What Does George Soros See That’s About to Break The Market?

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Thursday’s news was all about how Geroge Soros, famous for reaping over a billion in profits in 1992 on a bet that “broke” the bank of England by forcing it to devalue the British Pound, has returned to trading and has recently directed a series of bearish bets.

Several weeks ago it was reported by the Wall St Journal that one of his bearish bets included “2.1-million-share “put” option in an exchange-traded fund that tracks the S&P stock index.”

Should you be worried?

For the last few weeks the S&P 500 has been marching higher, with much media fanfare, towards its all-time highs.
The Bears point out that the S&P’s rally has left the other major equity indexes in its wake which is not constructive to a sustained move.
To the contrary, the Bulls have pointed to the strong and strengthening cumulative advance decline already at multi-year highs as evidence that the rally is on solid ground. There’s a lot to be said for that argument for sure.

In this week’s Market Outlook video I’ll review a market relationship that started flagging ‘Risk Off’ recently, and more interestingly it has done so as both of its component have been moving higher (until Friday)!

It would be easy to suggest ‘Risk Off’ is in order with the Brexit vote and Fed meeting looming, however…

Before we get to the video, there were a lot of markets that crossed or created major inflection points this week that you should take note of…

Gold and the gold mining stocks have been hot this year, and this week the mining stocks ETF (GDX) closed over its 200-week moving average for the first time since November of 2012. After 5 weeks of consolidation leading up to this break, it could be a very big inflection point.

In Thursday’s treasury auction the 30-year treasury bonds had the fourth highest level of foreign demand on record. The same measure foreign demand for the 10-year bond set a new record high.

This lead to new closing high breakout the TLT ETF which has been in an extremely tight consolidation pattern over the last 4 months. The weekly close was the highest since February 2015. And the weekly high slightly exceeded the ‘panic’ February 2016 highs.

The China Large Cap ETF (FXI), broke down hard below its 200-day moving average after trying to top the 35 level earlier in the week. The 35 level its plunge in January began, and where its subsequent recovery rally failed in April. Needless to say, 35 is a big level to watch in FXI.

In a move with the biggest volume for an up week since March of 2013, the ETF tracking the agricultural commodities (DBA) extended last week’s impressive weekly breakout over highs not seen since October of 2015!

The big volume in 2014 came after an 18% move off the multi-year lows of the time, and marked beginning of the end of that rally. This week’s high also marks about an 18% move off the recent multi-year lows, and the biggest move up in DBA since that rally.

18% is by no means a ceiling for commodities, but the excessive volume does mean this price level will be very important for months to come.

More interesting in the commodity space is Coffee (JO), which is had the biggest weekly volume since March of 2014 as it is trying to break out of a year-long base. A daily close over 21.50 could be the inflection point.

Finally the S&P 500 short-term volatility index ETF, VXX, which is commonly referred to as a ‘fear gauge’, closed this week over last week’s high. This the first time this has happened in its decline from its February 2016 highs.

With bonds, commodities, and gold all accelerating higher, it seems only natural to expect that stock traders would become a little fearful (even without Brexit looming).

So fearful, in fact, that on Friday, the Bull’s cumulative advance decline line experienced its worst drop since the market lows in February!

Is this the beginning of a summer selloff, or is there still plenty of money around to buy stocks on any dip?

Watch this week’s Market Outlook video, and see how to trade in all these cross currents!

You can find more videos and trading insight like this at: www.marketgauge.com/tutorials/

Comments

GasconyKid says:

When will that old kike drop dead?

annamaria torok says:

hello, awesome educating video! can you send me that link to that video please? thanks : Annamaria

bruceh024 says:

Do you have a You Tube video on how to trade the market based upon the first 30-minute range of the day?

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