A Lesson of when you are right, but wrong

 My last post asserted SPX hitting 4900, it hit 5120.  This is a prime example when you are right, but yet still wrong.  This is what the market is excellent on doing.  We did get a market decline and rally into the election as I asserted. 

But what I did not get is a decline to the target I thought.  Lesson is always trade out of positions when you are right, and don't wait until perfectly right.

I did close out of short positions, in the case of shorting Stellantis, it all worked out well.  But for SPX, I let quite a bit go back.

Looking ahead, while the market should be topping, I am reserving this from a declaration.  The reason is China is printing printing printing.  With loose money it will flow to whatever it thinks is a good investment.  I expect gold, bitcoin, and potentially the US stock market to benefit.  The reasoning is China's economy is a disaster, I question if the CCP will be in control by 2030.

Worse yet, we will likely get inflation in the USA, and the world, because of the Chinese printing flowing into hard assets.  Also Russia is attacking Ukraine international grain ships that will result in less world wheat.  These two items will force the FED to not cut rates, ensuring our economy doesn't get the support it needs.  I suspect the FED will know this and will ease in "different ways", like its special operations.  The interest rate lever is used to pretend it is the master controller of inflation, and while a component, it is hardly the largest one.

If assets do rise, the US pundits will use this to confirm the US economy is doing great.  Far from it.  The housing market is turning bearish (click).    And I personally know multiple people unemployed, some over a year in IT.   There isn't a crazy amount of layoffs, companies are simply hiring at a minimal level.  This is the first step to having an employment problem as the unemployed accumulate.

Where does that leave us?  With China printing we may get another goose up.  If it does Bitcoin & Gold is a good play, and the market.  Stay into the market going up, but if you get concerned listen to your gut and capture gains.  There is nothing wrong with sitting on a portion of your cash in fixed and sit watching into Q2 next year IMO.

Short to spx 4900

 We didnt reach the low into the election, when things hit below spx 5000 i will cover most things.

So if you are long in the next week or two, be prepared for some pain.  Ill join you as a short term bull soon.

We just experienced a counter rally, going down or up is never in a straight line.

Whats next?

 When the FED started to raise rates in March 2022.  At that time the Fed said it takes time , over 12 months before the effect of raising rates can cool down the economy.  The Fed raised incrementally rates from March 2022 to July 2023.  The overnight rate went from 0.25 to 5.5%

Since July 2023 the stock market has reached new highs and bond rates have actually fallen.  

The stock market had issues at the same time Japan had issues last Friday into this past Monday.
Now the market is calling for the Fed to cut.  Does anyone doubt the fed will cut if unemployment rises or the stock market destabilizes?

While its possible they don't cut, even the Fed set expectations they will in September.  What is the rate we are talking about?  Its the rate the Fed will pay some financial institutions to deposit their cash with the fed at a set annual rate on a nightly basis. 

Notice, this is NOT the 1/2/3/5/7 year, 10 year, 20 year, or 30 year US bond rate.  It is not car loan, credit card, or mortgage rates.    So a rate cut of the fed rate doesn't automatically cut borrowing costs.

It took 2 years from March 2022 first cut to have material inflation decline about March 2024.  Why do people think reducing rates by 0.25 or .5 from 5.5 to 5.0 will positively impact the economy quickly?

It can't because what the Fed rate does is influence financial institutions to seek gains from different financial activity instead of parking cash at the Fed.  When banks and other institutions change their investment strategy it takes TIME.

Therefore it isn't possible for a fed rate cut to 'save the economy'.  There are potential other events that will give a really good boost for a bit even if unemployment continues to rise.  But barring dramatic events, the dice is cast, the market has peaked.

Could we see a new high in the next couple of months, of course.  But when the Fed does cut rates, its them saying "we see the economy has taken a turn for the worse", and their action will start to help the real economy, in a year or two.

Now for other potential bad events, last week the reason the US market tanked was Japan had material challenges in their economy, including their stock market falling over 10% in a day, and the Yen appreciating dramatically.  This hurt US financial institutions using Japan as a "safe place to borrow money cheaply and use it to invest in USA or world".  A shift of rate hikes, Yen appreciation, and Japan market decline basically forced financial institution borrowers  to liquidate assets to have enough cash to cover the shift.

This is NOT the last major event, it is the first.  Think January 2008 when US market dislocated on a Monday.  Its a warning shot.

What to do? Secure assets in financial institutions that explicitly state FDIC insured up to 100K, or buy TLT ETF.  

When the Fed cuts, beware of long duration bonds as I expect markets to have long term rates rise in anticipation this next round of Fed Rate cuts will be followed by even higher hikes to tame inflation again.

If you can remain financially well of, I do expect investments of a lifetime available in 2026-2030 that will be the rocket ride of a lifetime with AI bringing in profits.

Good luck!

The top is in, now what?

 Hello! Its been a while since I posted.   I sold all my crypto a few weeks ago except my core bitcoin.  I lightened up on longs (not that I had much!) a few weeks ago too.

Now the market is correcting.  I will be exiting my shorter term puts between here and S&P 500 between 4,800-5,000.
I really doubt we will see a 2008 crash.  I do think we will see insane swings in the market, with an overall trend down.  The market is opening up insanely down today, and we could get more.

But when the S&P500 is below 5,000 its getting a little over-sold on such a short term.

In the chart below is the SPY, and we will see the 50 day moving average hit at between 4,800-5000 depending on the day in the weeks ahead.

I do expect August as a month to be DOWN, so I am not talking a meaningful bottom here.
My goal will be to roll over puts dated 2025 to 2026 and hold.

Overall, safest is 1-5 year US bonds and/or investments in core companies you think are worth it for 10 years.  I do think the next 5 years will not be great for the stock market, but I do think eventually AI will be explosive.  Its just a little too soon just like 2000 with the internet.

Good luck.

Latest and Greatest

 Been a while!  Watching the index slowly drift higher has been a bit boring. :)

The stock market is holding, but there are so many cracks its hard to understand how it drifts higher.
We have bitcoin breaking down,  skyrocketing household debt, bankruptcies skyrocketing, car repos skyrocketing, new/used car market collapsing, US bond market rallying hardcore today,  CVS/Walgreens/Rite Aids closing ,  Banks failing,  Market Crash signals triggering, Housing prices collapsing in SOME areas of America,  some commodities (like lumber) falling so hard being sold at a loss, unemployment rising, and so much more!

If we see a stock market fall, there is so much leverage that all assets should lose value.  This includes crypto.  I recently sold all my crypto except bitcoin.  My safety position is in cash, shorts, and some outside USA investments (INDA, MSCI).

The only reason I can see America's market continue to levitate is out of all countries, it is still the best bet.  Canada, Europe, China, Russia, and other major economies are facing very strong negative economics.

China isn't dumping US bonds, it is failing as a nation being forced to sell US bonds to try to prop up its currency.  

Such a cheery post!  I been expecting this moment since 2009 to peak between 2020-2024, that I am tired of it and just want the next shoe to drop.

Pay down your debts, stay in a safe job, lower risk investments and buckle in!

I am not sure even the  Donald promising he can fix everything will turn this around.  If AI makes some insane breakthrough it may help the USA remain the best of a debt ridden, demographic disaster situation.

No Flash, Shorts covered

 I covered almost all my shorts Monday, as Friday or Monday did NOT get a meaningful low.
We are in an "A wave" down, following Elliot Wave Theory".  We will get  a B wave up, probably around SPY 5005-5050 range, and then we will get a major wave down bottoming in May.

So enjoy the ride up over the weekish again before the pain train returns.
I am looking for re-entering shorts in the range above.  Good luck!

Flash Crash Ahead

Leading up to April 9th I went heavy short.   With news of explosions of Iran combined with 5 days of market weakness, a flash crash maybe on the table.

If we get an extreme market down, I expect SPY 4900-4800 range to hold.  If correct, the counter rally will be very painful if short.

Its very hard to cover shorts when your finally in the green.   Lessons from the past, nothing goes in a straight line.  I may go long or simply wait to get reshort.

If we break on a closing basis SPY of 4800 its going to get very interesting, and being short would be huge.   But I cant take that chance with such a sudden drop.

Good luck