I have been quiet as noted in my past posts as the Central Banks and their member too big to fail banks have taken over this market. Probably more so than at anytime in modern history. Why wouldn’t they since bail out money from tax payers and quantitative easing has given them seemingly an unlimited buying power to prop up equity markets.
The 18000 Level on the Dow suggests that the average technical analyst looking at the charts and the fundamental analyst looking at the lackluster economic data suggests that shorting or selling up her is the right thing to do. If you were greedy and never covered between 15 and 16000 earlier this year then you failed to use your stop orders to protect gains. Sorry to issue a shame on you for succumbing to greed. If you got long then more power to you just make sure you have a stop as usual to protect your gains.
Here is the reality in that the funds and central banks will perform their usual window dressing this month just in front of the July 4th weekend. This coupled with a good supply of stop orders above 18000 indicates the perfect storm for a rally that could push the Dow to 19000 and even challenge 20,000. This could even sucker a lot of bears into going long with the long awaited speculative bid to mark the top. Will this happen? I don’t know but I will look to capture my piece of these moves from time to time as that is the difference between a trader and an investor. We are in the Shemitah and this suggests to me that this might be the long awaited failed pattern that sparks the very best moves. The last time I hinted at failed breakout bear trap was with oil back in the summer of 2013 and we saw a oil crash from over $100 to just under $40 a barrel. Not saying this is the case with equities but I got a good feeling about it and we shall see in the summer if this is it!
A trader risks a portion that is usually no more than 10% of his assets to get a 20% or more return on a trade, while the average Joe and institutional investor will risk an entire portfolio all for the sake of a 10% total return. I will shake my head and leave it at that.
One final note is that I will no longer post my commentary on facebook, twitter, instagram or linkedin and will be making some changes to this site that will limit access to clients and subscribers.
As always make sure you get your piece!