Volatility has certainly picked up, creating more opportunities for investors. On November 4, readers were advised to cover 12 1/2% of the short position, resulting in a profit in excess of 4%. This alert was triggered by a short-term buy signal based on pre-election negative sentiment indicators. Since the election, the market has bounced substantially, engendering a new sense of optimism in the marketplace. Recent sentiment numbers show a large spike in optimism. However, this excessive, violent and sudden optimistic swing should be viewed with caution. The market is now overbought in the short and long terms.
Many global interest rates are used to assess the direction of short-term interest rates (for instance T-bill rates, Fed fund rates and even the 10-year Treasury yield). However, we believe the most important interest indicator gauge right now is three-year LIBOR rate, because LIBOR rates tend to closely track Fed fund rates. However,…