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Goldman Sach’s Top 6 Trading Ideas for 2017 + 3 Trade Ideas of My Own!

As I was preparing for the year ahead, I came across this interesting read in the news. Goldman Sachs had just released their top trade recommendations for the year 2017 as a response to a Trump win in the recent U.S elections, amid economic and political uncertainty. These trade ideas were birthed by recent developments in the major economies of the world, and I couldn’t help but recall what Goldman said in 2015, about 2016 being a year of economic gloom. Already, the S&P 500 is hovering at 2,200, up 9.4% for the year 2016.

goldmanImage Source: Bloomberg

“Goldman Sachs’ top strategists predict that stocks will once again disappoint next year. Goldman predicts the S&P 500 will go nowhere in the coming year, ending 2016 at 2,100.” – Fortune.com (November 2015)

Analysts can be wrong, and to be fair, very few expected the S&P to hit all-time highs. As traders know, we don’t expect to be right all the time. There were a number of great opportunities for bears to take profits even in the uptrend market we’ve seen this year. With information from 29 Nov 2016, the S&P 500 was about 100 points above what Goldman predicted for the year, and the graphic (a weekly chart of the S&P 500 index) below gives a clearer picture of this.

goldman-predictionImage Source: MetaTrader 4

I often read opinions of the market not because I need them, but because as a trader it is essential that I keep up to date with what the institutions are thinking. In the latest recommendation, Goldman recommended the following: (quoting the titles directly from Bloomberg’s report)

  1. “U.S. Dollar the Winner From Developed Market Populism”
  2. “Bet on Trump Getting More Upset About China’s currency”
  3. “Keep Calm and Carry the Right Emerging Market Currencies”
  4. “Long Emerging Market Stocks with ‘Insulated Exposure to Growth’ “
  5. “The Reflation Trade Has Legs”
  6. “Long European Dividend Growth”

What in the world do these ideas mean? Just in case it sounds too confusing, I have translated them into simpler bite-sized titbits below.

confusedImage Source: freepik.com

HERE ARE THE SIX TRADE IDEAS:

Trade Idea #1: Short the EUR/USD pair and GBP/USD pair

currencyImage Source: CleanFinancial.com

Goldman expects the US Dollar to rise. As such, shorting currency pairs with ‘USD’ at the back would express this adequately. Trump’s economic policies are expected to be growth-inducing. Stuff like great quantities of fiscal stimulus, protectionism (both in terms of foreign products and foreign people, haha) to boost local growth and employment, and not to forget, rising interest rates; all these increase demand for the US Dollar.

Uncertainty in Britain (because of the details of the Brexit process) and “populism in Europe” (another Donald Trump situation in Europe?) should “weigh on the pound and the euro”. Essentially, they mean the currency of Britain and Europe should be less in demand as compared to the US Dollar.

Trade Idea #2: Go long on the USD/CNY pair

globalImage Source: Globalriskinsights.com

China’s current currency regime is a fixed yuan with respect to a basket of other currencies, therefore a strong US Dollar should push the Yuan higher. Kind of the same logic as idea No.1.


Trade Idea #3:
Go long on emerging market currencies, like MXN, NOK and others

Following the U.S. election, a number of the higher-yielding currencies experienced a mini-meltdown. Nothing new; they’re just recommending taking a reversal trade on oversold currencies.

mxnnokHuge run-ups in USDMXN and USDNOK show major selling in emerging market currencies.
Image Source: MetaTrader 4


Trade Idea #4:
 Buy emerging market equities that don’t benefit much from U.S and China’s growth

Quite a straight-forward idea; countries like Brazil and India will probably continue to grow despite America and China’s antics, and they should be seen as safer places to park money.


Trade Idea #5:
 Bet on rising inflation by buying 10-year U.S. TIPS

Growth in the U.S should lead to re-introduction of inflationary pressures. Along with bullish expectations for energy prices, Goldman expects 2017 to be a year of inflation.


Trade Idea #6: 
Bet on rising dividends by buying Euro Stoxx 50 2018 dividend futures

Yes, you can not only bet on inflation, but on dividends rising. The Eurex actually offers futures contracts for people who want to bet on dividends rising. I’ve heard of other strange futures contracts like cheese, freight, gold volatility index futures, crack spread futures, but this is interesting.

In 2011, Goldman Sachs expressed their prediction for 2012 as “Overall, though, a volatile market, with little overall change, what we describe as ‘fat and flat,’ would be our central view for the year as a whole, but with things getting worse before they get better…”

In 2012, Goldman Sachs predicted the end of the gold bull market and an improved economy (as well as a bullish stock market), and accurately so. Well done for them. (check out the bullish move in 2013 in the chart below)

spAnd so Goldman Sachs predicted the bull market of 2013.
Image Source: MetaTrader 4

From an outsider’s point of view, it seems that Goldman could just be very, very good at predicting things. However, a quick google search will reveal that they are also incorrect in their calls at times, and this should humble any aspiring trader.

In my opinion, the end of the gold market of 2013 was a result of simple price action analysis. Statistically speaking, or using probabilistic reasoning, a sideways market was a reasonable prediction.

In the image below of the gold weekly chart, we can clearly see the multiple trend line breaks that 2012 was characterized by, and the subsequent sideways-bearish move in 2013. We are still in a sideways market on a multi-year basis.

bullGold experienced a bearish move after multiple trendline breaks in 2012.
Chart Source: MetaTrader 4

With all this in mind, what then should we be looking out for in 2017? Although trading themes are being churned out by analysts year after year, using simple price action strategies, the average investor can identify a few potential trade strategies to take for the upcoming year.

THREE SIMPLE IDEAS OF MY OWN:

1. U.S. STOCKS – CONTINUE BUYING ON DIPS

As most traders know, when the market is trending strongly, ride the trend until it proves itself otherwise. This simple strategy is what I applied on the USDJPY right after the recent U.S election results. In the chart below, we see 12 distinct buying opportunities spread out over 14 days. By simply riding on a strong uptrend, it is actually not too hard to watch your profits snowball – provided you have the patience to hold your trades.

usdjpy12 buying opportunities spotted on the USDJPY 1-hour chart
Chart Source: MetaTrader 4

On the S&P500, a strong trending bull market means buying on any dips is a profitable strategy. It doesn’t take a lot of analysis to realize that this is a high probability trade. Of course, as with any other trade, stop losses will take me out of the market immediately if the trend quickly reverses.

“What about a Santa Claus Rally?”

Graphic shows average monthly change in Standard and Poor’sChart Source: Stock Trader’s Almanac 2010

The statistics for Nov to Feb rallies in past years is pretty positive. Starting from 1950 to 2009, the average November-January rally brings in 4.2% returns. It seems buying on any dip from now till about February next year would be a statistically sound trade.

 

2. FADING OVERLY DEVALUED CURRENCIES

For those who aren’t aware, fading simply means taking the trade in the opposite direction of the trend. This seems like a contradiction to my previous trade idea, but it isn’t; in the context of clearly trending markets, going with the trend is the reasonable thing to do, and the trend sometimes lasts for much longer than one would expect. However, when the move is very, very quick, huge, and climactic, it has to end quickly as well.

In order to see the speed of the collapse, you can obtain intra-day charts of the USDCHF on that fateful day.

chfThe famous Swiss Franc crash and rebound of 2015.
Chart Source: MetaTrader 4

Returning to the devalued emerging market currencies, it is reasonable to assume that huge moves will come to an end, and a reversal trade (with a clear signal!) would make for a profitable bet.

 

3. PRUDENT ENTRIES IN OIL AND GOLD (WAIT!)

On the commodities front, the markets seem more sideways than trending. In such a case, it is prudent to look to trade near the extremes for a reasonable risk-reward ratio. Here’s the crude oil daily chart, and I’ve drawn two simple lines to aid in visual analysis:

crudeIn the case of crude oil, buying near the channel line makes sense.
Chart Source: MetaTrader 4

It’s hard to say where the crude oil could go. Although Goldman predicts it would pick up modestly, I’d rather wait for a strong bullish setup before making an entry. It’s perfectly fine if you are not comfortable entering the market; wait for clarity. It always comes.

For Gold, I had to zoom out a lot more on the charts to make sense of what was happening. Sure, it’s seen a huge dip recently (as a result of the U.S election), but I’ll wait for more confirmation before deciding what to do.

goldGold price chart from Sep 2013 to Nov 2016
Chart Source: MetaTrader 4

By the time the news reports a huge move in commodities, it’s too late. It’s much more logical to look at the charts yourself, and decide on an entry before the move happens; that’s the only way you can profit from the market.

WHAT ABOUT THE SINGAPORE STOCK MARKET?

The STI has been sideways for a couple of months now. This makes for very difficult trading, as the market changes direction many times within the month. I recommend staying clear of trading it until a clear trend develops.

stiChart Source: Tradingeconomics.com

For dollar-cost-averaging investors, this year would have been a very frustrating one indeed.

Using a simple excel sheet, I calculated what returns the investor would obtain if he had bought in any of the first six months this year, and held it to the current price (in November): (all prices used are closing prices for each month)

returnsBuyers of the Straits Times Index from March 2016 onwards would have seen measly returns.
Source: Yahoo finance (calculations done by author)

If you had bought the STI at the end of January, good for you; you would be up 11% on your investment. If you had bought at end February, you would be up 8.6% on your investment. However, the market situation isn’t good news for those who bought in the subsequent months, as shown in the diagram above. For those of you who need candlestick charts, here you go:

stiThe STI has been in a tight sideways market since July 2016; others may say it started in April 2016.
Chart Source: ChartNexus

WHERE DO WE GO FROM HERE?

I’ve shown that the Singapore market has been a tough one to trade in recent months, while opportunities were plentiful in the forex markets. Also, commodities have not asserted themselves in either direction yet, and the effect of a Trump presidency is still weighing heavily investors’ minds.

With that said, as I’ve always asserted, trading decisions are made using simple price action principles and must make logical sense. Goldman Sachs could be correct or wrong, and I could be right or wrong; what matters in the end is that the winning trades make more than the losing trades.

As Soros famously quips:

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros

 

RESEARCH SOURCES & REFERENCES

https://www.bloomberg.com/news/articles/2016-11-18/here-are-goldman-sachs-top-trade-ideas-for-2017
http://www.zerohedge.com/news/2016-11-17/goldman-reveals-its-top-trade-recommendations-2017
fortune.com/2015/11/25/goldman-sachs-stock-market-predictions-2016/
http://www.cleanfinancial.com/financial_images/trading/eur_usd_spread_betting_250x250.png
https://www.theguardian.com/business/2011/dec/22/goldman-sachs-forecast-for-2012
http://www.businessinsider.com/goldmans-2013-forecast-2012-12?IR=T&r=US&IR=T
http://www.investopedia.com/news/goldman-sachs-how-trade-first-year-trump-gs/

The Synapse Program Q3 2016 Intake – An Extremely Enthusiastic Bunch of Traders!

Last weekend, we conducted another full-house training for the “Synapse Program”, where I spent 2 full days imparting professional trading skills to both new and experienced traders.

It was an awesome weekend, and I look forward to seeing my next millionaire student! 😀

photo-18-9-16-2-06-02-pm
TRAINING FEEDBACK & TESTIMONIALS:

“Wonderful course, highly recommended. This course gave me the confidence to read the market, and enter it knowing I’ll have higher odds of success!” – Jay Tan

“Trading is a lonely journey so having a network of support is a plus. The course is very technically based. This course has definitely help me to consolidate all the book knowledge I have gathered. Spencer has put in a very good effort to condense all the practical techniques as a starting point for a beginner like myself.” – Sean Tong

“Never know that trading can be so simple. Every time we learned something new, we tend to add on to our existing strategy thinking that it can better enhance our trading edge, but instead it confuses us more. Spencer breaks a whole new level of trading by introducing just these 4 types of setup that can easily give you the edge where others don’t have. Any one of the strategy with risk management in place, increase the probability of being consistently profitable in the long run. Whether you are a very experienced trader or just started out, you will find his course refreshing & enlightening. Support from Terence is outstanding as well. Making sure we are all well-prepared before the lesson. Technical problem such as setting up of account and program are well solved by the friendly and patient Terence.” – Willie

“Very interesting and informative training program. Spencer is very knowledgeable and able to coach very well. Students are taught to interpret chart instead of trading system.” – Teoh Chee Haw

“Amazing! Would recommend to everyone who is interested.” – Sarah Tan

“Spencer & Terence make a good team!! Simple & easy to understand!” – Rich, NUS

“Helpful for a beginner who has no knowledge of technical trading. Spencer & Terence are helpful with all the questions raised. Appreciate it!” – Jessica

Gave me more confidence in reading charts and making sense of the charts.” – Jenny

“Synapse manages to give us some simple clear guidance based on Spencer’s trading experience.” – Bernard Lim

The only course you need to attend to be pro trader!!!” – Wong Jun Jek

“The lesson was interesting and fulfilling. I have learnt many new concepts that I am unaware of.” – Tan Kang Rui

“Only attended day 2 (yet to attend day 1) but lessons are quite well-structured, ideas are well conveyed. Very interesting and easy to understand. And it is true that mentality is important, even for long-term traders.” – Lee Yong Kiat, GF

“An all-rounder course which touches on all aspects of trading.” – Tan Tze Yong

“The approaches are simple to follow through.” – Lindy, MPA

“Synapse Trading provides actionable knowledge that I can use to make more informed trades.” – Alvin Poh

“Spencer is getting better in his coaching & helpful & so is Terence – very competent & helpful. Spencer is continuously improving. Spencer training style improved another level higher. He is clear on his setups & hit charts base on 20EMA – very clean charts. Simplicity. Way to understand how to trade. I have made losses due to non-consistency & non-discipline in money management, but now it is different. I am making profits (decent) & my losses are way lesser.” – Eve Choy

“This course gives me a stronger fundamental base, technical proficiency, & more importantly the confidence. Would definitely recommend this course to others.” – James, JLT

“This course is an eye-opener for me as I did not think it was possible to trade without indicators before. Great course – it helped to simplify trading. Thank you!” – Raphael Chew

“This course provides a very holistic approach to trading. Teaches practical things like chart reading, psychology of traders and money management when comes to trading.” – Mingyao

“Risk-management is well-elaborated on.” – Sean Tan

“Spencer is patient and willing to share his strategy and knowledge without holding anything back.” – Alina

Very clear and structured explanation. Learnt a lot from actual chart reading.” – Cai Yitian, NUS

“The course suits beginners to more advance traders, explaining the basics to the simple set ups. Increases confidence to trade live!” – Jonathan Lim

 

NEXT INTAKE RESERVATIONS:

The registration for the next intake (Q4 2016) has opened, and you can reserve early to avoid disappointment.
Check availability: http://synapsetrading.com/the-synapse-program/

See you soon! 😀

More Results & Positive Reviews for our “Trading Foundation Workshop” – Last Run is Next Week!

Thank you everyone for attending my “Trading Foundation Workshop” last night, and I was surprised to see such a large crowd despite the recent Zika outbreak. ✌️ I had a great time conducting this 3-hour 5-part training, and imparting all the essential skills for new traders and investors to get started in the financial markets. 😄

I was also glad to have time to log in to my live trading accounts to show my current trades, and make some new trades along the way. I believe that real trading is still the best way to learn. 💰

I will be conducting one last session next week on 07 September 2016 (Wednesday), and I think there are still a handful of seats left, so do grab yours before they are all sold out! 👍

Check availability: http://synapsetrading.com/trading-foundation-workshop/

 

A photo posted by Spencer Li (@iamrecneps) on

 

HERE ARE SOME SNIPPETS OF THE FEEDBACK WE RECEIVED:

“The explanation is very clear, professional, and Spencer’s communication skill is two-thumbs up!” – Indra, China Construction Realty Pte Ltd

“Clearly delivered, learned a lot in this short 3 hours. Good for beginner.” – Ng Zi Kai

Very simple yet concise trading foundation course that beginner traders should attend before they start their trading journey.” – Adrian

Great for a starter learning the fundamentals of trading.” – Nora

Good foundation program. Should include more examples.” – Jason

“Good job on social trading service!” – Tan Wei Peng

“Good!” – Poh Yong Seng

“Nice pace, quiz was entertaining!” – Jonas Lim

“Good beginner’s course!” – Huiwen, BFG

“He is a nice person.” – Yip Kok Wei, NTUC Income

“Good presentation, we were having fun. Thank you!” – Cecil

Simple and easy to understand for beginners with little background.” – Kaishu

Great detail of information on the foundation of trading, good for beginners.” – Jackson Sin

Read more results & feedback:  http://synapsetrading.com/testimonials/#workshop

RESERVE YOUR SEATS NOW!

Once again, seats are filling up fast, so sign up via the link below, or contact us at 97724280 for reservations or enquiries.

Check availability: http://synapsetrading.com/trading-foundation-workshop/

Thanks, and see you there! 😄

Another Full-house Session for the “Trading Foundation Workshop”!

Thank you everyone for all the great feedback for this 3-hour “Trading Foundation Workshop” that I created to help new traders and investors get started in the markets! 💰💰💰 We just concluded a session last Wednesday, and we will be having our second last session next Wednesday on 31 August 2016.

Check availability: http://synapsetrading.com/trading-foundation-workshop/

 

A photo posted by Spencer Li (@iamrecneps) on

 

HERE ARE SOME SNIPPETS OF THE FEEDBACK WE RECEIVED:

“I find Spencer is very humble and sincere in sharing his knowledge & skills. He is so young but so wise and wants to make a positive difference in people’s lives!” – Diana Ang

Timely organized. Will recommend this to others.” – Jason

“Feels that the method is very simple and trusty for profit.” – Ming Yao

“Thanks for sharing. Will recommend this to others.” – Tien Long

“I learn something new that can incorporate into my trading skill.” – Chong Yang

“Will recommend this to others. Provides good fundamentals. Useful sharing.” – Raymond & Lindy

“I will recommend this program to others.” – Sean

“Heard of this workshop during an event, will definitely recommend to others now that I have attended.” – Ng C.P.

“Good teacher. Complexity simplified into an easily digestible format. Thanks and see you soon during your quarterly course.” – James, JLT

Note: The original handwritten copies of these reviews can be found here, together with thousands of other reviews, feedback, testimonials and results:  http://synapsetrading.com/testimonials/

RESERVE YOUR SEATS NOW!

Once again, seats are filling up fast, so sign up via the link below, or contact us at 97724280 for reservations or enquiries.

Check availability: http://synapsetrading.com/trading-foundation-workshop/

Thanks, and see you there! 😄

“Trading Foundation Workshop” Raving Reviews + Weekly Trading Results!

Thank you for another more-than-full house turnout for the 2nd run of the “Trading Foundation Workshop“! 💰 It was so full that some people decided to sit next to the pantry to enjoy the free flow of drinks. 😝

In light of such strong demand, we will be holding a 3rd run next week, so if anyone is keen to get started on trading or investing, do reserve your seats early before it gets all snapped up!
Check availability: http://synapsetrading.com/trading-foundation-workshop/

A photo posted by Spencer Li (@iamrecneps) on

 

RAVING REVIEWS FROM 2ND BATCH OF ATTENDEES

“I’ve learnt more than what was taught in financial trading modules in school.” – Samantha, Sapphire Swimming

“Very structured and systematic in teaching. To share more about exit strategies.”

“Very informative and good content. You’re very knowledgeable & experienced. Have a strong passion for trading and the talent in it. Thank you!”

“Quiz was good for attendees to check & reinforce learning points. Foundation workshop was informative enough to impart core knowledge to start trading, basically the core things one needs to focus on.” – Keiji

“Synapse Trading is a genuine educational portal to learn trading from.” – Vin, Boudroom

“The lesson has well captured & retained my attention. Good lesson duration, strategic break timing, loved the notes – it’s a good takeaway.” – Gideon, Crossroad Cycling

Live example trading in SG Market & also see the chart. Analyse 1 SG stock using 4 types of markets & chart trends. Good trainer.” – Wina

Well-prepared presentation material, fun quizzes.” – Richard, SMU

“Content make a lot of trading sense

“The game was fun, was a good introduction for newbies.” – Jenny Khor

“Good technique and method.” – Nelson

“Pretty good speaker. In-depth knowledge on subject discussed.” – Deston Wong, GSK

“Spencer is sincere and clear in his presentation” – Anthony Chan

“Mr. Spencer’s explanation is simplified and easy to understand.” – Hiro, Self-employed

“Very good, learnt a lot about charts.” – Teo Rong Chang

Note: The original handwritten copies of these reviews can be found here, together with thousands of other reviews, feedback, testimonials and results:  http://synapsetrading.com/testimonials/

 

RESERVE YOUR SEAT NOW!

It was no surprise that almost 100% of all attendees said that they would strongly recommend this value-for-money 3 hour intensive training workshop to all their friends and family, especially those who are keen to get started in their trading or investing journey.

Once again, for those who are keen to see why this new workshop has been generating such good reviews, do reserve your seat early to avoid disappointment!
Check availability: http://synapsetrading.com/trading-foundation-workshop/

See you there! 😀