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Market Outlook: Ray Dalio expects a paradigm shift

‘’The world has gone mad with so much free money’’
November 6, 2019

In a lengthy LinkedIn post yesterday, hedge-funder extraordinaire, Co-CIO and Co-Chairman of Bridgewater Associates LP Ray Dalio, said he believes the [current] set of circumstances is unsustainable and certainly can no longer be pushed as it has been pushed since 2008. That’s why I believe that the world is approaching a big paradigm shift. The dynamic is that of ‘pushing on a string’, something that’s happened many times before in history. ‘’At the same time as money is essentially free for those who have money and creditworthiness, it is essentially unavailable to those who don’t have money and creditworthiness, which contributes to rising wealth, opportunity and political gaps’’.

Published this morning in Japan, October sentiment surveys were clearly below the 50 mark, denoting shrinking business and confidence. The Jibun services sector reading was 49.7, down from 52.8 in September, while the composite reading was 49.1, the lowest on record for this series with a 3-year history.

DAX 30

Still overbought on a daily basis as we zoom up on the Monday and then do absolutely nothing on Tuesday. The Financial Times reports this morning that German finance minister and SPD leadership hopeful suggested that Berlin should support a common banking deposit insurance scheme.

 

SHORT TERM TRADER: Square.

 

POSITION TAKER:  Square.

FTSE 100

Yesterday’s little doji might signal that we’re stalling for a third time in the 7400-7450 area. Watch for a potential evening star 3-candle combination today, reversing Monday’s rally.

 

SHORT TERM TRADER:   Square.

 

POSITION TAKER:  Square.

S&P 500

Not quite so overbought as we retreat from Monday’s record high, which in turn was based on hopes for moves on the Sino-US trade spat.

 

 

SHORT TERM TRADER: Square.

 

POSITION TAKER:   Square.

BRITISH POUND/US DOLLAR

Still in a potential pennant formation while against the euro the exchange rate again dipped briefly below 86 pence this morning.

 

SHORT TERM TRADER:  Long at 1.2950; stop below 1.2800. Target 1.3150.

 

POSITION TAKER:  Long at 1.2950; stop below 1.2750. Target 1.3350.

EURO/US DOLLAR

The MACD dipped into bearish territory on yesterday’s close as we look at what might be an interim double top (M-shape).

 

SHORT TERM TRADER:  Small long at 1.1150; stop below 1.1065. First target 1.1250.

 

POSITION TAKER:  Square.

GOLD

The commodity channel index has well and truly turned on yesterday’s sell-off. Ironically yesterday the Gold Fields Mineral Services (Refinitiv GFMS) survey was published in which it noted that ’renewed economic concerns and rising geopolitical tensions have driven the value of gold to a 6.5 year high’, helped along by cuts to key interest rates. However, it then goes on to say that retail investment plunged 25 per cent versus Q3 a year ago, and that jewellery manufacturing fell 26 per cent.  

                            

SHORT TERM TRADER:  Short at 1520; stop above 1520. Target 1440.

 

POSITION TAKER:  Short at 1507; stop above 1540. Target 1440.

Nicole Elliott is a long-standing member and Fellow of the Society of Technical Analysts and has taken over the IC’s trading coverage.  She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.