Last week, equity markets around the globe gapped up on the news of the French elections. I do find it interesting that the expectation was for a victory of Macron and LePen and then when the outcome is as expected, markets surge. Something about the irrelevance of the news right?
Probably too many were short positioned, and based on the assumption that it’s a zero sum game and the crowd can not be correct, then the surge can be explained. True or not, it is what it is and the market does what it wants. Bulls scream buy buy buy to new All time High. Bears claim this is a Lower High and the crash is about to start. I’m in the middle, bearish for the short term (May, June) and bullish for the longer term (>Q3 2017).
Trump’s tax plan turned out to be a buy the rumor, sell the news item. I did not understand the enthusiasm about the tax plan and I still don’t. Somehow, the government has to fund this tax break, as empirical evidence shows it does not add real value to economic growth. And since the US government (as any other government) is practically bankrupt, I wonder how this will all end up like a good thing. For one group
I do think that the current events all lead up to the point that the artificial low interest rates are not sustainable, and rates will revert back to the mean. In the end, everything turns back to its mean. In time. If that is the case, that rates revert back to the mean, it implies EU rates at 4% or higher. That’s an increase of 100% from current levels and for some countries even more. How do you think that’s gonna turn out? The bond market will be a bloodbath and a trillion of investment products will face severe value changes as they are pegged to interest rates.
I’m in the corner of Armstrong, and expect a flight out of public assets (government bonds) and into private assets (equities) for the next couple of years.
Subscribe and stay informed!
Looking back at April, I’m up 1.4% for the month, a bit above target of 1% per month, so can’t complain, but I’m not satisfied about all of my trades, of course, with hindsight. Several (candlestick) patterns played out nicely (Snapchat, Nielsen, Bank of America) while others failed so far (Home Depot, Tesla, Facebook). The cryptocurrencies performed very well, Bitcoin added value to my total portfolio as well Ethereum which I bought at $36-$40, currently near the $70 level, doubling my investment in a month. I am aware of the fact that it could be gone in a blink of an eye, so I “only” invested 3k in cryptocurrencies. If it drops to 0 overnight, it will be a sad loss, but I will survive 😉
For the month of May, I’m targeting a 2%-3% return as I expect a lot of volatility and an increased probability of reaching my target prices that are at least 5% from current prices. So a 2-3% return should be possible (no leverage).
Enjoy your weekend!
WEEKLY CHART S&P500
During March 2017, the S&P500 broke the major trendline to the downside and this week it tried to close back above. Of course, it depends on how tight you draw your lines to make the statement that it closed below or above for this week but based on how I drew the line, it closed below (subjective nature of technical analysis).
Regardless of the trendline, based on the weekly time frame, a bearish view is valid as long as it is not able to break > 2400. For the medium term, it formed a Lower High as it was not able to break the 2400 that was marked in February 2017. A break > 2400 means the S&P500 is back above the green trendline, forms another Higher High, continues the long term uptrend and this last corrective pattern was simply to form a Higher Low and not the start of a corrective wave (yet). I do have an important cycle date scheduled for May 8-14, so it might indicate that we’re close to a High on the weekly time frame. I simply see to much patterns popping up as so often right before a downtrend of 5%-10%.
Sell in May and go away, but remember to come back in September?
For the week, it gapped up and formed a Higher Low and a Higher High. Sooner or later, gaps will be closed. Could be the week after or it may take some time, but a gap is there to be closed.
If it is able to close above the green trendline @ 2400, then 2410 is next level to break.
DAILY CHART S&P500
Candlestick Patterns – For the 3rd day in a row, the S&P500 forms a Bearish Reversal Pattern. On Wednesday, it formed an inverted hammer, Thursday a Hanging Man and Friday a Bearish Engulfing. Could it be more obvious? Or is this the game they play…make people believe it’s topping, so we enter shorts and it’s only meant as fuel for the bulls? Mind games….For now, the last three days showed signs of topping, a market that’s getting exhausted, not able yet to break to new All Time Highs. There’s still time left though, as I expect the major change in Trend somewhere in the cycle time window May 8-14.
My expectation is a retest of support at 2360-70, bounce up 2390 mid May, retest support 2340-50, resistance 2360, 1st Target area 2270-2300. Keep in mind that this scenario line is just my own desire, projection, thoughts, so not something to trade on. Trade the numbers, not the opinions. And the numbers say I should be biased short < 2400 for the short term. Long term, I’m extremely bullish on stocks, as I explained before that the real bubble is the government bond market in my view.
SuperTrend – On a Buy since it broke the 2370 to the upside. Stays a long if the close > 2370. New sell if close < 2370.
Cycles – Based on my own developed Cyclical Model, the power of 7(0), I end up with the following dates: April 27 (91 day cycle, short term High?), May 3, May 8-14. So keep an eye on these dates for a change in Trend (High or Low). May 12, full moon. Bradley Model dates: April 29, June 21.
SPX vs VIX
Target Prices – The pattern that I’m following here is the Rounding Top S&P500 and the Rounding Bottom VIX, explained in this video. Based on this pattern, I would not be surprised to see VIX gapping up again and reach the 1st target of 14 and eventually the 2nd target of 17-18 during May and June.
For the S&P500, the main targets are 2270-2300 and 2100-2150 based on 1) The Rounding Top, 2) Divergence with the Risk Parity Fund and 3) The divergence with Hard Economic Data and The Bond Market (see Trading Updates April 20-24).
RSI – several stock markets show Bearish Divergence, such as the S&P500, DAX and the Nasdaq, indicating a sideways pattern or downtrend to start. Uptrend is getting exhausted. For the VIX, the RSI is at a key area, will it be able to break to the upside? And I do wonder, what is the reason for VIX to form an Island Reversal Pattern and cause VIX to rise by 30%? Nothing good in my view…
Copy My Trades – If you want to follow or copy my Trades, then please click here and sign up for free! I’m keeping track of my Trades in my account named EdwinVandenBerg.
Buy – Bullish Engulfing:
The Gold miners…is Gold about to pop? I’m stacked with Gold and Silver coins, so would be greatm, but I’m in it for the long run. Could not really care for price changes as I keep it as an insurance against a financial implosion.
A tool to protect my assets. At least, I think it’s better than holding the EUR 🙂
Sell – Shooting Star:
Sell – Bearish Engulfing: