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| Disclaimer: The profits and performance shown are not typical and you may lose money. From 4/17/24 - 6/19/24 the result for trade alerts issued in real time was a 77% win rate on 234 trade alerts, with an average return of about 2% on the underlying stock including winners and losers with an average hold time of 3 days. When hypothetical options were applied to trade alerts, the average return was 22.3% over a 3-day hold time. Performance is not indicative of future results. Trade at your own risk and never risk more than you can afford to lose. By clicking the link above you agree to periodic updates from ProsperityPub and its partners (privacy policy) |
| Why the Greenback Holds the Key to Understanding Trump’s Tariffs |
| Hi Traders, Investors have recently shown a great deal of enthusiasm about the speed and scope of proposed policies under the new administration, buoyed by a Republican majority in Congress and control of the White House. Yet Monday’s market action offered a stark reminder that implementing sweeping measures can often be more complicated than it appears. The optimism around the U.S. dollar briefly wavered after reports emerged suggesting a narrower approach to tariffs—focusing on goods deemed vital to national or economic security—instead of the universal tariffs once promised. This news initially led to a selloff in the dollar, prompting one of its steepest one-day drops against the euro in months. When the administration issued a denial on social media soon after, the dollar rebounded. Still, the zigzagging price action highlighted just how quickly market sentiment can shift, hinting at a potentially volatile road ahead. In recent weeks, the dollar has marched steadily higher alongside rising Treasury yields. The rally found support in several factors, including the relative strength of the U.S. economy and expectations that supply of Treasury bonds may keep expanding, contributing to concerns about the federal budget deficit. Many on Wall Street have also aligned themselves behind a bullish view on the greenback, as reflected in historically high net-long dollar positions in currency futures. Signs of strain have begun to appear, however. The U.S. Dollar Index recently notched its strongest level in more than two years, and mounting questions around new tariff plans and other trade policies have introduced uncertainty. Some traders caution that rolling out broad tariffs—or any complex piece of legislation—takes more time and political maneuvering than campaign rhetoric might suggest. The drama surrounding the House Speaker’s re-election bid last week, for example, signaled that party unity can be fragile, which may slow or even derail key parts of any policy agenda. Meanwhile, major stock indexes have shown signs of discomfort with the dollar’s surge, as it can weigh on corporate earnings and emerging markets. December concluded on a softer note for equities, prompting worries that a too-strong dollar could be a headwind for a market that has otherwise experienced a long stretch of gains. It’s also worth noting that the incoming administration is unlikely to roll out its entire trade policy in a single sweeping announcement. Multiple executive actions, interspersed with legislative battles in Congress, could produce a steady stream of headlines—each capable of triggering significant market moves. Rapid-fire reports and denials, often anonymously sourced, may further fan the flames of volatility across currencies, stocks, and bonds alike. For now, many traders continue to bet on dollar strength. Yet the recent pullback, followed by a dramatic rebound, serves as a reminder that markets rarely move in a straight line. There are echoes of previous election cycles, where initial enthusiasm led to a quick rally, only to fade as the details of policy implementation began to emerge. If the administration follows through on its more aggressive trade ideas, the greenback might find another leg higher. But should the policy process prove slower or less forceful than expected, there is plenty of room for disappointment. There’s no doubt that the next few months will bring a rush of announcements, negotiations, and potential surprises from Washington. How effectively—and how quickly—new measures are implemented will be a decisive factor in determining whether the dollar continues to power higher, or if the currency might begin a more sustained retreat. Until then, investors are bracing for more twists and turns ahead. - The Team at Altos Trading In the next article, wary market timers, shaken by recent turbulence, may unwittingly provide the fuel stocks need for a fresh rally. |
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Why Hesitant Market Timers Might Fuel a Rebound |
| The current state of market sentiment among short-term stock-market timers offers an intriguing glimpse into the psyche of investors after November’s turbulence. Despite an earlier period of irrational exuberance, timers have significantly reduced their equity exposure, granting the bull market a temporary reprieve—at least from a contrarian perspective. Leading into December, the average recommended equity exposure among market timers reached an unprecedented 92.8%, according to historical sentiment data. This marked the highest level since sentiment tracking began in 2000, signaling to contrarian observers that a pullback was on the horizon. As anticipated, markets experienced a downturn, and sentiment responded sharply. The average exposure has since plummeted to just 29.3%, a remarkable 63-point drop. This sharp reduction in equity exposure is notable because it defies the pattern typically seen at the onset of bear markets. Historically, market timers at the start of prolonged downturns often cling to bullish expectations, unwilling to acknowledge the possibility of a sustained reversal. The current shift toward caution and bearishness, therefore, is a positive sign from a contrarian standpoint. This behavior contrasts starkly with what happened during the internet bubble’s peak in March 2000. After an initial 10% decline from the market’s high, short-term market timers became more bullish, only to see the bubble burst catastrophically. Today’s hesitance to remain optimistic after a downturn could indicate a healthier dynamic in the short term. Bonds Show Promise Amid Broader Market Sentiment Market sentiment extends beyond equities, offering further insights into other asset classes. Sentiment indexes tracking Nasdaq-focused stock timers, gold, and bonds reveal an intriguing divergence. Of particular interest is the bond sentiment index, which has plummeted to levels comparable to the peak exuberance seen in equity sentiment just a month ago. This extreme caution toward bonds may signal an overly pessimistic outlook. From a contrarian perspective, such low sentiment suggests that bonds could outperform near-term expectations, defying Wall Street’s generally subdued forecasts. While equity timers continue to recalibrate their outlooks, it’s worth keeping a close eye on these shifting dynamics. Sentiment remains one of the most valuable tools for gauging market behavior, offering clues about potential turning points across asset classes. As the market continues to evolve, contrarians may find reasons for optimism—albeit cautious and measured—amid today’s volatility. |
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| Disclaimer: The Altos Trading Alert Newsletter is published as an information service for subscribers, and it includes opinions as to buying, selling and holding various stocks and other securities. However, the publishers of the Altos Trading Alert Newsletter are not brokers or investment advisers, and do not provide investment advice or recommendations directed to any particular subscriber or in view of the particular circumstances of any particular person. Altos Trading, including its owner, does not participate in any trades issued through the alert services. Subscribers to Altos Trading or any other persons who buy, sell or hold securities should do so with caution and consult with a broker or investment adviser before doing so. Trading securities and options involves risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade securities and options, and must meet suitability requirements. Past results are not necessarily indicative of future performance. Performance figures are based on actual recommendations. Due to the time critical nature of trading, brokerage fees, and the activity of other subscribers, there is no guarantee that subscribers will mirror the performance of the service. Performance numbers shown are based on trades subscribers could enter based on the trade alerts. Altos Trading, LLC assumes no responsibility for any losses incurred by any individual or entity as a result of trade alerts or strategies taught through courses or coaching services. 7154 W State Street
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