The latest tumble has left the Wall Street in a sour mood and this could further stretch into New Year, said Paul Ciana, the technical strategist of Bank of America. He has got some great ideas for taking advantage of the fearful tone of the market heading into 2019.
LONG THE U.S. DOLLAR, SHORT THE S&P 500
Paul Ciana said,
Going back long term, the dollar versus the S&P as a ratio has a few significant bottoms that end up leading to a period where the dollar severely outperformed the S&P 500.
Back in 2000, the ratio found a bottom before the equities started tumbling and the dollar went soaring up. The years 2008 and 2014-15 saw a similar setup and now it’s time for another one. At such times, dollar is seen outperforming, whereas the S&P 500 will under perform. So all you got to do is buy dollar and sell stocks.
GO LONG CRUDE OIL
Crude oil is the best oversold bounce trade heading into the next year and this is one of the reasons why it is singled out. The prices of crude oil have reverted all the way down to the moving average of 200 week like several markets’ take of 2018’s position liquidation trends.
Crude oil has jumped around 5% last week, it still remains down 21% over the past few months. Its relative strength index also fell below 15 during mid November.
SELL THE 10 YEAR AT 2.80%
The bond market rally has suppressed the yield, but the trend is expected to be reversed soon. With the rise in bond prices, there is a fall in yields.
The main question is if this rally is over yet and the yields may find some support at the rising trend line of about 2.75 – 2.80 and if that area holds. Only in this case, there is a chance that the bond market will sell off and the U.S. Treasury may rise.
Source: CNBC and The Conservative Investor Daily
