Below is a transcript from Monday's Morning Market Hit video above.
Welcome to Shortview Trading. This is your morning market hit for Monday, 11th of November. What matters today and this week for markets, especially if you’re a trader of US equity futures with a one-to-two-day time horizon? What should you be thinking about and focusing on? What short-term indicators will give you the clearest steer on near-term market direction? How do you go about thinking about whether to be short or long in this equity market? That is the purpose of this video.
And the first key question we’ve got to ask ourselves is, what's the context for this equity market? How are global markets behaving? Last week, they were surprised by the election result. Almost all forecasters were predicting a pretty tight race in the US election, but it looks like a full sweep for Trump. He took the presidency, the Senate, and probably the House of Representatives. As a result, we’ve seen some pretty dramatic moves in asset prices. Small caps, for example, rallied dramatically. This is the Russell 2000 on your screen now; it closed up 8.6% on the week, breaking above the top of its sideways trading range. Other parts of the market also performed well, particularly cyclically sensitive indices. This is the Dow Jones Transports Index, making a new all-time closing high last week, all of which is pricing in the fiscal expansion and pro-growth policies likely under Trump. Bitcoin has also broken out to the upside; last week, it was up 177%, closing at a new high. Trump, of course, has talked about creating a strategic reserve of Bitcoin.
What was interesting about last week, though, was that US Treasuries stopped selling off. They had sold off ahead of the election; bond yields had been rising as part of a classic election trade—a way of positioning for an expected Trump win, with concerns about the inflationary impact of tariffs and a possible loss of fiscal discipline in Congress and the wider fiscal balance. As you can see on your chart, however, yields initially rose sharply on the election result, but 10-year yields actually closed down seven basis points on the week. So, bonds stopped selling off and closed up last week. What does that tell us? Is there a message from the bond market, and will upward momentum in equities persist over the coming days and weeks?
We answer all of that in our daily publication. In it, we make a one-to-two-day trading recommendation, long or short, on US equity futures. That’s available on our website for subscribers, and we also offer a free trial. If you’re interested, click on the link below, enter your name and email address, and we’ll set you up with a free trial of our daily risk appetite publication.
What gives us an edge as we make these calls on markets? Well, it’s indicators like this one you see on your screen now. This is our short-term technical scoring system for the S&P 500. It’s generated timely signals in recent months—you can see it was on “buy” just ahead of the election, and it’s now back on “sell.” Sometimes, when there’s a regime change, sell signals can be early, like the signal we got in June and July. At other times, it’s good at picking the turning points in the index in a timely manner.
So, how are we trading this market? What signals are we getting from other short-term models? Are we in the midst of a regime change, or will the signals be timely in telling us that, in the very near term, equity markets are somewhat “toppy” and vulnerable to the downside? We answer all those questions in our daily publication.
What are we watching this week in terms of macro data and events? There’s plenty going on: tomorrow is the Senior Loan Officer Survey; Wednesday brings the US inflation (CPI) report; Thursday is PPI; and Friday is US retail sales.
That was your morning market hit. Do follow us on YouTube—search under Shortview Trading—and join us on Twitter, LinkedIn, and Facebook. Thanks for listening.
FIG 1: Russell 2000 futures candlestick shown with its 50 & 200 day moving averages
FIG 2: Dow Jones Transportation Average with 50 & 200 day moving average
FIG 3: Bitcoin Price with 50 & 200 day moving averages
FIG 4: US 10-year bond yields shown with key moving averages
FIG 5: Longview S&P500 short term 'technical' scoring system vs. S&P500 futures
