Trading Sunset

 

Ten trading days is a long time in market land, with the SPX swinging from 5119 to 5661, a wave of 542pts (10.6%). The mainstream have literally swung from begging for an emergency rate cut to ‘the consumer is strong, #everythingisfine’.

You can argue the mainstream have always been twitchy, and bi-polar to some extent. Yet such collective mood swings have never been more powerful, and more rapid.

The same mainstream believe that a rate cut will help equities, the consumer, and the broader economy. The most recent three grand market declines (2019/20, 2007-9, and 2000-02) all began from around when the fed started cutting rates.

No, I’m not saying rate cuts caused the equity declines or the recession, but they sure as hell do make for the ‘ultimate equity sell signal’.

As things are, I’m expecting three rate cuts before year end.
Sept’18th -25bps
Nov’6th -50bps
Dec’18th -50bps

If I’m right, they will merit as an equity sell signal, especially for the financials, whose net interest margins will be significantly impacted. I’m actually hoping to see a few posts from people this mid September, who turn extra bullish the banks on rate cut’1. Good luck with that!

Regardless of how we trade across the next ten days into the Labor day holiday break, I’d look for price action to become increasingly problematic across September, and more so… October. There are seasonal factors of course, but the uncertainty of the election will be a prime excuse for the market to take another dive lower.
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August began on an especially bearish note, with the SPX swinging from 5566 to 5410, and settling -75pts (1.4%) to 5446.

Thursday’s candle was especially bearish engulfing, eclipsing the price action of the prior four days, and strongly bodes for lower lows.

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Increasing market drama

The past few weeks have seen volatility climb from the 11s to 19s, as we appear to have a key equity top ahead of the election.

I’d especially note VIX monthly momentum, which turned positive in July, and is set to be increasingly positive into the Fall.

Between now and early November, I have to expect at least a few of the ‘wild cards’ to play out. If correct, we’re set for some very dynamic price action.
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Regardless of how June settles, with a new hist’ high (5505 as of June 20th), its to be seen as a net bullish month. Monthly momentum is powerfully strong, as all cooling waves remain very limited.

The summer does threaten some unrest though…

-French & UK Elections.
-Trump, and related political chatter.
-Geo-political upsets via Israel/middle east, and Ukraine/Russia.

Between now and the Nov’5th election (assuming there is one), we should expect market volatility to increase from the current VIX 13s.

If you love drama, the US equity/capital market should provide it, and more so… into the fall.
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Silver saw a net May gain of +$3.79 (14.2%) to $30.44, having printed $32.75, the highest since Dec’2012.

The break above psy’ $30 was decisive, as I shall continue to see silver as the most obvious, if not most comfortable trade into/across the summer.

It should be also be clear, the higher that silver climbs, the more wild/volatile the price action shall become. For some… it will be too much to stomach. For others… it could be very profitable.

A push to $40 looks realistic before Labor day. If correct, very bullish implications for the related silver miners, not least AG, PAAS, and HL.
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US equities have begun April on a weak note, but two blue Elder* candles don’t count for much, having not seen a red candle since the Oct’2023 low. Indeed, 4103 is a very considerable 1101pts (21.1%) to the downside.

*for more on Elder Impulse candles… see: Stockcharts
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As things are, I will continue to see the m/t trend as bullish unless a rollover in monthly price momentum, and a monthly settlement under the monthly 10MA – currently 4731 (adjusting into the 4800s in May).

Until then, I see any short index trades as distinctly risky, although the bolder day/swing traders could try. Long Gold, Silver, and Oil will arguably make for better sleep at night.

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The wild cards

If the equity bulls should be concerned about anything this spring/summer, its a geo-political wild card/s. The US election is certainly one, but there are many others…

Ukraine/Russia/NATO
Israel/Gaza/Iran
China/Taiwan

I’m sure you could add to the list.

It should be clear… the war drums are getting ever louder. Whether you agree we’re already in the early stage of WWIII doesn’t really matter. What does matter is that you recognise the truck load of geo-political wild cards, which are arguably even more important than whether Print Central cuts or raises rates.

One thing is for sure, things on planet Krazy are only going to get more wild this year.
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