If there is one thing that has been so dramatically impacted in the markets since 2008, it’s the speed of moves. The causes are widely known. Number one, high frequency trading (“HFT”). Number two, massive amounts of money and capital backing HFT ops in conjunction with low-cost capital freely available to the “players” for any and all speculations.
A player is defined as bank trading desks, asset managers, hedge funds, pensions, university endowments, insurance companies, sovereign wealth funds, and any other sufficiently large entity managing money or assets. And let’s not forget corporations and their buybacks.
The sheer velocity with which trend changes initialize now is amazing. Trend followers will continue to have their impact because of their late nature to a move and their “pour-on” effect once the action is deemed legitimate.
Which leads us to the current sentiment in the buck, treasuries, bank stocks, copper, and steel.
Trump wins. Buck goes up. Bank stocks go up because rates go up. Copper and steel go up because Trump is going to build four regional towers with elevators that reach the moon. He’ll also build hyperloops all around the US. Additionally, he’s going to revamp every bridge, tunnel, and plain old road with $4 trillion worth of modernization.
That’s how those five assets are currently trading.
Says to me, a short looks pretty good here. I may be a little early. But I think profits will be taken as fast as they’ve been made if sentiment reverses and the fervor dies down around the president-elect.
Take copper. The chart’s a little convoluted, but everything on it are charting 101 tools. So chartists will instantly see what’s appears to be logical retracement points on a potential reversal of this fast trend.
That green-red, support-resistance line terminates right at the 20-week EMA. If we were to see a profit-taking event, $2.30/lb. is as good a spot as any to maybe lock in short-profits as the mega-breakout at $2.20 just may be legitimate.
The same analysis can be applied to the other four assets, especially steel. Using US Steel as a proxy, a 20% correction wouldn’t be surprising in the least. There’s also a monster gap up at $20.
Two things most traders love, gaps and stems. Technically, the stems are called “wicks” or “tails.” I call’em stems because once they begin to grow on the underside of a candle, long profits seem to blossom.
It sure looks like little piles of money are building over in the corner. Even if you don’t have the guts to go short, keep your eyes on the US dollar, Treasury yields and T-bonds, bank stocks, copper, and steel.