INVESTMENT EDGE
I know I spend way too much time on market research, living every peak and valley and have come to realize the hard way it is a distraction for the things that matter most in life. There has to be balance but finding it can be a struggle for me. As such sometimes I find it good to put it in to perspective and this chart helps me do that. Maybe it can help you - - -
“The 7 cardinal rules in life”
My latest video recapping notable activity in last month's markets is posted at the link below.
The summer grind continues. Still waiting for the impetus to push US stocks out of their longstanding trading range. European and Japanese equities are in serious need of a lifeline.
What I am not writing about
What I am writing about …
While ever so slight, the US dollar index closed just below critical prior swing low support level a week ago and then immediately reversed higher closing back into the channel on Friday. While volume is not available as this is not a tradeable index, using the tradeable proxy (UUP) the reversal occurred on almost 2x the volume.
Bear Trap Definition - A bear trap occurs when shorts take on a position when an investment is breaking down, only to have it reverse and shoot higher. This counter move produces a trap and often leads to sharp rallies.
With this weeks close back into the consolidation channel and combined with a higher close next week, this latest move could be a classic example of a bear trap. If so, I would expect we see a sharp rally in the coming weeks carrying the potential for the index to break out above the most recent 100-101 swing high.
Why do Bear Traps produce sharp rallies? - The first wave of buying will occur when the most recent broken support level is exceeded, due to the number of shorter term traders who have their stops slightly above the most recent swing high. The second wave of buying comes into play once the stronger realize that it is not just a dead cat bounce, but that the move has much bigger potential. This will produce the second bounce, which will often precede the short-term top in the counter move.
If all this talk about bear traps sounds vaguely familiar, it should. I wrote about another potential bear trap in the mining stocks back in February. Since that bear trap, the GDX has rallied almost 100%. Now, I am not saying the dollar will rally 100%, as that is all but impossible, but if this does turn out to be a bear trap the implications are enormous. A strong dollar can push bond prices higher (yields lower), make the recent rally in commodities, precious metals, emerging markets and large cap US stocks (with large foreign sales) a thing of the past as these typically move inversely to the dollar. Sure, money can be made by being long the dollar but it will pale in comparison to those who short those falling inversely correlated investments.
There are no guarantees, but if the dollar breaks higher, this is setting up to one be the best money making opportunities this year. Stay tuned as the next few weeks is going to get really interesting.
A fascinating chart I saw regarding what happens on average every minute on the internet for the sites with greatest activity . I can honestly say I am active in 3 of them daily and only 2 others on a weekly basis. What about you?
How bad is the tax burden in America? According to the Tax Foundation, people will spend more on state, municipal, and federal taxes than the annual financial burdens of food, clothing, and housing combined, according to its data.
The calculation is based on the date of Tax Freedom Day, the point at which Americans have gone enough days to pay their annual taxes, beginning from the first day of the year. This year, that date will be April 24. It is worth noting that U.S. tax payers are better off than those in several other countries.
The organization’s researchers explain:
· This year, Tax Freedom Day falls on April 24, or 114 days into the year (excluding Leap Day).
· Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of almost $5.0 trillion, or 31 percent of the nation’s income.
· Tax Freedom Day is one day earlier than last year, due to slightly lower federal tax collections as a proportion of the economy.
· Americans will collectively spend more on taxes in 2016 than they will on food, clothing, and housing combined.
· If you include annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur 16 days later, on May 10.
· Tax Freedom Day is a significant date for taxpayers and lawmakers because it represents how long Americans as a whole have to work in order to pay the nation’s tax burden.
