Do buyers or sellers have a stronger case to control market direction into Q1 earnings season? I outlined scenarios Monday here. More tactical scenarios for this week, writes Ziad Jasani of the Independent Investor Institute in weekly video and commentary.
Here is Ziad’s market strategy video recorded Monday:
Recorded: April 9, 2018.
Duration: 1:04:12.
In the case of Scenario A or B presenting the following spaces and decisions are suggested on a swing trading basis:
• S&P 500 (SPY), Nasdaq (QQQ), Dow (DIA): Hold-To-Buy if S&P 500 > 2,604, 2nd Buy if S&P 500 > 2,620
• Oil-Longs Hold If Oil < $63.13 But > $62, Hold-To-Buy if Oil > $63.13 (USO, HOU-T)
• Gold – Precious Metals/Miners Hold-To-Buy IF Gold > $1,331 for a move up to $1,355
• Bonds – Hold while 10-year U.S. Treasury yield oscillates between 2.9% and 2.7%; If >2.9% Sell, If $23.75 Buy, If 15,175-110, 2nd Buy If TSX > 15,300
• Sector specific decisions follow: S&P 500, TSX.
In the case of Scenario C presenting the following decisions are suggested:
• If the S&P 500 breaks its 200-day average (2,593) short-to-mid-term Traders are looking short/inverse (SH, IWM, PSQ, DOG); we would still expect a bounce at 2,533 (Feb. 9) lows
• If the S&P 500 breaks the Feb 9th lows (2,533) it would signal the 2nd leg of short/inverse trades
• If the TSX breaks below 15,175-110 short-to-mid-term Traders are looking short/inverse (HXD-T)
• If the TSX breaks below 14,950 it would signal the 2nd leg of short/inverse trades
• If the S&P 500 breaks below Feb. 9 lows (2,533) and remains below, longer-term investors would reduce long-side exposure by 33% to 50%
• If the TSX breaks below Feb. 9 lows (14,786) and remains below, longer-term investors would reduce long-side exposure by 50% to 70%.
Global Risk Sentiment this week
Looking at the third column to the right we see a comparison of higher risk asset classes and defensive asset classes back to the S&P 500 (SPY) on an annual basis.
When we see more green above the SPY-Line (middle line) and more red below we have a general “Risk-On” signal; and vice-versa (red above, green below would be “Risk-Off”).
Currently, we have a weak risk-on posture with Defensives expensive to very expensive and Higher-Risk polarized with the TSX (XIC), Russell 2000 (IWM) and Eurozone (EFA, FEZ) presenting as expensive while the rest presents neutral to cheap.
This implies there is room for a macro-market-swing-low to take hold in the week ahead, but it is likely short-lived (maximum two weeks-three weeks).
With Defensives presenting as very expensive we must keep an eye on any data that stokes the “inflation-fire” this week (US CPI & FOMC meeting minutes April 11, U.S. government bond auctions April 11, 12.)
View the Independent Investor Institute trading ideas and strategies videos here.
