Trading Under Trump: Uncertainty clouds financial markets

February 21st, 2017 by VantagePoint Software

Trading Under Trump

Earnings, the Fed, the fundamentals, and the President. This is what is facing those trading under Trump. Uncertainty is now the buzz word for traders, and how could it not be? A U.S. president can rattle world markets with the stroke of a pen or a misplaced word. The dollar fell against the yen following President Trump’s executive order attempting to place a 90-day travel ban to the U.S. by citizens of some Middle Eastern countries.

The reality of a U.S. president’s influence on world affairs and markets is not new, of course. But, we seemed to have entered unprecedented times. President Donald Trump’s short time in office has shown how unpredictable he can be compared to his predecessors. That volatility in politics easily transfers to volatility in the markets. Making an already difficult practice even harder for those trading under Trump.

This reality is also not new. As far back as the Great Recession, global markets have struggled through periods of uncertainty. The big question is: how do traders deal with an uncertain Presidential “trump card” hanging over the market?

Normally, one looks at all the factors currently affecting the market to arrive at an understanding. We recently discussed how winning more than losing is all about moving the odds in your favor.

So, in this time and place, we have the unknown in President Trump. We also have knowns in earnings and economic fundamentals. Looking at these two factors, one could assess the market as being in a fairly solid place, right?

The “knowns” are positive

Earnings have provided a very positive outlook recently. As of January 27, with 34% of the companies in the S&P 500 reporting actual results for Q4 2016, 65% of S&P 500 companies have beaten the mean EPS estimate and 52% of S&P 500 companies have beaten the mean sales estimate.

Economic fundamentals are also bullish. The January Dallas Fed manufacturing survey jumped to 22.1, beating the 15.0 expected and marking the highest level since early 2010. December’s report was also revised to 17.7 from 15.5. The report had spent most of the last two years providing negative figures.

The government may trump everything

Despite the reality of decent earnings and decent economic fundamentals, the market might well be trumped by Trump. It’s looking more at the President’s influence over the world, particularly as it relates to the Fed.

Who can forget the Fed? This group has created more uncertainty in the market in the last decade than any other entity. Change is coming, eventually. Fiscal policy, trade policy, and regulatory policies are all on the table and up for review in the Trump administration. In addition, we can’t rule out seeing significant changes for the Federal Reserve and how it conducts monetary policy.

Where does all this lead us? Why right back to the future of the market trying to determine how we turn the odds in our favor with all the uncertainty in play. One choice is to sit it out, watch, and wait. But, four years is a long time.

How traders can balance it all together

So, if trading under Trump is unavoidable, an alternative approach could be to become a smarter trader. Watch specific markets carefully and ask yourself a question – Which individual markets could flourish under President Trump?

Use trading software that can spot similarly trending markets and utilize artificial intelligence to identify trends before they take off. VantagePoint does just this. It utilizes artificial intelligence to forecast market movements 1-3 days in advance with up to 86% accuracy.

With an ever-uncertain presidential cloud looming over the markets, the more reliable tools you have in your corner, the better you position yourself to be profitable.

Become a smarter trader with VantagePoint

The best tools make you a better trader. Sign up today to receive a free demonstration of VantagePoint and see how our predictive technology uses artificial intelligence to forecast market movement with up to 86% accuracy.

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Market Risk – Moving the Odds to Your Favor

February 17th, 2017 by VantagePoint Software

Market Risk and Reward

There is an inherent market risk when trading. An obvious statement, we know. But why, then, do so many play the market as if risk does not exist? Why do so many traders lose more then they win and, eventually, lose it all?

The answer is just as obvious. Perhaps it is because many believe market risk can be overcome, when, in reality, it can only be reduced, mitigated, or otherwise tempered.

The market IS risk to varying degrees, nothing more, nothing less. It is people (and people programming computers) making bets. There is only one certainty. The market will go up or the market will go down. You can reduce the probability to an even bet. There is no overcoming market risk – it will either go up or down. Flip a coin.

Every trade has an element of risk, but you can lessen it while increasing your chances of picking which way it will go. If you understand this, you are ahead in the game.

There are those who think that there is no need to lessen your market risk. They believe they “know” which way a given market will go, or they believe someone else “knows” which way it will go and they can listen to that person. We say that blind faith is a coin toss. At best, you will win more than you lose. At worst, you will lose all you have playing with that strategy long enough. It is not even luck – it is the law of probability. It is guessing and putting you at the mercy of inherent market risk.

Try to mitigate your market risk instead. If you do, you can bend the law of probability in your favor. There are three easy steps you can take to start limiting your market risk:

3 Steps to reduce Market Risk

  1. Learn the market you want to trade. Identify past patterns that will repeat over time.  Study them and you will be better served to see repeatable patterns you can act upon.

If you study the market from May 2009 through the summer of 2016 you will see identifiable patterns attached to repeated events. For example, in 2009 there was a repeated event – the potential collapse of the euro. A market pattern developed as that event was repeated ad nauseum in the news. We have a current event that mirrors this in the Fed’s “will they or won’t they” discussion on raising interest rates. Study the movements around this event and you will begin to see a pattern.

  1. Understand the psychology of the market and The Market ‘R Us people making emotional decisions.

The psychology of the market is correlated to the above, but it is less specific and harder to pinpoint. Nevertheless, if you track global events, stay tuned into the global consumer. Understand economic fundamentals and you will soon learn to better “predict” emotional market responses from the greater population of traders. This will allow you to be in a better position to make moves for your own portfolio.

  1. Supply yourself with software that helps you reduce market risk and help you win more often and defy the law of probability.

Understanding that market analysis software is here and ready for you to use it as a solid way to mitigate market risk. The best way to capture these benefits is to find software that works, software that has a track record of helping users determine short-term market movement. VantagePoint uses artificial intelligence to predict market movement 1-3 days in advance with up to 86% accuracy. We eliminate the coin flip approach and help you focus on markets that are more likely to produce winners and reducing market risk and volatility.

If you learn nothing else regarding your trading in 2017, understand that market risk is always present. However, with the right education, market understanding, and analytical tool, you can manipulate it to be more in your favor.

Reduce your market risk with VantagePoint

Make sure you have all the best tools available to you that will reduce your market risk. Sign up today to receive a free demonstration of VantagePoint and see how our predictive technology can help you gain an advantage over the markets and make 2017 your most profitable year yet!

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Big Trends and Big Trades after ‘The Big Game’

February 13th, 2017 by VantagePoint Software

Big Game Big Trades

The financial world is full of big trends and trendy indicators, predictors of future market value. But, one would be hard-pressed to find one as wild as the Super Bowl indicator.

According to the “Super Bowl” indicator, a win by an American Football Conference team, like the New England Patriots, means stocks are more likely to see big bearish trends.  The indicator, which was first introduced in the 1970’s, has an 80% accuracy rate according to Investopedia.

LPL Financial crunched the numbers further and found that in the year an NFC team wins, the average return for the Dow Jones Industrial Average is just under 11%, compared to just a 4.3% average return in the years an AFC team wins.

Theoretically speaking, this is interesting, and it sparks thought about probability, randomness, and cosmic forces beyond our control. But on the practical side, traders should ask the question, “Is this an indicator that I should utilize to capture big trends and utilize to risk your money?”

Putting aside the 80% accuracy rate of the above, the odds are good the market will drop substantially this year. For no other reason than the Schiller P/E ratio for the S&P 500 is extremely high. Shiller P/E at 28.6 is 71.3% higher than the historical mean of 16.7

Factoring in the current U.S. and global economic fundamentals, one does not see the precipitous danger. But, they are also not pointing toward momentous growth, which brings us to the Fed.

Janet Yellen will disclose their thinking next week. It would not be surprising to hear her say (once again) that the Fed is considering raising rates. Why? Perhaps it would be the big trends that led to an escalation in jobs and the slow rise in wages.

Combine an interest rate hike announcement with a market that has ridden big trends to new highs that may be too good to be true, and add the geopolitical wobbliness, and you have the ingredients for a snowballing effect in the market. One thing the market deems “bad” and we see a push of the panic button. Once the stampede starts, the market could easily see big trends to the downside and see a 10-15% fall rather quickly. It is that far out of balance.

While this still falls into the “possible” category, one thing that is fairly certain. According to historical terms, the market is due for a correction. The DJIA has climbed approximately 11% since the election. The “President Donald Trump Rally” looks to be weakening. When you take Trump out of the equation, there is no substantive reason for the recent market run in place since November. Which then leads to every credible market analyst pointing towards any reason it would continue.

The Patriots came away from last weekend’s game as champions as an AFC team. You can decide how much merit you will place in the unrelated “Super Bowl” indicator.

Catch the big trends BEFORE they happen with the help of VantagePoint

If you want to find a more reliable way to analyze the markets, then look no further than VantagePoint Intermarket Software. It utilizes artificial intelligence to forecast market movements 1-3 days in advance with up to 86% accuracy. If you want a specific example, then check out the chart below of the E-mini S&P 500 that demonstrates how accurate VantagePoint can be.

VP blog -Big trends after The Big Game

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