Global Trading Volume is Declining: Time To Worry
Let’s look at the data, according to the chart below, global trading volume is declining but does that mean its time to head for the hills and panic. At the Tactical Investor, we view any potential disaster as an opportunity in the making. However, let’s continue looking at the data
image courtesy of https://www.wto.org/
The volume of global trade has declined since 2018; in fact, It has declined by roughly 5.5% to be precise. So, is that cause for concern. If you focus on what the experts and mass media have to say, they would both have you believe that the sky is falling, but the stock market does not seem to be buying this narrative.
One of the reasons for this decline is all but obvious; its due to Trump’s trade war with China and the second reason is the growing awareness among the citizens of sovereign nations that globalization is not as great as it was made out to be. The Brexit vote is a clear confirmation of this trend; citizens are demanding control over their borders.
The NY Times Seems To Think Its Time To Worry
A global recession remains unlikely, even as growth slows, most economists say. But the dangers are clearly mounting, threatening to spread from the factory floor to households in many major economies.
The latest sign arrived Tuesday morning, as the World Trade Organization slashed its forecast for trade growth for this year and next.
World trade in merchandise is now expected to expand by only 1.2 per cent during 2019, in what would be the weakest year since 2009, when it plunged by nearly 13 per cent in the midst of the worst global financial crisis since the Great Depression. Only six months ago, the organization was forecasting more than double that pace of growth, a 2.6 per cent expansion in merchandise trade. NY Times
Opportunities To benefit from the decline in Global Trading
Every disruptive event creates opportunities; once only has to know when to look for them. One can only spot new emerging opportunities if one is calm and does not follow the gloom and doom scenarios the mass media loves to come out with. In fact, if one looks at history one can see how the mass media went out of their way to stampede the crowd and make the situation worse. Some recent examples that come to mind are, the dot.com crash, the housing bubble, president Trumps election victory in 2015 and the list goes on.
The trend is up and market sentiment does not support a crash
Let’s look at what we said to our premium subscribers not too long ago regarding the turmoil in the markets
There is a strong layer of resistance in the 26,900 to 27000 ranges, and that goes back to the beginning of 2018. Only a monthly close above 27,200 could potentially overrule a quick fast downward move. A monthly close above 27,200 would lower the odds of a strong pullback, and a monthly close above 27,450 should pave the way for a blistering strike of the 29K ranges. Market Update Oct 30, 2019
While the Dow has not closed above 27,200 on a monthly basis it has broken out to new highs, and that lowers the odds of it dropping to the 24,500 ranges significantly. While we stated that this is an outlook we would have favoured, we did not put all our eggs in one basket by going into cash or shorting the markets. If the Dow pulled back strongly it would have made for a lovely buying opportunity, the trend as we alluded was still firmly positive. Shorting a market when the trend is up, is a recipe for disaster. Market Update Nov 10, 2019
The current market action validates what we have been stating for a while now, that if one is going to rely only on technical or fundamental analysis, then the outcome is going to be far from optimal. What worked before 2008 in most cases no longer works today. We threw 90% of our tools out and replaced them with new tools, and we placed more emphasis on mass psychology.
Our primary goal is to identify the main trend, and after that, we look for additional opportunities. Hence new subscribers should understand that while we are looking for a pullback that could range from mild to wild, our focus is always on the long term trend. As it stands, the trend is still positive (up), and hence all pullbacks have to be viewed through a bullish lens.
Stock Market Ignores Impeachment and trends higher
US stocks have soared after the House voted to impeach Donald Trump, in spite of the president’s warnings of a market crash should he be censured.
The S&P 500 was up nearly 7 per cent compared to when Nancy Pelosi first announced the impeachment inquiry in September, and all signs point towards stocks headed higher on Thursday, according to CNBC.
So far, investors and markets have seemingly ignored the political firestorm that has consumed Mr Trump’s presidency and Washington, rallying higher and higher in spite of the grave accusations facing the American commander-in-chief.
The strength of the markets shows that the impeachment of Mr Trump may, economically, end up looking more like the event surrounding Bill Clinton’s impeachment in the 1990s, when the stock market continued to climb in spite of the sordid details that emerged surrounding the president’s affair and subsequent lies about that affair. Full Story
If Impeaching Trump has had no effect on the Markets, it is very unlikely that a decline in global trading volume is going to have any significant effect, especially when one considers the data below.
Global trading is declining But Sentiment Supports higher prices
Investors are from bullish and until they embrace this market with gusto, every strong pullback should be viewed through a bullish lens.
One could have written a small novel 3-5 years ago on why this market should have crashed, but that novel while written as a work of non-fiction would fall under the category of fiction today. 90% or more of the tools, indicators, or whatever one employed before 2008, will never work again. This is the main reason, so many experts have gotten this market wrong. We don’t care what calls they made or how wonderful they were before 2008; those tools are dead. The main force driving this market despite all the lies pushed out there is “hot money”.
Once you understand that, and the fact that the masses still have faith in these so-called experts better known as modern snake oil salesman one can understand why the crowd has refused to embrace this bull market. Frankly, we are delighted that they have refused to jump in, for its 3X easier to make money in a bull market then it is in a bear market. We feel quite disturbed when people start to agree with us, so the fact that many individuals disagree with our assessment is music to our ears. We hear the same rubbish that was mouthed in 2015 and 2016 being pushed as sage advice today; it did not work then and it will not work today.
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