While many investors are now starting to look more closely at global equity markets, there are some changes that are taking place. From a purely technical standpoint the S&P 500 has traded well in the past three months, however last week negative signs started to appear.
After the S&P 500 sold off twice for 21 and 15 days respectively in terms of duration, it recovered and regained the 7.5% and 5.5% it had lost on these pullbacks. However, more recently, when the S&P 500 faded by about 5%, it struggled back but was not able to achieve a new high on increased volume – this raises concern.
Also, the notion that China will sign a deal with President Trump is far less likely now because China has interest in applying pressure to Mr Trump while he is dealing with the Ukraine, Biden and the US Congress. Getting Trump out of office is an international goal for the powerful in Beijing and a domestic goal for the Democrats.
So we have focused on reducing positions in equity, with the view that over 70 percent of longs should be reduced and of course want to wait 5 trading days to think and analyze before rebuilding positions. At least in the short-term, there could be a pullback in US and global equity markets.