What could go wrong?

Now that virtually everybody has bought into the reflation and global cyclical recovery trade, and Reddit flash mobs are ganging up on short sellers to drive the most short-sold stocks into the stratosphere, what could go wrong with this bull?     Notwithstanding the silliness of the WSB flash mobs, here are some key bearish...

What would a Biden presidency look like?

Joe Biden has officially clinched the Democratic nomination for president, and his odds of winning the Presidency in November have been steadily rising, and he is now at 54% on PredictIt. For the uninitiated, the contract pays off at $1.00 if a candidate wins, so buying the Biden contract at $0.54 implies a 54% of...

What gold tells us about confidence

How badly has the pandemic affected the global economy? The United Nations Development Programme (UNDP) has some answers in a recent report. It expects global human development to decline for the first time this year, and EM economies will bear the brunt of the impact. The International Labour Organization (ILO) estimates that up to half...

What’s the next market narrative?

This crisis has so far gone through two phases of market psychology. The first phase was panic, as it became apparent that COVID-19 had become a global pandemic, and economies around the world were shutting down. Stock prices rebounded during the hope phase, supported by a flood of fiscal and monetary stimulus, and the hope...

Cruisin’ for a bruisin’

Mid-week market update: Bloomberg reported that BAML strategist Michael Harnett wrote a report back on December 12 forecasting a melt-up. He believed the market's gains would be front loaded in 2020. and he projected an S&P 500 target of 3,333 by March 3. The index reached that level intra-day today, and it's still January. Are...

How far can Tariff Man dent the stock market?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Is a trade deal imminent?

On Friday, Trump said that a trade deal with China was "potentially very close" (via CNBC): President Donald Trump on Friday said that a long-negotiated trade deal with China is “potentially very close” following reports that an agreement might not be reached until next year. Trump was speaking on one of his favorite television programs,...

The biggest risk to the cyclical recovery

Evidence is piling up that the economy is undergoing a cyclical recovery after a soft patch. The technical picture confirms the cyclical rebound narrative. The market relative performance of cyclical sectors and industries are all turning up. Semiconductors are now the market leaders, though they look a little extended short-term.     Here is the...

The Art of the Deal, Phase One edition

The markets began to take on a risk-on tone on Friday when the news that American and Chinese negotiators had "made headway on specific issues and the two sides are close to finalizing some sections of the agreement". Bloomberg went on to report today that the text of the "phase one" agreement is basically done,...

The Art of the Deal (with Chinese characteristics)

Our trade war factor has been heating up, though readings remain in neutral. A secondary index (red line) measures Sheldon Adelson's Macau casinos operator LVS against other gaming stocks (inverted). As Adelson is a major Republican donor, and the casino licenses expire in 2022, the licenses represent another form of backdoor pressure that Beijing can...

What would an Elizabeth Warren Presidency look like?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

3 supply shocks that could derail the economy

As the market reacts the weekend attack on Saudi oil facilities, the level of anxiety is mounting. Forbes published an article on Sunday entitled "Attacks on Saudi Arabia are a recipe for $100 oil". Bloomberg that this represents the biggest disruption to global oil supply since the Iraqi 1990 invasion of Kuwait.   As visions...

Should you buy the breakout?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

How to trade foreign cross-currents

Mid-week market update: Global markets have taken a decided risk-on tone today on the news that Hong Kong leader Carrie Lam has withdrawn the controversial extradition bill. As well, the revolt in the British parliament has lessened the chances of a chaotic no-deal Brexit on October 31. On the other hand, the market was hit...

The rise of the Fear Bubble

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Buy the dips, sell the rips

Mid-week market update: The SPX has been mired in a trading range for several weeks. Even as the market is once again testing resistance, it is displaying a mild positive RSI divergences, which argues that there may be further minor upside to resistance at about 2950. Nevertheless, this pattern argues for a trading strategy of...

A correction, or a trade war meltdown?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...