Come On Kids – Can’t We Play Together?
The beat goes on. The mess in Washington is becoming embarrassing. They know it, and we know it. The government is not going to shut down. Truthfully this fight over power is hurting the countries reputation. It appears that Mr. Trump and Mrs. Pelosi are going to stay locked in this battle as long as they can. It is like tick for tat. You have two of the most influential people in the world in a sand box and they will not give in.
They both are behaving like a pair of 6-year old’s. Nancy started this one by sending a letter to Mr. Trump stating that she felt the State of the Union address should be postponed over security reasons. What in the world did this have to do with security? Mr. Trump then cancelled Mrs. Pelosi’s government plane for her trip to Afghanistan and other foreign countries, claiming that she needs to be in the U.S. until this current mess is settled.
Who is right and who is on the wrong side of the ledger in this one is hard to say. I have been following the markets and the politics in Washington for more than 40 years and I have never seen the “swamp” in a bigger mess. The talking heads keep saying that this is the end of the world, but I have seen this movie before, and this will eventually sort itself out.
The big question is where do we go from here? The Dem’s want Mr. Trump impeached but I can’t see why. No question he is controversial at best and probably a serial philander, but so was Bill Clinton and the country learned the meaning of what is “is”. Did Mr. Putin have an impact on the 2016 election? Who knows? Maybe he did and if you get enough people to believe it, it might work. In the meantime, the equity markets know the result and after the downturn in the last quarter are quietly rallying, They feel safe and that is all that really matters!
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions with a short paragraph which will cover the trading subject.
Why is the VIX so low as the chaos in Washington continues?
Answer: The VIX represents what traders think of future risk. Even though the market is still digesting the carnival surrounding Mr. Trump, the VIX is now down and trading lower than its 20-year average levels. Most likely traders are anticipating that the market has absorbed the economic and political news and doesn’t think that the current information will destabilize them. The reason the VIX exploded in the first week of February, and again in December is that traders that had been short volatility for the past few years got caught when the market turned. They scrambled to protect their profits or if they had just recently got short to try to cut their losses. The resulting trade created the classic” V” formation (blow off) when everyone tries to get out at the same time. Traders don’t care about price when they are getting a tap on the shoulder from the clearing house and they must cover their position, or the clearing house will cover it for them. They become price insensitive and will pay any offer or bid if it stops the pain. Eventually once the market is satisfied it returns to the mean. This is why you never want to sell naked options. I can guarantee you that the FED will not be there to bail you out!
The Wise Guy Report: The View from The Electronic Floor
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation in three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis. This week Let’s look at how the equities markets have performed since the start of 2019.
Equities Possible Reversal (Bullish)
Market Edge’s computer model turned negative at the end of September 2018 and although the market continued to rally we advised against taking any new long positions. We thought it was much better to trade from a safe posture. When a head and shoulders pattern for most of the major indexes was violated in mid-December, we felt that there would be more pain in the market. As it turned out we were right. The start of the 2019 calendar has changed our opinion. Our model now feels confident that the worst is over. The volatility has decreased. This is earnings season and most of the reporting companies are in line with diminished expectations. We are probably due for some retracement, but if we don’t violate the old lows, this could be the start of a new bull.
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“Don’t Buy Them – Sell Them”.
Mr. Seifert