Every week in 2020 seems to get stranger and stranger. Last week we saw the death and rebirth of stimulus talks and Trump uses his ‘art of the deal’ tactics to look good for the election. Make no mistake, the election is a big deal and it’s coming closer. Odds are that volatility will pick up a little heading into the election and thus we’re happy to take it very slowly. That said, markets are looking generally strong and confident at the moment.
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?
The world is mostly mad, but luckily our views and beliefs about the world around us has little to do with what is actually happening, and the key to moving forward is to respond appropriately to the external environment, regardless of whatever it is that we might believe. Our job as traders is now and has always been to simply follow the market. Therefore we look mostly at technical analysis again this week so that we stay unbiased.
This week we are looking at a few local charts from a technical perspective only. Sometimes we get a little caught up in the noise that comes with consuming news around the market. Thus, sometimes it is helpful to just block out all the noise and just look at the charts. The mantra we often have to repeat to ourselves as traders is ‘allow the market to lead’.
It is starting to feel a little like the roll-over we were on the lookout for in U.S. markets last week is beginning to happen. Gold is pushing a lot higher on the back of growing coronavirus concerns as Italy enters the early stages of lock-down due to the virus spreading within its borders rapidly. We’ve seen videos of scores of people queuing outside banks in China and rumours of Chinese banks not having liquidity for withdrawals. The situation is getting worse.