Romulus Report: Making money from the meddlers

MARKET Watch

It is human nature to meddle. People want to help, but most of the time the situation would be better off left alone.

Some issues are black and white. For example, communism is bad. There isn’t a single circumstance that negates this truth — a truth that eventually finds its way into the international markets.

The Soviet Union collapsed because it went bankrupt. FXI, the exchange-traded fund that tracks the Chinese stock market, is down 12% today, closing in on the lowest point it hit in late 2008. FXI is off 62% from the 2021 highs and 70% from the all-time high set in 2007.

The average Chinese citizen is going to experience a lower quality of life from now on. Expect the Chinese government to start meddling in their stock market in ways they’ve never done before. Xi and his corrupt cronies won’t be able to stop themselves.

A few weeks ago, the Japanese Yen dropped to a 32-year low against the Dollar. For a currency to show that level of weakness is never good. The Japanese central bank knows this. So, they have been intervening in the currency markets, trying to prop up the Yen.

Western European countries recently instituted price controls on natural gas. I guess they forgot what happened to Richard Nixon after his disastrous price control calamity in 1972.

These interventions, interferences and meddling policies will not work in the long-term. At best, they will be band-aides and temporary solutions to structural problems underpinning the global financial system. The challenge for investors and traders, however, is trying to maintain a growing portfolio when surrounded by meddlers, interventionists, and even Commies.

I focus on analytical methods that help to ferret out the timing of interventions and meddling actions. Extremely overbought and oversold conditions typically spark a government official to open their mouth or take action. This often leads to a countertrend move that we play in both directions.

Grow Wealth, Not Risk. Trade alongside a 27 year hedge fund veteran

Another benefit for us is that due to the unyielding nature of human nature, our edge should remain forever.

U.S. markets got a taste of the meddling behavior on Friday when the San Francisco Federal Reserve president, Mary Daly, started yapping about not taking rates too much higher than current levels. Stocks are rallying on those remarks. I suspect yields will cool off a bit in the near-term, as well.

If the Fed follows through on Daly's foolish comments the rally will not survive more than a few months, as inflation will keep hanging around. Easy enough for us: oversold, overbought.

The stock market is approaching the typically bullish time of year. November and December tend to produce strong positive returns and there are several short-term indicators supporting this seasonal tendency.

There is a big challenge for the snorting bull, however. The major trend remains down. High quality indicators, such as the advance decline line, set new bear market lows on Friday, October 14th, which can come back and haunt traders long after Halloween fades away.

The solution to this conflict is a focus on swing trading and shorter time frame plays, sometimes lasting no more than overnight. I alert Club Romulus members to these in my Acta and Aquilas trading portfolio, which combined are up over 16% this year—outperforming the S&P 500 by over 35%.

The highest probability outcome is that the October 13th lows get taken out within the next six months, but a rally above 4,000 on the S&P 500 is a real possibility.

Remember:

Wealth, like Rome, cannot be built in a day. But, like Rome, it can be lost in a day. Watch for future announcements from Romulus about profitable market moves, important indicators, and major market swings. For trading education, mentoring, or to beat the markets with Romulus’ trading group, contact romulusteaches@yahoo.com. About the author: In his real-life existence, Romulus started on Wall Street in 1994 and traded for a hedge fund for 13 years. Since 1994, he has called every major market top ahead of time and profited from them, including the break of the Dot-com bubble in 2000, the market crashes of 2008 and 2009, and the Covid crash of 2020. Since 2020 he has been working with investors and traders to actively manage their portfolios by growing wealth, not risk, as a teacher and mentor working with Backpack Trader, a stock trading educational company.