Global trade metrics are slowing, interest rates are rising, real costs of living are rising (transport, healthcare, shelter), but wages are not keeping pace, says Ziad Jasani Monday.
This almost always leads to less consumption, which leads to less revenues, which leads to margin compression as corporations fight for a slower-growing-economy, which leads to lower equity multiples, not to mention inflation may creep up at a faster pace than anyone is expecting especially with Oil remaining above $60.
Outlook – Swing traders (Equities)
The currency controlling equity moves is the U.S. dollar (USD), and it has overheated and has just little more room to rise before a pull-back, suggesting the current market negativity resolves with the S&P 500 (SPX) testing 2,759 and bouncing or at 2,743 and bouncing; in S&P Composite/Toronto (TSX) terms a move down to 16,095-55 and a bounce or down to 15,950-25 and a bounce.
We are currently in a macro market swing-high formation and not accumulating long-side risk but playing short until we see cause not to. The strong reversals presenting on Friday, June 15 have not yet proven worth of buys, but we did lighten up on our shorts.
Scenarios, trading decisions for swing traders this week
During our Weekly Coaching Workshop (Friday, June 15) we established three scenarios for the week ahead, with the majority of our Community voting for Scenario B (Indecision).
My video commentary recorded June 18:
• Scenario A (Bullish)
A direct bounce higher into next week for equities (S&P 500 > 2,795, TSX > 16,285), with a cooling of the USD and Commodities shoring up, while U.S. Treasury yields rise and Bonds suffer marginally along with defensive interest rate sensitive Equity Sectors (but Financial Equities outperform).
• Scenario B (Indecision)
Just a little bit more equity negativity (S&P 500 ~ 2,743, TSX 16,095-55), USD strength, Commodity weakness, and Bond levitation, before a bounce up for Equities.
• Scenario C (Bearish)
Big bearish breakdown (S&P 500 < 2,743, TSX < 16,055). Into the close on Friday June 15, Equity Markets were bid up well off intra-day lows, however, no clear signals presented supporting decisions to get long this market.
As such we ended the week net-short but are on the ready for the Bullish or Bearish scenario if signals present early in the week.
Get familiar with support and resistive levels on Equities, Bonds, Commodities & Currencies to be ready to act this week.
View the Independent Investor Institute trading ideas and strategies videos here.
