US is going higher - Momentum has taken over

Richard Coppleson

The US is going higher. We cannot ignore what we are seeing: momentum has taken over. Trump’s speech (where all you could hear was clapping & standing ovations all through it) will absolutely kill the bears. They have been talking about this speech being the “trigger”, but it wasn’t and the other day in the US a short basket rallied 3% (Vs mkt +0.1%) which indicated the US shorts have finally begun to panic – after pretty much holding their nerve all through February (where S&P 500 rallied +3.72% its best monthly rise in 11 months)

So we may see a combination of US short covering & US instos continuing to buy + US retail buying + offshore buying (net TIC inflows) AND the one that has been the biggest supporter of US mkt in last 2 years: the US Buybacks (by US companies) that are all now reactivated (with reporting season in US over)…

So just to remind you that the US rallied +3.7% in Feb with all the US buybacks – that have been the biggest buyer of US equities in the last 2 years – “inactive” … So with the US Buybacks now joining back in …well it could easily see another leg up!

So you tell me what is going to see a big US selloff – it needs to be “big factor” – not just a “I hate Trump" reason, or that the US market is “overvalued” because that just doesn’t work.

You have to understand we are now talking about “momentum” and one thing I have seen over the years – you may even be the best trader, fund manager, broker or technical guru in the world – but when momentum is running, the markets don’t care what your charts or numbers tell you in the short term. It can keep going for a lot longer than anyone realises.

The CTA’s (Commodity Trading Funds) who buy the breakouts & the ETF’s don’t look at fundamentals – they just trade the trend & momentum. So it doesn’t mean we won’t get a decent selloff – we all know it will come – but those banking on it in the next month may be in for a rude shock. Still, today was meant to be an “Independence Day” event (think the movie) for the shorts where they caught the alien Trump out, but it seems Trump has not delivered the disaster they have all predicted, they have all wanted, and that they have all positioned for. They are stuffed. He really has thrown a spanner into the works. He was meant to crumble by now and even though he has had a few notable setbacks – they are not in the areas that we all watch and care about – the US economy.

Ok another reason why I see the US moving higher was that when Trump put in his much hated and very controversial … 90 Day “Muslim ban” against 7 countries (that funnily enough had actually been determined by the Obama regime earlier) it was seen universally a pretty shocking event for many Americans (and others across the globe).

That for me was a really defining moment for the “markets”. It was going to hit US tourism, US flights, US relations etc – it was deemed by the ‘media’ as horrific & disgusting – there were multiple “protests.” So that saw the first sign that the selloff was coming - the US market fell for about 2 days by about 1%. BUT then – it did what no one expected - it rallied straight back & as an extra slap in the face – went to a new record high!

That was such a massive sign.

It told us that the momentum for Trump and what he is going to do for the US is so great they will ignore this event. If the US was not going to sell off on this – then it needs something “really BIG” to trigger a big selloff. Ok The nongs out of Europe may give us a trigger – but all those who are looking at Trump and saying he will cause it … well we are still waiting and the US just keeps on going up. All the selloffs are mild and get bought every time.

Tomorrow I’ll highlight why you probably want to stay “long” the Aussie market (and make sure you buy it on the selloffs) over the next 2 months. It is an interesting Aussie market stat you really need to be aware of, that I wanted to mention a month ago but with reporting season I had to can it. But I’ll try and have it ready for tomorrow.

I’ll also put in a really worrying stat (for the bears) that has been triggered and indicates the US will continue its phenomenal run, and be higher in 3 months AND 6mths. It doesn’t get triggered very often, but when it does, it has an extraordinary success rate.

Extract from The Coppo Report. More detail about the report is available here: (VIEW LINK)


About this contributor

Richard Coppleson

Richard Coppleson

Director of Institutional Sales and Trading, Bell Potter

Richard Coppleson is a Director of Institutional Sales and Trading at Bell Potter Securities and authors “The Coppo Report”, a highly regarded market newsletter. He has over 30 years’ experience in financial markets, beginning his career at Ord...

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