Fade The News & Close Higher
The Biden administration is going tough on China. Expect that to happen in all the political hot beds.
Trump is contemplating ties with Taiwan. A trade that has worked quite well for us.
These two news wires work in lockstep to force China’s hand?
You should only believe it if you see it!
Fade The News
It’s prudent to consider fading the initial news-driven moves until more tangible developments occur. Today’s scenario, with a 1% or more gap down, is relatively uncommon but not rare, happening approximately once a month on average.
Regarding the dynamics of the gap, it’s noteworthy that while it’s rare for the opening price to be the absolute low on 1% gap down days (occurring in only 2.56% of cases), the low is often very close to the open; approximately 25.64% of the time, the low is within 0.3% of the opening price.
When the open is near the low (within 0.3%), there’s a strong tendency (80% of cases) for the market to close higher than the open. This underscores that if the market does not continue sharply lower after the open, it frequently represents a compelling buying opportunity based on historical patterns.
We are in striking range!
As readers know this spec on Taiwan has worked out brilliantly and on the Trump comment part I would brush that off as a ‘I’ll believe it when I see it” sort of thing.
I mentioned to a smart colleague in Australia the idea about being ‘long term right’. Whomever conceptualized global trade to bring liberalization has been long term wrong. All it has done is empower the ruling elite of the regime as in the case of all nation states. Yet, you want to empower the correct friends and allies.
What have the forex reserves of China’s central bank, accumulated through global trade, done? They have simply empowered your biggest headaches today. Trade wars and sanctions, you say? After waiting until China became the world’s second-largest economy?
How did that happen?
Long Term Wrong.
The primary issue is that some nation-states have a foundation of liberty for their citizens, whereas others do not. Having spent time in communist states, you can see that these regimes are interested in the government’s sovereignty in a draconian manner, yet they do not pass on human rights and decencies to their own citizens.
In fact, most of their citizens cannot even grasp what they have never experienced. When these citizens immigrate or travel worldwide, they will gravitate toward social welfare as they may experience ‘Paris Syndrome.’ Paris Syndrome refers to the culture shock that tourists have when visiting Paris for the first time, especially those from the East. Which is linked the heighten stress levels that many Russian’s felt during the fall of the Soviet Union.
Jordan Peterson refers to the serotonin levels that lobsters have in nature, which is analogous to free markets. Yet, those who come from or reside in regimes have never experienced such things due to the collectivist nature of their culture. The collectiveness and groupthink are products of the homogeneous nature of these countries, leading to significant culture shock when entering the global economy, especially socially. This leads to heightened risk levels referenced in ideas like ‘The Great Replacement’ theory.
Best.