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The Trade War Stock Market Cycle Explained, With Color Charts and Diagrams

This is a syndicated repost courtesy of Slope of Hope. To view original, click here. Reposted with permission.

It’s only been dead two weeks, but I’m already nostalgic for the Trade War. Oh, did I say dead? I simply meant paused. You know as well as I do that after we once again go through the charade in a few weeks, we’ll be right back to where we were, only worse. I don’t know why they put us through this. Keeping up appearances, I guess.

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Follow the money. Find the profits! 

Let’s look at the three main events since then:

  • In magenta, a couple of weeks ago, was the last hurrah of the nascent trade war. Both sides let their tariffs go up, as promised, and the backbiting was still going on. The market had hoped for some kind of reprieve, but the poor darling would need to wait a few hours to get what it wanted.
  • In green, Trump lied and said that he had spoken to high-level Chinese officials and that they wanted a deal. Perversely, his lie might has well have been the truth, since that’s exactly what transpired later on. Maybe there’s some kind of magic in what the guy makes up.
  • In cyan, where we are at now, we’re just kind of grinding higher, similar to the past eleven years, for no particular reason except that there’s nothing specific to be pushing the market lower, like nuclear conflict.

So as a reminder, this basic cycle is all ye need know:

There are a couple of ETFs which, for me, represent a more abiding truth behind the scenes.

The first is the banks, by way of symbol KBE, which continue to be forming an absolutely sensational top, trade war insanity notwithstanding. The top is not complete, but it is about 85% done, and there isn’t a pixel out of place.

Second is the metals and mining ETF, symbol XME, which encapsulates the still very real global economic cycle. This pattern is more like 95% complete. Of course, neither 85% nor 95% is greater than 100%, so these are both speculative with a dash of hope.

For my own portfolio, I remain relatively light at 39 [short] positions. The notion of just grinding things out for a few more weeks until the next farcical collapse of trade talks is pretty nauseating, but the last time I checked, none of us have control over the market, so, grind we will!

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