Once again, the market has bounced back from the pullback, but this doesn't feel like a V bottom that will keep going and make higher highs. It feels more like a move that goes back to retest previous resistance around SPX 2780-2800. Perhaps by next week, as a new quarter usually brings in investment flows into stocks. The put volume never got extreme this week, and we are still in the stock buyback blackout period, so I don't expect a flood of money coming into to chase any rallies.
Most of the leading economic indicators have peaked or flattened out, so expect the economy to slow down later this year and into 2019.
China is peeling out a page from its 2015 playbook to fight the downturn in its economy. China only resorts to yuan devaluation when it is backed into a corner. And right now, the best way for them to relieve pressure on the economy is to print money and devalue the yuan. There will be no deleveraging. They are stuck just like the US and Japan into a world of continual monetary backstops, due to the size of the debt and lack of growth.
What is even more painful for China this time around is that crude oil is strengthening, not weakening like it did in 2015. Inflation makes their devaluation strategy that much more painful, as importers will be hit on both ends, a weaker yuan and higher commodity prices in dollar terms.
Strong rally today, I am just waiting for a bigger extension higher to short, probably in early July. Don't like the risk/reward of buying dips at these levels.
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3 comments:
Well that reversed fast.
TrendRambo on Twitter: I am putting on small short positions with options and the money is keep coming back. I don't like shorting but longs just don't work 2009 -till 2016 was easy long. 2017 was a short squeeze . Here is the way I see it:
Trump/Powell will be putting pressure on market for at least 1 more year and then will stop raising rates for the elections. There will be a bull market from mid 2019 into the 2020 elections. Trump essentially took control of markets with Powell. He will not let market decide the elections like in favor of Rothchild globalist Obama vs McCain.
Beyond the tax cuts, I don't think Trump knows what helps and hurts the stock market. He really believes that winning a trade war with China is something that the market cares about, when in reality, its all in Powell's hands. And Jerome Powell seems to be running monetary policy looking in the rearview mirror, like his predecessors Bernanke and Yellen. Although Powell is a big improvement over the previous Chairs who only knew one thing: print money and hope.
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