Thursday, January 12, 2017

Trump Disappoints

Trump was definitely not on his A game yesterday.  He threw flaming Molotov cocktails at the pharma industry and looked like he could care less about the stock market.  The Trump sell the news phenomena is at work today.  There was some short covering ahead of the Trump press conference yesterday, and then longs dumped as Trump was rambling about random things and just put on a poor showing.  That is not what the longs were looking to see.  They wanted more concrete details about tax cuts, deregulation, and infrastructure.  They got none of it, except a combative Trump chewing out the media.

We are chopping around at the top, just like 2015.  This time, the VIX is much lower, so don't expect the dips to be as big as the ones that we had in the first half of 2015.   Despite the big down move today, the VIX is at 12.5 as I write this.  That is a pathetically low level, a level where the VIX usually rises from, but often with the market rising as well.  That is when you have to start looking for a top to short.  Right now, use the chop to buy the weakness.  This selloff will not get serious unless you break SPX 2240 and stay below for a couple of days.  There is strong support at that 2240 area, around the closing levels of 2016.

It is a bit too early to buy the dip, although not a bad risk reward.  I will save my powder for the market to get closer to that 2240 support zone before I get aggressive with dip buys.  Sometimes you will miss 60% probability trades, waiting for that 75-80% probability trade.  But I expect there to be some selling ahead of the inauguration, as that is the motto that many fast money types are espousing:  Buy the election, sell the inauguration.  Instead, if we selloff into next week, I would want to buy the inauguration, sell the Trump economic policy announcements.

Treasuries are also lining up for a turn, as we get closer to 2.30% 10 yr yields, that could be a good spot to put on a swing short in bonds.  Although long term, yields should go lower, over the next few months, there are a lot of negative catalysts for bonds which should push yields back up towards those highs in December around 2.60%.


Anonymous said...

Permaneutral : Trump wants the market to go up for the right reason. Not sure the ring leaders of market drivers want to move prices in the interim. Hold the levels until growth or trying to tame Trump. Globalist - open border wacko Marco Rubio turned against the Trump cabinet yesterday.
Ebony John McCain ( his son lost his mind) also undermining the new cabinet along with the Bushes. Fortunately Trump is unforgiving and vindictive. Unpleasantly surprised indexes recovered yesterday. I guess why sell the market on the short term since it will always go up on the long run..Everybody prints USD..

Anonymous said...

I don't expect Trump to be the market's bitch like every other politician. ( smugly Yellen has no idea yet...)

Market Owl said...

Fully expect Trump to pick his own Fed chairman, bye bye Yellen. Hopefully he brings in someone who will not offer a Fed put for the markets on every dip!