Back on October 12th, my Seeking Alpha Article – Rate Spike Carnage – was published for Premium members.
The End of Red October is over and clients of LaDucTrading can feel proud we traded successfully through the biggest October drop in ten years. No stock market had this ugly a start to a fourth quarter since 2008!
RESULTS from my 4 Live Portfolios: October Total Realized ROI:
As for Rates… I see a continued creep to 3.3% in the 10-year yield before it’s potentially rejected (to rest and reset). The rate of change in the advance of that move is what will determine whether the current oversold technical rally in stocks last week can continue – more so than any Mid-Term Election outcome in my opinion. (More on this for members in my Gone Fishing Newsletter Week Ahead post.) The FOMC Meeting on Nov 8th is not expected to include a rate hike or press conference. Yes they could surprise, but nothing is anticipated as Fed has only hiked at Quarterly meetings since their first hike in this new cycle which started December 2015. There is, however, an 80% chance of a hike this December 2018 at their FOMC quarterly meeting. If the Fed was to say anything dovish this week, the market would most likely sell off initially, US Dollar would spike lower and Gold/Miners take off higher. Always pays to be prepared but I think a higher probability outcome will be based on rates and USD rising into the next FOMC meeting then reversing!
Add to this the uncertainty with the on-again, off-again China Trade Conflict. Last week, after weeks of heavy selling in China on their slowing economic growth, company margin calls and capital outflows, Emerging markets outperformed +6% last week in reaction to news of potential positive trade outcomes between China and US. That financed call spread in $EEM in my Swing portfolio was worth 650% on Friday (although I took it off at 450% Thursday) as USD pulled back from $97 resistance as the Yuan spiked.
Problem is, the talk of US Trade War against China getting resolved seems more than premature – if not premeditated on the heels of Election Tuesday. Yields continued higher (bonds lower – yes, I am short as clients know) once the wage inflation report showed strength on Friday.
My Bet: a continued interest rate creep would put pressure on the equity bounce from the October trounce – to potentially the $2500 in SPX.
But good news: Although October was spooky, and November is not easy to predict (like the Elections), Santa Claus is coming!
Happy Trading and Don’t Forget To Hedge,
Thanks for reading and please consider joining me in the LIVE Trading Room where we work through Value and Momentum trade ideas and set ups every trading day.
At LaDucTrading, Samantha LaDuc leads the analysis, education and trading services. She analyzes price patterns and inter-market relationships across stocks, commodities, currencies and interest rates; develops macro investment themes to identify tactical trading opportunities; and employs strategic technical analysis to deliver high conviction stock, sector and market calls. Through LIVE portfolio-tracking, across multiple time-frames, we offer real-time Trade Alerts via SMS/email that frame the Thesis, Triggers, Time Frames, Trade Set-ups and Option Tactics. Samantha excels in chart pattern recognition, volatility insight with some big-picture macro perspective thrown in.