Market Will Drop Until G20 – Bears Dodged 2 Bullets Overnight
Posted by Pete Stolcers on November 15
China responded to US trade demands and this was a prerequisite to the G20 meeting. Both sides are miles apart and odds are that the response did not back down from their previous stance. Trump and Xi will meet November 29th and we can expect superfluous comments from Trump. Best meeting ever, fantastic trade deal underway, Xi is a good friend… These are likely remarks after the meeting. After a heavy dose of selling, the market will like this “warm fuzzy” and we can expect a bounce. At best, the two leaders will agree on a cease-fire and Trump will not increase the proposed tariffs in January as long as trade negotiations continue.
Two weeks after the G20 meeting the FOMC will hike rates. Powell did not soften his tone and investors are concerned that the Fed is missing the global soft patch. As the FOMC draws closer, any G20 gains will be stripped away.
A Brexit deal seems close, but we’ve heard that before. May has battles within her own Parliament and she is battling with the EU. This has been a difficult process.
Europe has not addressed Italy’s plan to run massive deficits next year. Credit concerns could start to surface.
An EU trade deal with the US is unlikely without a firm deadline. Trump will get impatient and he will set one before year end.
Apple has the largest market cap of any stock and it has come under fire. Suppliers are reporting soft demand and the stock has been downgraded.
Oil prices continue to drift lower. This is the fabric of every economy and this price drop is another indication that global demand could be declining.
Swing traders should remain short. We will lower our intraday stop to SPY $273. That was our entry point Tuesday on the open. Out target is $263 and that is where you should take profits. I don’t like shorting into year end so this is only a half position.
Day traders should short any intraday rallies. The selling pressure is very persistent and Asset Managers are not worried about a year-end rally. Any bounce is immediately faded. I also suggest shorting in the last hour of trading if the price action all day has been soft.
A Brexit deal and dovish comments from the Fed could have sparked buying this week. That did not happen and I’m expecting a move lower the rest of the week.
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