Short SPX given the break in the long-term trend established since Feb 2016. The long-term trend has broken.
This run-up is simply a retest to the trend, before heading lower. 2 Primary reasons why: 1. The honeymoon phase with Trump will come to an end*; and, 2. The Fed will raise rates in December, adding headwinds to an overpriced market.
*The Dow reached a new high today, while the SP 500 was relatively flat and the NASDAQ dropped 0.8%. This difference underscores investors shift in focus after the election of Trump. Primarily, investors are shifting their portfolio to Industrials, Financials, and Bio-Techs which are perceived to outperform under Trump. Once this reallocation completes, most investors won't speculate until after the inauguration. In the meantime, the market's will work to reprice assets given the impending Fed rate increase and uncertainty surrounding the Trump victory.
Комментарии
stantrader
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Please leave comments to open a dialogue. I would Enjoy hearing opposing opinions.
BhaktaBasics
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@stantrader, Not an opposing view per se here. To be honest i can see both sides of the coin ...
Negatives - Everything about this debt fuelled bubble is telling me that there is a storm brewing and when it hits, it will be very bad. I don't need to list all the potential bombs waiting to go off. However the problem is one of timing i.e. 'when' will the storm hit. The SPX has had a very 'toppy' look for 2 years now but the irrational market keeps plugging away regardless of all the bad news.
Positives - Never underestimate the establishment and the amount of mindless money printing that can still occur. As above, regardless of all the bad news the market brushes itself off and drives forward. Looking at EW theory, there is an argument for one more wave higher (though by rules of EW theory this should go no more than ~2233). Also, there's not the euphoria that's usually associated with market tops.
All in all it's tricky to call and i'm personally torn between the two trains of thought.
stantrader
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@BhaktaBasics, Thanks for the opinion. There are definitely positives and negatives. And the market is always irrational, trying to make sense of it all. Given the increased valuations, as well as lowered growth expectations and now a resurgence in bond yields, I believe sets us up for a nice repricing. I don't necessarily believe we are going to drop 10%, but I think we will make a meaningful retracement.