The European markets can't handle a strong euro. At 1.20 EURUSD, the European equities are struggling to keep up with the US. The paper napkin chartist in me sees a double top made last year, One in May and one in November. The ECB is tapering bond purchases and showing few signs so far of worry about lagging European stocks and a stronger euro. The European stock market is pushing as far as it can to force the ECB's hand. They don't want to see QE end, and they are signaling their dissatisfaction by selling off despite a US market that grinds higher.
You would figure with the automatic inflows into equities, the European markets would be stronger, but they are down again today, despite Hong Kong going up 2% and Asia strong overall. The action in Europe shows you that QE isn't everything when it comes to driving stock prices. Otherwise, Europe should have outperformed the US since 2015. Clearly, they have lagged badly.
With the big gap up today, I am going to be shorting this morning, small size, to test the waters, because it seems like all the good news catalysts are behind us and the price action the past 2 weeks shows enough heaviness to interest me on the short side for short term trades.
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6 comments:
Hi just curious: do you go short via ETF, futures, options, or other fancy strategies?
Hes a big time futures e mini trader. Not a little guppy like you. He trades futures contracts. Get with it small fry. Jeez
Just incredible really. No pullbacks ever.
Absolute shit stocks are going up for no reason including failed biotechs, other worthless companies with no product, no money, no future. Even blackberry is going up. Explain what is going on in this market right now. Why the need for a dash for trash so early in the year? Is this just indiscriminate buying by algos which don't know better and are just allocating money to any stock that hasn't gone up because they don't deserve to? What is the nature of this money flow? Clearly this is not discriminate, selective bidding of the market. Does this represent that regardless of what stocks are doing in this decent economy tax cuts taking effect starting from this year represent a 10% increase in valuation? If that's the case the SPX needs to hit close to 3000 at current earnings in order for investors to feel fully priced in.
What is going on is a 2000 redux. It is madness out there, and this phase of the bull market is the shortest and forms the top. Retail is extremely bullish here, combine that with extremely high valuations, even with the tax cut (which is temporary, not permanent!), and you have a recipe for a violent counter trend move within 6 months.
Shorting tops is hard work, and not recommended for those looking for immediate results.
The dash for trash is a sign of the bubble phase, as the worst companies get bid up as they are the ones that haven't gone up, and look "undervalued", compared to the higher quality companies that have more bloated valuations.
Beginning of January usually has strong money flows as many individuals and institutions make big allocations to equities, some are discretionary, some are automatic flows.
No, the tax cuts are priced in, the recent up move is a FOMO based last gasp type of rally, and institutions desperate to not be left behind.
I short simply by selling futures. The most bang for your buck.
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