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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
* Major World Market Indices * Futures Markets * U.S. Sectors and ETFs * Commodities * U.S. Bonds * Forex

* The content in my articles is time-sensitive. Each one shows the date and time (New York ET) that I publish them. By the time you read them, market conditions may be quite different than that which is described in my posts, and upon which my analyses are based at that time.
* My posts are also re-published by several other websites and I have no control as to when their editors do so, or for the accuracy in their editing and reproduction of my content.
* In answer to this often-asked question, please be advised that I do not post articles from other writers on my site.
* From time to time, I will add updated market information and charts to some of my articles, so it's worth checking back here occasionally for the latest analyses.

DISCLAIMER: All the information contained within my posts are my opinions only and none of it may be construed as financial or trading advice...please read my full Disclaimer at this link.


* If the dots don't connect, gather more dots until they do...or, just follow the $$$...





* Fri. April 5 @ 8:30 am ET - Employment Data
* Wed. April 10 @ 2:00 pm ET - FOMC Meeting Minutes
* Wed. April 17 @ 2:00 pm ET - Beige Book Report
* Wed. May 1 @ 2:00 pm ET - FOMC Rate Announcement + Forecasts and @ 2:30 pm ET - Fed Chair Press Conference

*** CLICK HERE for link to Economic Calendars for all upcoming events.

Monday, October 26, 2020

The 2020 China/USA Hedge & the US Presidential Election

* See UPDATE below...

I've been writing about the COVID-19 pandemic and its effects on world markets for much of the year. My post of April 27 outlined information on the origins of the virus (what little was known at that time) and its spread from China to the rest of the world. It highlighted China's gross lack of transparency toward world leaders and their scientists, destruction of world economies, wilful negligence, and world-wide destruction of human life caused by the virus. 

I asked which foreign investors were willing to buy into China's Shanghai Index (SSEC) to further prop up the CCP regime, bearing in mind that China did nothing to assist foreign leaders in their mad dash to find any information about the virus and how to mitigate its effects and contain the spread.

The US began its mandatory lock-down of its states in March. Unemployment skyrocketed...but has been declining steadily, to date, to a level just below the worst numbers posted during the 2008/09 financial crisis.

US Unemployment Rate

Judging from the (essentially) steady buying, to date, that began in China's Shanghai Index (SSEC) in February, it appears that many investors did put their money to work in China...regardless of China's culpability in this matter.

SSEC Monthly

Conversely, investors began buying the S&P 500 Index (SPX) in April, following the panic sell-off that began in February.

SPX Monthly

Both the SSEC and the SPX are at levels just below their respective near-term major resistance levels (3400 for the SSEC and 3500 for the SPX). The US Presidential election is fast-approaching (November 3).

It looks as though investors have hedged their bets by buying into both markets. It seems that some are betting that former Vice-President Joe Biden would win the presidency (a win for China and the SSEC, due to his pro-China stance), while others are betting that President Trump would win a second term (a win for the United States and the SPX, due to his tougher stance on China).

Keep an eye on the SPX:VIX ratio. Following a bullish moving average Golden Cross formation near the end of September, price is caught in between the 50 and 200 MAs, but has been rising the past several days.

Should we see the RSI rise and hold above 50, and the MACD and PMO indicators reform bullish crossovers, we should see this ratio recapture the 150 level. 

Under such a scenario, look for the SPX to retest its recent all-time high of 3588.12 and, possibly, move higher...marking a second-term win for President Trump, in my opinion.

SPX:VIX Ratio Daily

So, to quote President Trump, "We'll see what happens!"

* UPDATE October 29...

Blowout US Q3 GDP numbers were released today (Source: Forexfactory.com)...a big win for President Trump and his overall financial and economic policies, as well as his massive fast-tracked COVID-19 health and economic/financial assistance/stimulus and recovery policies and programs.

'Operation Warp Speed' is one of many COVID-19 programs currently underway "to produce and deliver 300 million doses of safe and effective vaccines with the initial doses available by January 2021, as part of a broader strategy to accelerate the development, manufacturing, and distribution of COVID-19 vaccines, therapeutics, and diagnostics (collectively known as countermeasures)."

I see no reason not to be optimistic for a strong Q4 GDP finish, as well...assuming a second-term win for President Trump and the continuation of all his above-noted policies and programs.

US 2020 Q3 GDP

(the highest reached since Oct. 2008)

By the way, it's worth noting (for perspective) where the COVID-19 pandemic sits on the following graphic depicting a comparison of deaths by various pandemics as a percentage of the global population at the time. 

With the massive world-wide research and resources that are currently being employed toward mitigating and eradicating the effects of this virus, I'd hope that this percentage would remain small, in comparison, over the months to come.