This saying from the world of feedback studies summarises the state of the equity markets. The ‘Trump Dump’ is in progress and already the $ has dropped right back to where it was just before the coiffed buffoon was elected. The S&P and other world indices have been sending up distress flares for some time, as reported here, and now a decline has begun but they are still well above the levels before the election on November 8th last year. It is possible that they will fall all the way back down to that start point, which is around 2070 in the S&P and 18,000 in the Dow IF the bull market is fatally wounded. They could of course go even lower than that if the White House and other organs of government continue to engage in a dialogue of the deaf – each shouting louder but with no communication.
The US is not a command economy however and even with a boastful ignoramus in charge, business will (thankfully) continue. It is perfectly possible that this will prove just be a dip and that we will we able to buy stocks again for another rally – we were waiting for just such a chance in the Nasdaq. We are currently ‘between signals’ in equity markets, having seen weekly and daily-scale top extensions that made us bearish in the US, Europe and Japan and we have no reason to abandon that view yet. We are watching intently for any signal that would indicate that we should cover shorts and try long positions but there is nothing to report.
Obviously there are areas of support below the market – there is one such right here in the Nikkei at 19300 – but these may not hold. From a trading perspective, it seems prudent to take some profits but wait to cover the bulk of your equity shorts and we will advise when we see something new. The same advice applies to any Gold longs you may have taken on our advice last week – hold on for now, taking only partial trading profits.
