Round 2 Goes to China

October 13, 2019

Weekly Market Outlook

By Keith Schneider

blankUS equity markets were under pressure early in the week, but reversed course Thursday and Friday, ending up about +1% for the week. Risk Gauges all flipped positive.

The twitter storm from the White House was relentless, sending the market intra-day up or down 1% within minutes multiple times this week.

The call for the Impeachment of President Trump has been gathering steam, but the market ignored it as the bigger headlines took the spotlight. That being the trade war with China, which has calmed down somewhat. This has pacified the markets for the moment.

How long the pacifiers will last is the big question as no formal agreements with China have been signed, and the core issues are left unresolved. However, additional tariffs have been postponed.

Equity markets even ignored an attack on an Iranian oil tanker and Turkeys attack on Kurdistan, which could end up freeing thousands of imprisoned ISIS fighters.

Oil spiked, but Gold fell. It’s not often that Oil spikes based on geo-political stress and Gold drops, but this is the new normal.

Please do not try to be logical as it is futile in the current environment.

Even the most seasoned players are complaining about how choppy and weird markets are behaving while sitting on piles of cash.

Expect some sort of wild open on Monday after the market has time to digest the status of the trade war.

This week’s highlights are:

  • Risk Gauges flipped to Risk On
  • Market Internals flipped positive
  • Semi’s continuing to lead by a wide margin
  • Volume patterns stabilized and are neutral
  • Small Caps (IWM) remain weak and are down almost 5% over the last 6 months
  • Foreign equities gained the most with FXI (China’s ETF) now outperforming US equities on a short-term basis
  • Gold, Gold Miners, and Bonds all traded below their positively sloped averages again

Adding to the confusion is reading the tape…

U.S. equities closed on their intra-day lows on Friday but still strongly positive while clearing short-term resistance levels. It’s either a short-term blow-off or a great buy opportunity.

Mr. Market will let you know on Monday afternoon.

However, our Alpha Rotation trading model, which has been one step ahead of the market all year (up over 43%), isn’t waiting until Monday afternoon. It issued new trade alerts for members to take advantage of Monday morning.

Click here to see the replay of last week’s Alpha Rotation introductory training to learn more.

Best wishes for your trading!

Keith Schneider

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