http://themacrotourist.com/images/2017/05/MacronMay0817.png

Today’s post will be short and sweet. As the polls predicted, Macron ended up destroying Le Pen in this weekend’s French election. But, much to the surprise of all the Euro bulls, both the Eurostoxx and Euro currency sold off on the announcement.

http://themacrotourist.com/images/2017/05/EuroStoxxMay0817.png

This was a classic example of buy-the-rumour-sell-the-news. University professors should take this past week’s trading and immortalize it in their lesson plans.

But today’s reaction is a gift. Over the past week, there has been a monster buyer of European risk assets. I don’t know if it was a Central Bank (SNB - Swiss National Bank?), a large retirement fund (GPIF - Government Pension Investment Fund - Japan?), or some other whale of an account. Of course it wasn’t driven solely by one buyer, and I am sure there was a host of different players, but there was at least one large account obscenely pushing European stocks upwards.

Today’s decline is most likely the result of that account having chosen to stand down on the day after the election. With that buyer missing, the market is in the process of shaking out the weak longs, but make no mistake - that buyer will be back.

This decline is a great opportunity to get long Eurostoxx.

And whatever you do, be careful shorting any stocks right now.

Have a look at the Nikkei. Gapping up and breaking out:

http://themacrotourist.com/images/2017/05/NKYMay0817.png

And it’s not confined to the two countries with the most aggressive Central Bankers (Europe and Japan), the MSCI World Stock Index is running higher:

http://themacrotourist.com/images/2017/05/MSCIMay0817.png

Even the S&P 500, with the world’s most hawkish Central Bank, is pushing up against resistance.

http://themacrotourist.com/images/2017/05/SPXMay0817.png

There is an old trader saying that there is no such thing as a triple top. The reasoning being that the more a security pushes up against resistance, the more likely that the buyers are the stronger force, and that eventually it will break out higher.

Some stock market bears might take this morning’s Eurostoxx market action to proclaim that the top is in. Of course, a trader should never say never, but I don’t think that’s the correct analysis.

Today’s reaction is most likely nothing more than a short term pause. And in fact, weakness should not be sold, but bought - especially in the EuroStoxx.

Thanks for reading,
Kevin Muir
the MacroTourist