Healthcare sector went to the emergency room.
IF… If it was more than an excuse from fear of a policy change – “Medicare for All” – the speed of selling could happen to other sectors – one by one. And that brought to mind the timeless belief of die-hard money managers and traders that:
The market drops because institutions need to buy, and market rises because institutions need to sell.
Yes, the famous SOLD TO YOU on the way up and then quickly drop it so institutions can come back in and buy at better price points. Obviously, I don’t know for sure, but it sure does feel like this could happen to the indices at any moment – especially as SPX is reaching my $2920~ target / NYSE $13,000 – and VIX bounced off $11.05 (last time was week of Aug 21 2018 before it tripled into December).
Fundamentals < Price
- Taiwan semi $0.38 vs $0.63 est. Sales $7.1bn vs. $9.03bn est
- Rev guide of $7.55-7.65bn vs. Street estimate of $8.4bn (-9.5%)
- Stock is approaching ATHs despite TWO miserable Qs in a row:
S&P performance is far outstripping the real economy’s growth. Minus the tax bill, we are already in an earnings recession. The market just doesn’t show it yet.
I do not plan to read or comment on the released redacted report. AG Barr isn’t going to let the President go down any more than the Fed will let the market fall.
China Inventories. US Inventories.
Market Huddle Time
1st. Let’s talk about SPX:
Price Targets reached from mid-December prognostication … my prediction that we would drop into NYSE 11,250 area, have a V-shaped rip-your-face-off rally into NYSE 13,000 then correct again – most likely in Flash Crash fashion. We are there: $SPX 2880-2920. And JUST when Bullish Sentiment is at EXTREMES
Charts : A Prediction Come True: Then and Now
THEN ON MARCH 2019…AN UPDATE
WE TAGGED THE ‘PRE-TRUMP BUMP LEVEL” AND REVERSED UP TO $13,000 CURRENT LEVEL
MONTHLY – WAIT FOR THE TROUGH TO POSITION LONG. (YOU MIGHT NEED TO WAIT AWHILE…)
2nd. Let’s talk about VOLATILITY
I am known as a Volatility trader. Not the quant kind. The pattern recognition kind. All those quant VIX traders that say you can’t perform TA on VIX have no idea how to do TA on VIX! I DON’T USE VIX! I look for Price Divergences in my Intermarket Analysis that will trigger Volatility, because we all know, “Volatility Reprices Everything.” We traders also know Volatility is suppressed so here is a look back and reason for my bearish market/bullish volatility call.
This is from my Dec 13, 2018 Gone Fishing Newsletter where I saw Volatility moving – higher!
AND THIS WAS TAKEN A FEW DAYS AGO
I see aN inverse H&S pattern in my stock-bond-volatility ratio work that says CAUTION and wouldn’t you know it is just as my NYSE/SPX price targets are hit?!!
I combine pattern recognition and technical analysis with intermarket analysis using a Stock-Bond ratio overlayed with VIX.
And That’s how I spied the January 26th 2018 Turn, the October 3rd 2018 Turn, the December 21st (ended up being December 24th) Turn and why I’m closely monitoring the Next One – we are close!!
3rd. Let’s talk about GOLD
We have experienced a lot of disinflationary headwinds from the synchronized global slowdown and loose monetary policies. What could change these disinflationary headwinds into inflationary tailwinds as a result of or separate from the geopolitical events like US-China Trade Deal and Brexit? The biggest one: the collapse of the US dollar as the global reserve currency. Am I expecting that any time soon? No. But I am looking at wage growth, rising gas prices, improving CPI and increasing costs to contribute to headline inflation in 2nd half of 2019.
I like to refer to my Gold Miners Bullish Percent Index for my Intermarket Analysis Tell. Clients know I have used this quite successfully to trade gold/miners into FOMC decisions.
I suggested to clients Gold likely pulls back – buy Dust > $19 – before it reverses and Gold moves much higher.
Big Picture: a flatter yield curve and rate cuts (lower real interest rates) are bullish for precious metals.
When the winds are high enough even turkeys fly. I believe we are about to go into a cycle where we will see this play out, everything precious metals and resource related is going to fly. Strangely enough the highest percentage returns will be on the $.04 and $.05 stocks, some of which are probably going to be the biggest pile of garbage stocks out there. Bob Moriarty
The last time that the yield curve flattened significantly (2003-2006), precious metals began to climb and then in the Great Financial Crisis of 2009, precious metals launched into one of the most bullish phases in their history.
Gold Rally Presumes SPY Falls
- China-US Trade Talks likely trigger US Dollar Volatility. Whether trade tariff talks fall apart – and market seems to have priced in only a positive outcome – or they conclude with a deal – wherein the bond market has priced in only Powell’s Pandering (not higher rates and balance sheet run-off that can result from a positive trade resolution) – the ‘sell the news’ pullback could trigger 1. Duration Unwind in the bond market (see point #4 above) that can 2. Spike Interest Rates and 3. Spike the US Dollar. Granted, this might be short-lived, but a bigger issue would be the ensuing Inflation Expectations. Currently, inflation expectations have fallen hard since Oil’s collapse last Fall, and rate cuts are priced in across the futures curve through 2020. That’s exactly when I expect the crowd to get tested.
- Inventories in China AND Inventories in US are HIGH! GDP has some headwinds that folks aren’t talking about as they are all Bulled-Up!
- Rising Interest Rates – This entire era of low inflation, low long-term interest rates, and resulting high stock valuations rests on the continued expansion of trade. I can see a case where interest rates stay low so much so that investors prefer cash to bonds and stop buying, driving rates back up when the central bank is trying to keep them low.
1937 or 1998? I am more fond of the 1966 Analog
Not all inverted yield curves in history resulted in a recession. Dec 1965 to Feb 1967 had an inversion but no recession. But stocks did trend down from 2/9/1966 with Lower Highs and Lower Lows until 10/7/1966 for a total -22.2% drawdown. This took until ~May 1967 to work through and out of the inversion, but my point is the current backdrop of inversion to recession probabilities to Big Chop thesis fits better with 1966 than ’37 or ’98.
I will say, that I will be quick to jump into all that glitters if the Fed in fact cuts the Fed Funds Rate 50 basis points. Plain and simple for me: with an unemployment rate below 4% and the stock market at all-time highs, that action would be the trigger for high inflation and a euphoric run up and collapse to our stock market bubble.
Which is, naturally, good for Gold.
Tales from the Trading Desk
The Volatility trader – the one who folks follow on Twitter for her Public Service Announcements on when Volatility next strikes… was without ANY volatility trading vehicles on Volmaggeden. It’s more than embarrassing…
So that’s how this Macro-to-Micro analyst and trader uses Macro as a backdrop, Sentiment at extremes and Intermarket with Technical Analysis to navigate this crazy market!
Thanks for reading and please consider joining me in my LIVE Trading Room where I take macro and market-moving news, give it context, and work through Value and Momentum trade ideas and set ups every trading day! For additional education, I provide my LIVE Trade Alerts from Interactive Broker and my Gone Fishing Newsletter.
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. In addition to running a LIVE Trading Room, Samantha offers her Macro-to-Micro trade set ups through a LIVE Portfolio (across multiple time-frames) with Real-Time, Brokerage-Triggered Trade Alerts (sent via SMS/email/Web). Every trade has a Time-frame, Thesis, Trigger, Entry/Stop/Profit Price based on the underlying asset as well as Option Tactic. Samantha excels in chart pattern recognition, volatility insight with some big-picture macro perspective thrown in.
Important Disclosure: LaDuc Trading/LaDuc Capital LLC Is Not a Financial Advisor, RIA or Broker/Dealer. Trading Stocks, Options, Futures and Forex includes significant financial risk. We teach and inform. You enter trades at your own risk. Learn more.