also is a shortened day in US with volumes again expected to be low... Many "fake" prices will be seen until Monday when things get back to normal. Expect big moves on any major news as bots will mostly drive prices on headlines.

Considering the fundamentals, Deere is the 1st of the majors to warn of diminishing earning for the 4th quarter and beyond. Despite headlines telling you that reporting beat estimates, it is to be remembered that average earning for the year (so far) are just .14% above 2018, and forward guidance plus the view of economists is for lower earnings in the 4th quarter & in 2020. My view is that US markets will gravitate to, at most, the 2018 highs but probably will go below these.
 
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I laughed to tears... China is going to put Nancy on the "no entry" list for sticking her nose into its internal affairs... good on ya China, force this pompous, witch hunting woman to eat humble pie.
 
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I hate these holiday weekends, thanksgiving tops the list... closed Thu, ½ day Fri... Who's going to show up for work Fri morning? Just the bots I guess, and since there was no headline other than "we are close to a trade deal" for the 56th time, there's little that can be said about the market's small dip. (Wonder what it is about Thu and the Americans... you guys even hold elections on Thursdays).

As for trade, I think the mini deal will get done, the stakes of having additional tariffs at 25% are too high for both sides for this deal not to get done, Markets have already priced-in a deal so it is unlikely that there will be a Santa rally.... the rally already happened in Oct & Nov, hard to see what could push markets higher now with PE's around 20, although a no-deal will surely cause a sell-off and a "buy the rumour, sell the fact" could yet happen

If this phase one deal goes through with a truce on tariffs, then I think that's it... we won't see any further trade deals with China... Trump's agreement to a phase1 rather than push for a comprehensive deal blew his "grate" negotiating skills.... he's been played by the Chinese yet again.

I remain net short US and net long EU

20191129_sp500_.price_earnings_ratio.png


Note 2000: a 25 PE bubble followed by a 42% correction
 
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Interesting, we got both a new high and a one month low on the same day. Participants are coming to terms that phase1 trade deal is a fizzer and even if done, it will not resolve the trade issues and so the possibility of more tariffs down the road is likely. All that's holding the sell-off from being a correction is non-implementation of the 15th Dec tariffs which, IMO, are likely to be deferred but not cancelled. A correction might be avoided for Dec, but it is likely to happen early 2020. I remain Short US, Long EU.
 
Headline today: Dow rebounds, Job growth slows

Trade headlines continue to be the driving force behind the market sentiment, responsible for both Tuesday's decline and Wednesday's rebound in U.S. stock index futures, everything else is pretty much ignored, even the evidence of a slowing economy. European stocks, as usual, were brought along for the ride but this correlation might brake when the UK enters elections on Dec 12. Keeping with tradition, UK elections will be on a Thursday during the trading session... expect the usual minute by minute exit pole announcements that put the bots on heat with each announcement, until then, I think trade remains in centre stage.

Neil Dwane, global strategist at Allianz, said it's surprising the market still reacts after nearly two years of "close to a deal" talk, It’s like we’ve all become Pavlov’s dog, every time someone says ‘trade deal,’ markets go up or we go down.

But Fred Imbert writes that Just before bull markets end, they often enjoy a flash of brilliance, like a star dying in the sky. CNBC's Fred Imbert writes that stocks may have just hit a blow-off top, based on how they've looked in the past.

The Dow was up 10.5% in a short amount of time, on par with past bull market-ending rallies since 1901.

20191204_blow_off_tops_combined%20%281%29.png

https://www.cnbc.com/2019/12/04/bul...had-one.html?__source=newsletter|eveningbrief

My view is that the obsession with trade and the disregard to signs that the US economy is slowing is distorting markets, they are much above fair value. I remain net short US.
 
traider said:
How do you reduce the risk when the market melts up being net short US. It can be super painful
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Risk can be reduced by hedging, however, if the "melt-up" is significant, it will reach a point that even if there a significant correction, there still will be some of the lower shorts that will remain at a loss but these losses can be managed by entering into longs while the correction is in progress. By going long on the way down you are likely to have bought some longs at the bottom, these will cover the losses on the recovery.

It's never a good idea to short the US indices unless the fundamentals indicate sentiment has overbought markets to bubble point (market cap v GDP is a good indicator).
 
FXtrader8911 said:
Risk can be reduced by hedging, however, if the "melt-up" is significant, it will reach a point that even if there a significant correction, there still will be some of the lower shorts that will remain at a loss but these losses can be managed by entering into longs while the correction is in progress. By going long on the way down you are likely to have bought some longs at the bottom, these will cover the losses on the recovery.

It's never a good idea to short the US indices unless the fundamentals indicate sentiment has overbought markets to bubble point (market cap v GDP is a good indicator).
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So how exactly are you "net short" US?
 
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