John Mauldin recently closed the annual Strategic Investment Conference and shared the views of the magnificent speakers. The information he gave in his world summary was just nuggets. In the world, I had to look for context to bring it all together. As a trader, I live in a world every day. In this case, it is easy to lose the appropriate context to see the big picture and sometimes the macroeconomic picture. Reading Mauldin and the speaker notes clearly illustrated two key points of my trade.
First of all, I was faced with "everybody out of the pool" when the US Federal Reserve announced that it had begun to slow down the pace of the May quantitative discount (QE) program last May. The Fed would do just that for two reasons. First, it seems convenient for the economy to stand on its own feet. Second, because the economy is strong enough to stand on its own two feet, economic slowdown will be removed from the system causing inflationary pressures.
Mauldin & # 39; s records show there are a number of reasons why not worry, despite the decline in the unemployment rate. He quoted Speaker Steve Moore, who gave the following statistics:
– Low wages accounted for 22 percent of recession losses, but only 44 percent of recovery.
– The average wage industry accounted for 37 percent of recession losses, but only 26 percent of the recovery.
– High-wage fields accounted for 41 percent of recession losses and 30 percent of recovery.
It helps to explain why economic activities such as the low quality of existing jobs, average spending, home purchases and credit activities are not responding to declining unemployment.
I believe this is one of the reasons why the Federal Reserve Board has kept the QE on the table instead of linking it to the trigger of unemployment. The Fed's poor performance in the underlying economy is well illustrated by Mauldin's schedule, indicating that more businesses are joining the market. Therefore, the Fed keeps its fingers in the markets, distorts real income ratios and forces those who want to make a stock valuation.
This interest rate policy prompted the Fed to return to its pre-emergence rates after announcing the withdrawal more than a year ago. Interest traders have recovered 12.5% since the traders thought they were going to catch up and struggled in vain to move up to 138 levels of resistance in the Long Baghdad. Short Long Bond position more than a month ago. It is clear that the market is focused on deflation, not inflation.
Going from the last trade to the other, we turn our attention back to the securities market. We have consistently stated that the best way to make money on the stock exchange, index or ETF is by simply taking breaks, and we still subscribe to this theory in the "Tendencies to End the Stock Index". "I see two points that need to be addressed. First of all, most of the fundamental information I see on the stock market is negative. This includes all the major global markets. This is artificially lowered by the investors' collective pension portfolios with the transfer of lucrative money into the arena. confirms that they are climbing to protect their livelihood.
The second point is to look for a projected top in the capital that will allow us to shift our focus from buying breaks to selling rallies. I think we can make a connection between the exaggerated prices of the stock markets and the realities of everyone. We have seen that the S&P 500 and the Dow Jones Industrial Average have reached the highest levels this month. At the same time, the Nasdaq 100 and Russell 2000 indexes showed relevant indicators in March. The point is that historically, the small caps are at the top or before the big ones. In fact, Russell has sold more than 10% since gaining high prices on March 4, 2000, and Nasdaq has dropped nearly 9% after reaching its highest level on March 7 and 7.
The current trading pattern in these markets makes me believe that Russell's 2000 futures will not yield a new high before the quarterly run. This would be a classic example of the difference in technical speed. On the other hand, the Nasdaq can earn up to 3855 new earnings. This is my call to the summit. As for the big lids on the S&P 500 and DJIA, I think this end-use rally will be sold out. The failure of Russell 2000 futures to reach new heights should signal the end of the summer rally that began very early. We did not sell in May and moved away. Can we sell in June and see you soon?