Politics Without Precedent

At ANG Traders, we normally try to keep the political content to a minimum, but we have reached a point where we no-longer can restrain ourselves. We must say that the American education system has a lot to answer for when fully one-third of Americans lack sufficient critical-thinking skills to detect the face-slapping fact that If the Donald hadn’t had a rich daddy, he would be spending his days as a used car salesman under waving decorative flags.

An even more painful realisation is the exposing of, again, fully one-third of Americans (we hope they are the same third) as xenophobic, racist, and misogynistic. We find this both frightening and depressing. The American education system has a lot to answer for.

All this, is not to say that Hillary is an outstanding candidate, she assuredly is not; had she been running against a candidate that didn’t have a severe personality disorder, she likely wouldn’t have had a chance. The market, reassuringly, continues to price in a win for Hillary, despite the “evil-emailer movement”, which evolved from Donald’s earlier “birther movement”, continuing to distract the public with irrelevant accusations. The market managed to shrug-off most of the damage, by the end of the day on Friday.

We rely on historical market patterns to calculate the probability of future market events, but we have been unable to find a historical synonym to what is happening today. We have no choice, but to continue relying on the belief that Human emotions do not change over time and that our sentiment indicators continue to reflect the underlying reality in the market. We are betting that Humans will continue to behave like they always have; like a bunch of emotional monkeys.


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The short-term sentiment patterns that we are following, continue to unfold. Low bull sentiment occurring after a rally and when the SPX is at a relatively high level, correlates with impending market weakness (green circles on chart below) .

This correlation produces longer-term sentiment patterns which are still in effect (chart below).

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The SPX continues to demonstrate a positive correlation with the Pring Inflation index (chart below).

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The only bullish indication we see is the Rydex bear/bull ratio which continues to point the market toward a rally (chart below).

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On Friday, gold and gold stocks were moving down, as we had expected, until the news hit that the FBI was investigating more Clinton emails. Gold and gold stocks rallied on the news for about one hour, during which the retail gold-bugs loaded-up on gold. Once the gold-bugs were finished buying, the professional traders took profits and brought the gold price back close to where it was before the news.

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Overall, gold has bounced up to $1280 resistance and we expect it to continue working its way down to $1200 (chart below).

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