By Megan Davies and Rodrigo Campos
NEW YORK (Reuters) – The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration’s healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth.
Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a healthcare bill a litmus test which could give stock investors another reason to sell.
“If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades,” said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital.
U.S. stocks rallied after the November presidential election, with the posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.
Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it.
Any hint of further trouble for Trump’s agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone (NYSE:) Advisory Partners.
I expect markets to continue lower well into next week, as those who’ve not yet sold “freak out” at the last minute…then sell into the waterfall. Sound familiar? Stocks will bounce sure…so if you are holding now…you likely lose a few nights sleep but “its too late to sell now”.
How many days / weeks ago did I suggest to “raise cash” and look for another great entry opportunity?
Read the rest here.
Now that we’ve got that out-of-the-way ( the Fed’s sill little rate hike, and of course the nearly “not covered” debt ceiling debacle) we can move on. It’s time for more “mind bending macro market analysis” considering that these last few calls have been bang on the money. In short…..the U.S Dollar “plunge” shall continue, as both gold and The Euro continue to move higher. Further riches will be made with this simple concept burned into the back of your skull like a bad tattoo.
Let’s have a quick look at the weekly chart of my old friend AUD/JPY and refresh our memories, as to how this currency pair can help you gauge risk appetite with another simple concept.
AUD/JPY UP = Risk on.
AUD/JPY DOWN = Risk off.
AUD/JPY – Risk on vs risk off
You can see how AUD/JPY has been trading completely flat for the past 10-12 weeks as U.S Stocks have really only taken a small leg higher during the same period of time. U.S Stocks are always ALWAYS the last to go when risk appetite ( and the machines on Wall St ) switch from “buy” to “sell”. Always.
AUD/JPY has been up against very solid resistance for an extended period of time, and if “all was well” would surely have broken through, and climbed higher along side U.S Equities some time ago.
Such is clearly not the case as this currency pair has “literally” miles to fall. And fall it shall.
I am currently tracking this pair but not getting excited about entry “short” until I see a nice solid read candle and a decisive break lower. Even 85.00 and lower to truly seal the deal.
You see how this works right? I’m “tracking / observing” market activity with a pre conceived notion of at least two ( if not two hundred ) things.
- AUD/JPY ( a significant indicator of risk appetite in markets in general ) is trading in a range against significant over head resistance.
- A significant break lower should “clear the field” and is suggestive of a much larger shift from “risk on to risk off” across markets in general.
Eezy Peezy when you have a plan. Do YOU have a plan? There could be 1000 pips below this currency pairs current price.
Damn rights I’m still short USD. Damn rights I still own NUGT. Damn rights I’m killing it long EUR/USD.
Any questions today? I’m back in the saddle.
Unfortunately….for those of you who’s investment and trading decisions depend solely on the grunt’s and groans of some smart mouthed Silverback with an attitude – I am busy today.
An esteemed colleague and I have been summoned to the head offices of Google San Fran – where we will be building time machines, slipping microchips under our skin, and dancing through holographic simulations of the future. Jealousy will get you everywhere. I’ll post some pics later this week.
The Euro has continued higher – as expected. The U.S Dollar has taken its beating over the past few days and ( in my view ) will continue to get hammered – as expected. And good ol’ gold has now put in its daily cycle low somewhere here around 1200.00 per ounce.
The current trade hypothesis still resting on the fact that “whatever happens” on Wednesday with respect to both interest rates rising and the U.S debt ceiling being reached “again”…The U.S Dollar sees its day, and continues South.
This “could” stretch another month if indeed the powers that be somehow appease markets – by what? Raising both interest rates AND raise the debt ceiling? This I truly have to see with my own eyes to truly get the full sense of just how “totally F’d” this system is.
I don’t particularly enjoy trading ahead of macro news events, but in the case will take it on the chin one way or another.
Good luck to all over the next 48 hours…you’ll likely need it.
Best advice…..don’t move a muscle til ‘after the announcements on Wednesday….and even then – don’t get “trigger happy” Thursday morning either.
The near term strength in The U.S Dollar ( although still no higher than 5 days ago…. ) is a ramp into the proposed rate hike and a clear “sell on the news” trade. It’s so obvious. Staring you right in the face as Gold’s near term slide looks to FINALLY end – in the congestion zone around 1200.00
Looks pretty clear to me, as per the previous post and information provided by James Rickards. A “nominal rate hike” with stocks at all time highs ( when else could these bozos possibly even consider it ) and perhaps a short-term “extension” of this ridiculous euphoria….then reality, as both stocks and The U.S Dollar hit the skids.
- USD/JPY should hit resistance around 114.85-114.95 and that will be that.
- EUR/USD is perfectly fine here around 1.0525-1.055 ( as it’s STILL above 1.05 despite USD bounce )
- AUD/JPY ( our “risk barometer” ) hasn’t even budged. No breakout. No nothin so…..
Don’t get too excited. Nothing has changed except of course – further bad news on trade deficit with China and of course…..Trump instability / Tweetfest and generally nuttiness – still on the rise.
Please Read: I’ve highlighted the significant bits.
kong and rickards
Jim Rickards – Markets Are Experiencing Cognitive Dissonance
I can’t bear to watch.
See the green area on RSI – How long it’s been overbought? See the distance DOWN to the red line ( 200 Moving Average ) See the “rolling hills” of the MACD ( useless indicator anyway ) as price on the chart is so much higher…yet the near term “rolling hill” so much lower than the previous. Divergence baby – Huge divergence.
Even a correction down to the 50 MA will wipe any and all profits that anyone “envisions” prior to actually realizing them – and pushing the sell button.
This is the blow off top. How long she goes? Who cares! Just be sure to get out alive.
Dow Jones – 2000 Over 200 SMA
You’re going to want to buy EUR before Tuesday.
This trade fits into the exact same framework we have been working with…with respect to The U.S Dollar taking a very large nose dive – very, very soon. You can see in the chart below that EUR/USD has now put in an absolutely “classic swing low” right at the 50 day moving average…after completing only the first daily cycle of this new “intermediate cycle”. This suggests that we’ve got several more daily cycles to go ( lasting somewhere between 30-35 days each) before this upswing completes.
I would imagine the 200 day moving average ( marked in red ) should be the next target. That’s some 350 – 400 pips!
Buy EUR Before Tues Afternoon
These correlations with The Euro, USD and Gold are batting near 100% right now….as you can’t have The Euro rise without USD moving decidedly lower. The same thing goes for Gold, and if you really want to nail this…feel free to get long The Japanese Yen ( JPY ) as well. Yen chart looks exactly the same as EURO.
So…only one more asset class to consider here right? U.S Equities.
I can’t stand the stock market right now, as it’s continued rise goes against just about every fundamental principle I can drum up. There are too many indicators and factors to list – all suggesting this thing tops out soon…or at the very least – makes a serious correction. The stock market is cyclical and there is not a single thing “any acting president” can do to change that.
Trump has certainly “empowered the common man” with the talk of bringing jobs back, and I can certainly appreciate that but…..it won’t last. Unfortunately for stock buyers – foreign exchange leads the way and the message is painfully clear.
This thing needs a complete and total reset before some incredible turn around in the U.S economy will be realized.
Wash rinse repeat people. You know this. Has it ever been any different?
The U.S Dollar has now breached the low from the previous daily cycle….confirming that this “next cycle” will also manifest as a “left translated cycle” and take the dollar decidedly lower.
But first we bounce.
We bounce higher in a confirmed downtrend so…you don’t go buying this dip in USD bonehead. You wait 4-6 days ( 6 at most I imagine ) and “sell the rip” as we are in a downtrend. Patience is everything when trading, as you’ve got to fight that “urge” to get in there…and be involved every minute of the day.
I can honestly say that these days ( having long since been through the emotional torment experienced when learning ) I spent more like 85% of my time plotting / scheming / observing markets than I do “actually trading”.
Magically…..the less I trade – the more money I make…but don’t confuse this with “investing”. Yes I believe that gold and silver have bottomed, the Euro will rise and USD will fall…JPY will surge and U.S equities will soon take a substantial hit so….
Investing is 100% totally / absolutely / without question OUT! I trade…..and I trade assets I believe to be in longer term trends. I don’t consider it investing.
Most of the standard correlations are looking pretty good right now ie…USD down has The Euro and commodities ( priced in USD ) moving higher…and The Japanese Yen flying cuz money borrowed some years ago is now repatriating to the place of its origin. Yen up = U.S equities down.
The fact that this thing has traded sideways for this long must have many of you looking at your portfolios and wondering – why haven’t I done so well this past year?
How much “higher” can you really expect anything to climb in the face of a dramatically waning “appetite for risk”.
The planet is completely freaked out about Trump. Good or bad….I have no opinion, but I can tell you this….markets hate uncertainty, and the future looks “more than uncertain” to say the least.
Wouldn’t you agree?
Obviously the short USD trades are now in the money as The U.S Dollar continues to weaken. The mining trades have been on fire with GPL, IMG and now NUGT ( purchased yesterday ).
It may at first appear boring to just sit around and watch a single asset / asset class ( currencies and USD ) but one has to consider “just how much revolves around the value of USD” – as U.S equities and global commodities trade in this currency.
Correlations can always be found with respect to the “value of USD” and the price of “things” on planet Earth. Thus far we’ve really only seen the beginning of a much larger and expected fall in USD.
Perhaps this is where some of you stock traders can find a solid reason to follow currency markets closely. Also with consideration that JPY ( the Japanese Yen ) trades “in tandem with risk”. When JPY value moves lower – stocks move higher. JPY moving higher ( on repatriation of currency flooding back to Japan ) – stocks move lower.
That’s just how it is!
You can easily check currency pairs at www.stockcharts.com by typing the symbols like this: $usdjpy, $audusd, $cadjpy etc… just dont forget to add the “$”.
I will now focus on JPY as a turn in “global appetite for risk” will soon see JPY on the rise against nearly every other currency on the planet. That means “shorting” currency pairs such as AUD/JPY ( meaning….I a shorting the value of Aussie Dollar “vs” the value of JPY) where in AUD will fall and JPY will rise.
Hope it helps everyone!
Forex Kong Winning Trades
It clearly looks like this will stretch into the new year…….before we see a major turn in both currency and equities markets. Money is pouring into silver and gold with the gold miners ( and gold complex in general ) finally showing us not only the daily cycle low….but quite possibly the “yearly” cycle low as well.
This makes for some pretty solid trades as……The EUR will bottom along side gold and silver, the U.S Dollar slowly rolls over for extended losses and equities make a solid correction.
Sound about right? This is EXACTLY how I am positioned with short trades in USD/JPY, long silver and gold miners ( GPL bought at 1.27 ) as well limping into further “long JPY” ideas / shorting the commods ( AUD,NZD and CAD ) with marijuana companies holding tough.
End of the year selling, and who knows what other “market shenanigans” playing out these last days of 2016. I see a large-scale correction first half of January 2017.