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President Trump and Americas Brexit; The Stock Market Crash That Never Was

Stock-Markets / Stock Market Crash Nov 10, 2016 - 04:53 PM GMT

By: Sol_Palha

Stock-Markets

"Come to the edge," He said. They said, "We are afraid. "Come to the edge," He said. They came. He pushed them, and they flew. ~ Guillaume Apollinaire

In early October when the pollsters were all busy proclaiming that Hilary was going to win, we stated in an article titled Mass Psychology states Trump win Equals stock market buying opportunity that from a financial perspective a Trump win would present an excellent opportunity for the astute investor. We had made the same comments before Brexit became a reality, and it has been our theme that as long as the trend is up, all sharp pullbacks should be seen through a bullish lens. In other words the more substantial the deviation, the better the opportunity. Here is a small excerpt from the above-stated article:


Regardless of what you think of Trump, he is having the same effect as Brexit had on the markets but in smaller doses. If he should win the election, then the reaction will be several magnitudes larger. When the poll results came in stating that Hillary fared better in the 1st debates the markets responded positively and recouped their losses; this reinforces our argument of several years that says substantial pullbacks should be viewed as buying opportunities.

From a contrarian angle (and not a political point of view) a Trump win could be construed as a positive development; non-contrarians will demand to know why? Mass Psychology clearly states that the masses are always on the wrong side of the equation. A Trump win will create uncertainty, and the lemmings will flee for the exits; markets will pull back sharply and viola the same old cycle will come into play. The cycle of selling based on fear which equates to opportunity for those who refuse to allow their emotions to do the talking.

It turns out that the naysayers and doctors of doom sang the same old miserable song and instead of walking away with bags of cash, they were once again handed their heads on a platter. The action was fast and furious. The markets crashed, the dollar nose-dived, Gold took off, and oil dropped. It looked like hell was about to be unleashed, and then the markets reversed, and the momentary feeling of satisfaction the naysayers had was shattered. They were speechless as the markets not only recouped their losses but soared upwards; the action continues today; a clear validation of what we have been stating all along, that most of the advice coming from these so-called experts is on par with rubbish. The plot is always the same; scare the hell out of the masses and make it look like the world is going to end. Then trigger a strong reaction, and when the Crowd thinks the bottom is about to fall out, the smart money comes in and say's "thank you lemmings for giving us another free meal."

Take a look at the headlines before Trump was declared the winner

If Trump is elected president, it would be 'exceedingly harmful' to markets

The stock market could crash if Donald Trump is elected president

Economists: A Trump win would tank the markets

President Trump May Be Bad For Markets - Forbes

Mark Cuban Predicts a Stock Market Crash if Trump Wins

When we saw all this hype and nonsense being sold as news, we quickly fired an update to our subscribers stating the following:

This is Pavlovian programming at its best; the signal instead of a bell is a Trump win would be a disaster for the markets; the same signal was used to trigger the sell off after the vote for Brexit came in. It is a brilliant strategy, and it works all the time. Don't fall for this nonsense. We do not know who will win, but what we do know is that the top players are going to do everything in their power to trigger a significant reaction. In the end, all they care about is the reaction, and they will use whatever is necessary to trigger such a response. It is a game to them, to watch the masses stampede or turn euphoric. They trigger a reaction in both directions; hence always trade with a relaxed mind. ~ Market Update Nov 2, 2016

This brilliant and evil strategy has been employed for generations and probably predates the Tulip mania. The idea is to create a feeding frenzy or a stampede; in other words, the crowd always leaps and then looks. The crowd has been on the wrong side of this bull market since its inception, and that is why it is famously referred to as the most hated bull market in history. While the naysayers keep blabbering about how the next correction is going to be the big one; they forget that each pullback leads to a higher low and that when the market does pull back it is always trading above the targets they issued a few months or years ago. How do you think the naysayers from 2011, 2012 or even 2014 are feeling? If they held onto their short positions, they would have bankrupted themselves several times over. Thus it stands to reason that most of these guys are all bark and no bite. In other words, they talk but rarely act for if they did, they would be dead broke by now.

Dow Industrials Daily Chart

Instead of crashing the Dow is on its way to put in a series of new highs.  There is a strong wall of support in the 17900-1800 ranges. Eventually, this support is going to move upwards, and 18200 should become the new floor.   The Dow needs to trade above 18650 on a weekly basis, if it can achieve this, then19K could happen within the next 4-8 weeks.

Conclusion

The argument we laid out in our October article came to pass with almost perfect precision:

Just as Brexit was all bark and no bite; the same phenomenon is likely to play out if Trump wins. All the Naysayers from every crack and crevice will emerge screaming the end of the world and when the world does not end they will be forced to crawl under the rock again. It would be good to keep this saying in mind if Trump wins "dance when the crowd panics and standstill when they jump up with joy.

What we have repeatedly stated for the past several years is playing out to a T; don't listen to the Drs of Doom, they love to sing miserable songs; the problem with misery is that it loves company and stupidity just demands it. Focus on market sentiment and the trend; the crowd was nervous for the past two months even though the markets were still trading relatively close to their highs. No bull market has ever ended when the crowd is anxious; bull markets end on a note of Euphoric and until the crowd turns euphoric corrections should be viewed through a bullish lens. Trump's victory, just like Brexit provided the Astute investor who refused to let his emotions do the talking a brilliant opportunity to purchase high-quality stocks at a discount.

In the future, if you notice experts panicking, while market sentiment is negative, then you know they are full of hot air and the best mode of action is to do the opposite of what they prescribe. Regarding the markets crashing, the Dow is more likely to trade to 20K than it is of crashing. The stronger the deviation, the better the buying opportunity should be your motto going forward.

The next planned disaster is going to come from the Feds make belief attempt to convince the masses that they feel they are ready to embark on series of rate hikes. We all know what happened the last time they made such a bold proclamation. After one miserable rate hike, they backed down and resorted to telling tall tales. This economic recovery is a hoax, and they understand it, and so they are in no rush to destroy the illusion that they so painstakingly created. They might (emphasis on might) raise rates once more in order to have more leg room to manoeuvre before they push rates into negative territory. In the event, the markets do pull back sharply, be prepared to view that future pullback as a buying opportunity

"The privilege of absurdity; to which no living creature is subject, but man only." ~ Thomas Hobbes

by Sol Palha

www.tacticalinvestor.com

Sol Palha is a market analyst and educator who uses Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the right side of the market. He and his partners are on the web at www.tacticalinvestor.com.

© 2016 Copyright Sol Palha- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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