Trading the Indices on Fundamentals

[FXtrader8911]

For the 5th time this week, US markets saw new highs, the Buffett indicator has gone to 216%, the gap between the VIX & its Futures has widened and a few Fund managers are starting to use the "bubble" word. However, as the whole of 2021 has shown us, the traders that close their eyes and ears and simply trade on the assumption that US markets are going higher, are probably doing better than the others. But, not all markets followed the US on Fri, Europe, Japan & Hongkong were all down, the only exception was the MIB that actually hit a new high, therefore, the frenzy we see really only applies to the US and one European.

Myself, I closed off my longs in the MIB & the Russell resulting in $25k gains for the week, however, I am now net short and intend to ride out any further gains... Unless there is a dip, I won't be buying the US but night neutralize the shorts with some longs in the EU and Japan markets.

 

[TakeThe Punt]

I don’t frequent this place very often but thought a response to the above tripe was needed. You keep harping on about a correction and some dips …

Sure, there are going to be dips along the way - it’s inevitable - 10-20% possible at some stage.

However that statement made back in June that a 60% crash made by Michael Berry & Co looks rather foolish in hindsight. It’s a Fundamental view that does not demonstrate/support the Technical Analysis view nearly 5 months on.

For those that have been sitting on the sidelines waiting for the next correction, unfortunately have really lost out on some massive gains. It’s been the story for the whole of 2021 and currently looks as if it will continue into 2022 and beyond. A black swan event may be required to reverse the situation. Again have a read of the link to the 18.6 year property cycle below.

We’ve come out of the other side of mid cycle correction (Covid 19) and boom times are in front of us, we’re currently in the second half of this cycle.

https://propertysharemarketeconomics.com/18-point-6-property-share-market-economics/

The world is now well and truly in recovery mode, global economies are only going to strengthen.

Signing out again, focus on today NOT what might happen!

 

[Relentless]

... The world is now well and truly in recovery mode, global economies are only going to strengthen...

Yeah I don't think so. You dont go through what the world went through with Covid and magically escape back to normal by printing trillions of dollars. I expect returns to be somewhere in the range from 0% - 3% for the coming decade. They did a hell of a job pulling it all forward though.

Otherwise I agree. You've got to ride the horse until it dies.

 

[Overnight]

...

Signing out again, focus on today NOT what might happen!

But the index futures are all about what might happen in the future, not today. Hence why they are called that. If you want to focus on just TODAY, trade a basket of stocks

 

[TakeThe Punt]

But the index futures are all about what might happen in the future, not today. Hence why they are called that. If you want to focus on just TODAY, trade a basket of stocks

No kidding ….

I make the decisions on the day, not what’s going in happen a week or month or longer from now.

 

[FXtrader8911]

The world is now well and truly in recovery mode, global economies are only going to strengthen.

You can't disregard that it's the multiples that have increased, the economy has indeed recovered but hasn't massively grown from where it fell back in March 2020. As Relentless has pointed out, there is substantial manipulation that has distorted the reality and that's what we are seeing in the stock market... the distortion. However, when multiples increase, the yield decreases in proportion making stocks less attractive.

 

[FXtrader8911]

The PE ratio of the S&P500 has hit 26, yield is under 3.5% while inflation is 6%, the Buffett indicator is >215%. What does Buffett think? He has used one of his earlier Cinderella idioms "When the clock strikes 12, all will turn into pumpkin and mice". The S&P now has a negative return of 2.5%, something not seen since the recession of 1974 i.e. unless we see the S&P rise to >4,950, anyone buying now can expect to lose 2.5% of their investment at best, providing there is no correction.

 

[FXtrader8911]

Will Powell get reappointed? probably yes, he is doing what every administration always wants... keeping rates low and making accommodations that are good for markets. Should he get reappointed? No, Powel hasn't a clue of what to do nor does he even know why he does what he does. Manufacturing inflation is at 14% and experts think it has a way more to go, the average inflation is >6% and markets are artificially inflated, none of this is good and Powell does nothing because he does not understand what the Fed's job is... as long as the administration keeps patting him on the back he things he's doing a great job. America now has two unqualified people at the helm.... Biden & Powel

 

[Relentless]

Will Powell get reappointed? probably yes, he is doing what every administration always wants... keeping rates low and making accommodations that are good for markets. Should he get reappointed? No, Powel hasn't a clue of what to do nor does he even know why he does what he does. Manufacturing inflation is at 14% and experts think it has a way more to go, the average inflation is >6% and markets are artificially inflated, none of this is good and Powell does nothing because he does not understand what the Fed's job is... as long as the administration keeps patting him on the back he things he's doing a great job. America now has two unqualified people at the helm.... Biden & Powel

Amen.

 

[FXtrader8911]

Since new all-time highs were seen in early November, markets have been making lower lows and lower highs. the last 20 days have seen 3 attempts to break the high, each resulting in a reversal to a lower low, lots of volatility but no net gain. The DOW and NQ are now 2.5% off their high while the Russell is 6% under, having bounced off the 50DMA twice, I think it will go through, probably today. I would say that the easy money has been made, there are more reasons to t/p than to buy at this point. Earlier this month I had t/p on my longs, now I'm watching whether the 100DMA gets broken and might be looking to go long again at under those levels (under 34,400 for the DOW).