BROAD STOCK MARKET TRADE ALERT and MARKETS UPDATE (2:30 pm EST)
We are undoubtedly living in unprecedented economic times. Many of the financial analysts that I follow and study (some of whom have been doing this for 25 years or more) have recently commented on how difficult the markets have been to call over the last several years. I certainly agree with this. I've been trading for a little over 10 years and have noticed that most markets, especially the U.S. stock market, are much more difficult to predict and trade now than they were when I first started. Market analysts are using terms like "bizarre", "distorted" and "manipulated" to describe today's markets. In my opinion, manipulation is a major factor contributing to this unusual market behavior. It seems the U.S. Federal Reserve and most likely other big banks and financial institutions are exerting enormous control over equity markets by several means, but most overtly through extended low interest rates and quantitative easing (QE). (Yes, I know the last round of QE has ended, but there is serious speculation among economic analysts that the Fed may announce a new round of QE sometime next year, possibly to quell investor fears around the same time they plan to raise interest rates.) Without sounding too much like a conspiracy theorist, it seems a bit more than a coincidence that the Bank of Japan recently made the surprise announcement of increasing its own QE program the day after the Federal Reserve officially announced the ending of QE in the U.S. This has boosted the appeal of U.S. equity markets (as well as the U.S. Dollar), especially to foreign investors, and the U.S. stock market has been rising to new heights since the announcement was made (on Oct. 31- Halloween - which was a "treat" for investors holding long positions in equities but a "trick" for analysts like myself who were expecting an overdue correction in the market).
Last week was the second week of a reversal period (Nov.10-20) when there was a high probability of a downturn in the broad stock market, and the steep rally since mid-October did appear to be slowing down and leveling off. It seems that the strength of this market, however, is overriding the reversal zone as the DOW surged to a new all-time high on Friday and broke clearly through our stop loss resistance at 17,740. While it is still possible for this market to turn down, the factors supporting a strong correction now are diminished and won't be strong again until mid-December. We are also starting a holiday week here in the U.S. (Thanksgiving on Thursday) and equity markets often rally into holidays. For these reasons I am going to cover (unload) my short position in the broad stock market today. I entered this position on Nov.13 so we should be able to pull out here with a small loss of less than 1%. If the stock market continues to rise into mid-December, I will consider short selling again as there would be an even stronger chance of a steep correction then. Covering (unloading) my short position in the broad stock market today and standing aside this market for now.
Gold prices are staying below our $1,210 stop loss level (so far), and while both gold and silver could still break out, that possibility is starting to look less likely as gold and silver charts are now manifesting more bearish signals. Mid-December is the next potential turning point for this market, and we may have to wait until then before any serious correction starts. On the other hand, if the precious metals start a serious fall this week then mid-December could turn out to be a bottom and a potential buy spot. We will have to wait and see how prices move over the next three weeks. For now, I am maintaining (holding) my short position in gold.
Crude oil prices still seem to be forming some sort of base, and there is the possibility of a rally here to the $78 - $80 area. Such a rally, however, would likely be followed by a reversal (perhaps in mid-December) with oil prices sinking to new lows. I will consider selling short any rally that stalls in the $80 area. Out of this market for now.
We are undoubtedly living in unprecedented economic times. Many of the financial analysts that I follow and study (some of whom have been doing this for 25 years or more) have recently commented on how difficult the markets have been to call over the last several years. I certainly agree with this. I've been trading for a little over 10 years and have noticed that most markets, especially the U.S. stock market, are much more difficult to predict and trade now than they were when I first started. Market analysts are using terms like "bizarre", "distorted" and "manipulated" to describe today's markets. In my opinion, manipulation is a major factor contributing to this unusual market behavior. It seems the U.S. Federal Reserve and most likely other big banks and financial institutions are exerting enormous control over equity markets by several means, but most overtly through extended low interest rates and quantitative easing (QE). (Yes, I know the last round of QE has ended, but there is serious speculation among economic analysts that the Fed may announce a new round of QE sometime next year, possibly to quell investor fears around the same time they plan to raise interest rates.) Without sounding too much like a conspiracy theorist, it seems a bit more than a coincidence that the Bank of Japan recently made the surprise announcement of increasing its own QE program the day after the Federal Reserve officially announced the ending of QE in the U.S. This has boosted the appeal of U.S. equity markets (as well as the U.S. Dollar), especially to foreign investors, and the U.S. stock market has been rising to new heights since the announcement was made (on Oct. 31- Halloween - which was a "treat" for investors holding long positions in equities but a "trick" for analysts like myself who were expecting an overdue correction in the market).
Last week was the second week of a reversal period (Nov.10-20) when there was a high probability of a downturn in the broad stock market, and the steep rally since mid-October did appear to be slowing down and leveling off. It seems that the strength of this market, however, is overriding the reversal zone as the DOW surged to a new all-time high on Friday and broke clearly through our stop loss resistance at 17,740. While it is still possible for this market to turn down, the factors supporting a strong correction now are diminished and won't be strong again until mid-December. We are also starting a holiday week here in the U.S. (Thanksgiving on Thursday) and equity markets often rally into holidays. For these reasons I am going to cover (unload) my short position in the broad stock market today. I entered this position on Nov.13 so we should be able to pull out here with a small loss of less than 1%. If the stock market continues to rise into mid-December, I will consider short selling again as there would be an even stronger chance of a steep correction then. Covering (unloading) my short position in the broad stock market today and standing aside this market for now.
Gold prices are staying below our $1,210 stop loss level (so far), and while both gold and silver could still break out, that possibility is starting to look less likely as gold and silver charts are now manifesting more bearish signals. Mid-December is the next potential turning point for this market, and we may have to wait until then before any serious correction starts. On the other hand, if the precious metals start a serious fall this week then mid-December could turn out to be a bottom and a potential buy spot. We will have to wait and see how prices move over the next three weeks. For now, I am maintaining (holding) my short position in gold.
Crude oil prices still seem to be forming some sort of base, and there is the possibility of a rally here to the $78 - $80 area. Such a rally, however, would likely be followed by a reversal (perhaps in mid-December) with oil prices sinking to new lows. I will consider selling short any rally that stalls in the $80 area. Out of this market for now.
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