The “Political Coup” Was Just Initiated In Washington D.C.!

May 18, 2017

The financial markets have already “priced in” huge tax cuts, reducing red tape regulations and a massive increase in infrastructure spending.

Perhaps, the markets are now believing that the agenda is not going to occur with Al Green asking for Trump impeachment?  This could result in a significant downturn for stocks if it were to unfold.

The SPX index declined more than 1.75% and wiped away about $375 billion in market value. The SPX went from a record close three days ago, to below its 50-day simple moving average on Wednesday May 17th, 2017.  Institutional traders view the 50-day simple moving average as very strong trend support. The SPX level at 2407 turned out to be the best the bulls were capable to achieve. Their second attempt to push the benchmark higher failed at 2406, where the bears stepped in.

Financial Markets Are Spooked!

There is a slow leak in U.S. stocks. The SPX has more declining stocks than advancing ones during this tight trading range. This is unusual behavior and resulted in lower returns over the following month.  Tune in every morning for my video analysis and market forecasts on all ‘asset classes’ so you know where and why the market is about to move.

The SPX decline on Wednesday May 17th, 2017, was abnormally large, relative to the past 3 years.

These two market warning signs, the Titanic Syndrome” and the Hindenburg Omen” are giving a “preliminary sell signal” based on analyses of 52-week New Lows in relation to New Highs on the NYSE. On May 4th, 2017, the Hindenburg Omen was triggered on the NYSE and Nasdaq exchanges.  It has a consistent record at highlighting underlying weak market conditions that preceded market trouble. On May 16th, 2017, both exchanges triggered the Titanic Syndrome. This occurs when the NYSE 52-week lows out-number 52-week highs within 7 days of an all-time high in equities within days of the major indexes closing at a one-year highs. Historically, these signals have led to further weakness over the following two weeks. As stocks were plunging, investors are currently panicking out of stocks and into the “safety” of bonds.

Is This The Return Of New Volatility?

Richard Haworth, CIO of Capital Advisors, a London-based hedge fund, which bets on rising price swings is quoted as saying, “The market will revert to higher volatility and this could be the start of it. The sharp move this week reflects how low volatility the market was — how complacent.”

Conclusion

In short, investors have been overly bullish with virtually no fear that share prices could fall.  But this week’s drop seems to have renewed the fear and is cleansing the market by weak investor shares being sold to those who are bullish and willing to hold them for higher prices.

This is normal bullish price action and once this phase ends higher prices should return as we enter the summer months.

In the past week over at ATP service we have closed a few winning trades while the market sold off. SLV 3.2% profit, FOLD 9.5%, MOBL 15%, and ERY 5.4%.

The bottom line is that it really does not matter which way the market goes, there will always be ways to profit.

Chris Vermeulen
Daily Market Price Forecasting Video
Active Stock & ETF Trading

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.  Chris’ mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility. Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for multiple newsletter publications. Through years of research, trading and helping thousands of individual investorsaround the world. He designed an automated algorithmic trading software for the S&P500 index, which solves his client’s biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market. He is the author of the popular book “Technical Trading Mastery – 7 Steps To Win With Logic”. He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven, The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. 
You can reach Chris at: chris@thetechnicaltraders.com.

 

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