Although we do not give trade ideas on this platform we do point out some trends and reversals. We see this current collapse of approximately 20 percent in the Dow, S&P 500 and Nasdaq as an opportunity to cover shorts next week. The Dow will likely continue lower so the 21,500 to 21,200 range could be a window to cover shorts as capitulation selling continues. We see a panic cycle hitting a crescendo in the coming week or weeks.
Dow 21,500 to 21,200 could be a window….
The US trade wars with China, the Fed hike cycle and the Democrat and Republican Shutdowns will continue. and markets will come under pressure but note that there are no signs of economic slowdown – yet. With the new waves of Trump Tweets against Fed Chair Jerome Powell, the frustration is real. Trump has denied that he suggested to fire the Fed Chair but these rumors continue to upset Wall Street. Combine recent tweets about the Fed with the ongoing trade tensions between the US and China along with the growing fear of a US recession, and stocks naturally come under pressure, perhaps falling another 5 to 10 percent.
Of course the Fed is now normalizing rates – which started in December 2015. Trump of course wants rates lower and wants to keep them low to keep economic expansion running but history tells us that this is a dangerous game.
We like covering some of our shorts now in S&P 500 and the Dow while looking for new longs to establish in Nasdaq. We see opportunities in early 2019.