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Trading after Trump: part one

Steve Ruffley
The UK’s EU referendum and the US presidential election have shaken up the political and social order this year, and made a mockery of analysts’ predictions. So what is the world of trading like post Brexit and Trump?
Charting has been second nature for me for many years as a trader. I have always looked to the higher timeframes to figure out the absolutes of support and resistance. Then I’ll work my way through every timeframe down to the five-minute chart.
I think, like a lot of short-term traders, we take the longer-term view for granted. In light of the recent ‘shock’ events like Brexit becoming a reality (almost) and the election of Trump over Clinton, I now feel there’s a reason for looking back at the US dollar extremes to see exactly where the dollar may go in the long term.
I have taken some basic M1 Fibonacci retracements and expansions over what I consider to be the last moves leading up to the two main events above. I can’t help but think that these were the last moves of what we consider to be the norm.
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Pre-election the ‘experts’ were quite clear. Global stocks and the US dollar would tank on a Trump win. Some experts were saying the S&P 500 could drop 10%. There was certainly a correction on the result but this was retraced in literally a matter of one trading day. Why was this?

  1. Experts regularly get things wrong
  2. People overestimate how much power the president actually has
  3. Large institutions make money from retail sentiment – i.e. from the people who believe what they hear
  4. Stock markets, due to low interest rates, have taken every opportunity to rally on ANY news

Focus on Nasdaq and S&P

Since 2014 US stock markets have clearly rejected a close to the downside on the higher timeframe charts. Every tail (wick) that you see on the candles below is a rejection of a sell-off and traders buying back up the markets. There has been more uncertainty post credit crunch than there has been in the last 50 years.
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There is no other reason for stock markets to be this high apart from a distinct lack of alternative places for the one-percenters, institutions and individual investors to put money to get any kind of reasonable return.
This says to me that when the correction finally comes it will be quicker and harder than anyone could imagine. Everyone will remember what risky investments these are and want to get out of them as swiftly as possible! There will then be no final dip-buying as the markets will continue to find value much lower down the charts.
I have done many Reuters polls in the past and predicted that in six-to-nine months the market will be significantly lower than where it is now. Recent events have done nothing to shake me in this view.
Continue with part two of ‘Trading after Trump’

Steve Ruffley
Chief Market Strategist, Intertrader
For more information, trading education and offers visit Intertrader
The content of this article is the personal opinion of the author and not Intertrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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