INVESTOR OPTIMISM OVER AMERICAN BUYING BINGE FROM CHINA TEMPERED BY CONCERNS ABOUT MONEY PRINTING

American Buying Binge From China

Please click here for a chart of  S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

• The chart shows that the stock market has been moving up in a well-defined channel.
• The chart shows the stock market is at the top of the channel.
• Stock market bulls need ammunition to break above the channel.
• The ammunition has come in the form of an American buying binge from China.  Does anyone even remember that not long ago President Trump was fighting a trade war with China to reduce the continuous transfer of wealth from the U. S. to China?
• Significant optimism among investors has been created on the news that Chinese exports in August rose 25.6% year on year vs. consensus of 17.1%.  The rise in exports is primarily driven by an American buying binge from China.
• The Chinese stocks are higher on the data.
• Among investors, the optimism created by Chinese data is being tempered by concerns that the European Central Bank (ECB) will roll back its monetary stimulus.  In plain English, the better sense may prevail at ECB and they may reduce money printing.
• The stock market does not like the idea of reduced money printing as it will reduce the air that is being pumped into the stock market by central banks.

Japan Surges

The Japanese market surged 1.83% to add to a prior gain of 2.05% on the news that Prime Minister Suga will not seek re-election.

Momo Crowd And Smart Money In Stocks

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Gold

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For longer-term, please see gold and silver ratings.

Oil

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For longer-term, please see oil ratings.

Markets

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Interest rates are ticking up and bonds are ticking down.

The dollar is stronger.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1811, silver futures are at $24.44, and oil futures are at $68.11.

S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400 and 4318.

DJIA futures are down 11 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short-term bond funds or allocated to short-term tactical trades, and short to medium-term hedges of 🔒, and short term hedges of 🔒. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.