Imagine if the election is overturned and the entire 10% Trump rally evaporates overnight – that would be interesting. Nothing to worry about so far as we've made it to end-of-month window-dressing time and it's very unlikely "THEY" will let the markets drop away from record highs to close out November but December is going to be trickier as we have that Fed meeting on the 14th and this week already we have 7 Fed speakers to pave the way to the anticipated hike:
As you can see, just the Dallas Fed on the calendar this morning but then things heat up quickly as we get our 2nd estimate of 3rd Quarter GDP tomorrow after the hawkish Fed VC, Fisher has his say but Dudley cleans up after the data and then we see how confident the consumers really are. Friday is non-Farm Payroll but first we have to get past the OPEC meeting on Wednesday and there's another part of the recent rally that might reverse hard and fast if no deal is reached.
As you can see from the earnings calendar, we've pretty much run out of interesting companies to watch so the data becomes more important this time of year, until the earnings cycle starts again in January.
That trade allows us to stick with our real short-term plays, which are bearish as we look for a correction and look to lock in the gains we've made in our many long-term positions. To say I am skeptical of this rally would be a gross understatement – incredulous is more the word I'd use. Notice on
"THEY" are simply taking advantage of dumb money, that is flowing back into the markets through ETF flows which buy at the open or close of the day and the rest of the day "THEY" sell off their holdings and then blast the market higher again at the close – constantly jacking up the prices of whatever holdings the smart money still hasn't liquidated.
On the whole though, the "smart money" has gone the opposite way of the "dumb money" post election and, so far, the dumb money is having their way and doing very well but that was also true from late July through mid August this summer, when the smart money pulled out well ahead of the downturn and, on the whole, it wasn't much of a downturn. Of course, LAST summer, the smart money nailed it and got out ahead of the China collapse and none of us who had cash on the side regretted those last two weeks' of gains we "missed".
So, at the risk of sounding like a broken record – I'm still going to urge CASH!!! and CAUTION!!! into the holidays. Sure we can make upside hedges like Friday's DIA spread so we don't miss everything but that's low-cash and leveraged for a reason – we don't really believe in the rally but, if the market is determined to rally, then any idiot can make a fortune using just a little bit of leverage against the index funds – that's they way to play a rally you don't believe in!
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