There is enormous supply hanging over the market. The attitude of the Fed is changing. It is probably out of fear of being exposed. The appearance is that friends of the Fed are having trouble turning risk free profits. For decades trading has been dominated by extreme short term trading. I am talking about trades that last for seconds and even fractions of a second. In terms of long term holdings, volume has been sparse for decades. The length of the average trade can change to a longer time period. Up to now, very little in the way of long term holdings have hit the market to be sold. Can the friends of the Fed profit if the average trade lasts 5 minutes instead of just a few seconds? I doubt they can. That circumstances may cause a crash. Any serious decline will usher in the manipulators last tool. That will be to use government to pass as much in losses to the public as is possible.
As we move further into the fall, there will be good news in the way of sudden enlightenment announcements. We are in earnings season. Whether or not earnings hit or miss, the numbers will be embellished as much as possible. Over a ten year period, earnings must average out in a way they are honest. In a period of crime infested government, earnings can be just about anything the corporations want them to be for any given quarter. Any miss is much worse than reported. Any beat is not as good as it appears. Earnings beats are reported just like a commercial. Timing is never ignored and all else for effect.
One of two scenarios will play out. The economy actually has been destroyed. It is only a matter of time before GDP growth starts sinking into the red. Earnings will become so poor that embellishing them will no longer be possible. Once the economy folds completely the stock market will be unsavable. Or, enough long term holdings will hit the market that all of the organized support in the world will not be enough to prevent a bear market.
From mid October through year end, I am looking for the market to be in no man’s land. I don’t own a single share of stock. I am still 95% in cash myself. I do have very small positions in a number of bear ETFs. Last weak I added to my FAZ and TZA positions. These are not short term positions. I won’t close them until after the market falls. What if the market doesn’t fall? I will lose. There are no stops. I am taking a clear unhedged risk. I don’t know of a way to work the downside here other than what I am doing. I have only 3x bear ETFs. A few of these kinds of positions can grow by leaps and bounds in a bear market. My rule is never try and make more than a 12% annual return. I learned years ago that my odds of making a 25% annual gain are better when I am actually only trying to make a smaller number.
I don’t make short term trades but do take high risk positions and try to stay fully committed for an entire market move. I will start closing positions when I think the bear market has run its course.
Any short position is going to get squeezed.
As always, the stock market is a combination of stress and uncertainty.
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