Things are starting to get a little wild out there as we approach the U.S. elections. Most of the charts that we look at this week are or larger market indices. Volatility is likely to remain elevated for the rest of the year. We’re not quite ready to start buying the dip just yet, nor are we sure that we’ve even really seen the dip yet. A bit of a zoomed-out macro view this week.
Over the last few weeks we’ve shared some thoughts about the fundamental picture we are seeing, and thus fired off a few warnings about the sustainability of the tech rally. This week we’ll keep things simple and only consider the charts, without having the fundamentals interfere with our thinking.
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Markets are feeling a little fragile at the moment, thus we’ve not produced many offshore trade ideas over the last few weeks. We do at least have one offshore short-term trade idea today that we think is worth looking at.
Being overly bearish is bad for your health, so please take the this week’s game plan with a pinch of salt. Overall we are becoming more and more concerned with what we think is irrational exuberance in the market. We look at some of our concerns and identify some trading opportunities for the week ahead. We also have a look at some requested charts.
The ‘tech call option whale’ that’s been doing a lot of this buying has now been identified as SoftBank. We also had news that Tesla will not be included in the S&P500 index. Perhaps the Nasdaq melt-up might have finally come to an end?
Some short-term offshore trade ideas for the week, focussed on the U.S. markets.
Over the last few weeks the tone of the Weekly game plan and the trade ideas coming out of the International outlook blogs have become somewhat more bearish. Whether or not we are completely missing the mark here is still to be seen, however we are becoming more and more concerned about the sustainability of the current developed market (particularly U.S.) rally.
Gold and silver have been the talk of the town amongst most professional investors in recent months. With the Fed printing the dollar into oblivion, gold caught a decent bid and became massively overbought, along with its cheaper brother silver. Gold and silver sentiment became extreme and as you know, when the hysteria hits the market, it’s normally the end of the bull run. We have now had a decent retracement and believe that we can start looking at gold shares again for a bounce.
Building on some of the thoughts we shared in our blog post last week (U.S. commentary), we want to start off the weekly game plan by urging caution. We need to remain ‘trend followers’ and keep dancing while the music is playing, but we must acknowledge the possibility that the carpet can be swept out from under us at any minute. Most importantly, we need to be ready to jump when the carpet is pulled so that we don’t fall flat on our faces… but also not spend the entire party just jumping up and down in the middle of where everyone else is trying to have a good time. It is best then to keep a flexible ‘everything is temporary’ mindset, and be open and ready to change our views when presented with evidence contrary to what we might think we know.