By: Danny Riley
Yesterday’s rally was a combination of things. Around 5:00 am CT Bloomberg started flashing some headlines that said the U.K. and European Union were making progress on a draft plan for Britain to leave the block. Next up were the big N.Y. bank earnings, which showed that the largest U.S. banks have yet to feel the effects of the current rate cuts. And last on the list was the fed’s announcement that it will make monthly t-bill purchases of about $60BN for four months. There is one undeniable fact in all of this, the fed is being pushed into adding liquidity when the S&P is less than 1% off its all-time highs.
Many of the famous market timers continue to spout “gloom and doom” forecasts for the S&P. In all honesty, I am not sure why anyone would pay money for their services. They have time and time again put thoughts in investors heads that the end of the stock market rally is over, yet the bull market has continued on several years past where they thought it would end.
The average bull market lasts 4.5 years, and the current one, that bottomed in March of 2009 during the global credit crisis, is now over 10 years old, and running. That makes this the longest bull market in history. My question to all the well known market timers is, what if the bull market isn’t as long in the tooth as all the talking heads say it is, and is now in a super cycle?
What we have seen over the last several years is what I call ‘false starts’. First, there is some type of economic news event, or global event, that pulls the S&P down quickly, whether it lasts 2 days or two weeks, and then there is a quick rebound to new all-time highs. I am sure at some point the current bull market will indeed die of old age, but until the overall price action actually changes, the best trade remains being patient and buying the dips.
According to Delta Investment Management, the current bullish super-cycle began in 2013, after the market had recovered from the autumn 2008-winter 2009 nose dive (I remember it well), which is a lot less than the ‘official’ 10 year bull market the market-timers talk about. I suggest to both the bulls and the bears that you go to DIG’s website and hit the “Delta Insights” tab to learn more. Many of the things they talk about I have been saying for years.
How Long Will It Go?
All I know is, we live in a new world trading order where algorithmic and high frequency trading makes up 85% of the daily trading volume, and these bots have been programmed to pick up on investors mistakes.
Will the current bull market last forever? I highly doubt it, but like I said, until we see a real change in the price action, I think it’s fair to say that we should stay away from fighting city hall.
Yesterday’s high in the S&P 500 futures (ESZ19:CME) at 3003.25 was less than 30 handles off the S&P 500 futures all time high at 3032.50. From last Wednesday nights (October 9th) 2881.75 globex low, to yesterday’s high, the ES has rallied +121.50 handles in four sessions. That is an incredible amount of ground to cover.
That said, one of the things that bothers me, is President Trump always talking about getting deals done that are never officially signed. Even if the Chinese did sign the deal, there is still a lot of doubt about them sticking to it.
According to Rory Green, an economist at investment research firm T.S. Lombard, “China’s not going to change its core economic policy to placate Washington, be it on intellectual property or similar, they are accepting slower growth, they are not going to do a big credit stimulus as we’ve seen in the past; markets are slowly realizing that.”
The Wall Street Journal wrote a story on October 12th titled, “China Emerges With Wins From U.S. Trade Truce,” which is also a good read…
Read: https://www.wsj.com/articles/china-emerges-with-wins-from-u-s-trade-truce-11570912439
Our view; there will be a pullback this week. Will it come today, or on ‘Crazy Thursday’? I just don’t know, but I do feel strongly about it. During yesterday’s rally, many traders rolled short call positions higher. In most cases, that creates false buying pressure, and while I do think new highs are inevitable, I think it has to come after some type of shake out. The rest of this is up to you…
SIGN UP HERE TO GET THE FULL MRTOPSTEP OPENING PRINT!
As always, please use protective buy and sell stops when trading futures and options.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
No responses yet