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Hi Everyone,
SPX 1500!!
The only thing we have heard from any financial news media or blog, is how bullish this market is (and it is) don't fight the fed and when will the spx reach 1500? The way this market has been rolling, it is hard to go against it. But is NOW the time to jump on the long side or is it safer to start taking the other side of the trade?
We have gone over all of the long term timing charts in the monthly newsletter, which has some eye opening information that investors/traders must see for the sake of your portfolio. That special $39.95 offer, which includes 30 days of our premium service, ends Sunday. But even with everything that says we should pull back, the indexes have ignored and gone in one direction-UP!
Is it safe to short?
So is taking the other side of the long trade safe? I have reasons to believe it is almost as safe as falling out of bed. Let me explain-The vix is at the bottom of the bolling band here. Last time we saw this, equity markets actually paused and went down. We're back down there now, which means if the vix breaks the bollinger band, it will set up another equity sell signal. See the chart below for the last times we were down here.
Don't fight the Fed
The primary reason everyone is so bullish on the stock market, has nothing to do with the economy or growth. It is because the central banks are flooding the markets with liquidity, which is bringing up all assets. It is hard to fight that, but is there any time to fight the institution with unlimited money supply? I believe there is and I also believe this is where you can hit the creature from the east-where he expected it least right now. Have I lost my mind? That happened a long time ago, but let me explain what I mean.
Yes, the central banks have been very easy with the money supply, but something is happening that may have them sucking some of that money back in-AND SOON!! Yes, Ben and all of the central bankers are happy that the Dow is above 13K and they will take credit for that with high fives being thrown out everywhere. But what they have tried before and that failed-and are TRYING again and ALREADY getting push back, is NOT take credit for sending oil over $109, which is where it is as I type this letter.
Last time oil was at $115, Ben said the inflation was transitory and they weren't the reason for it. That went over like a balloon full of nails. The public-congress and just about every blog out there, gave specific charts and reasons the fed was the sole reason oil was at $115 last year. He was stuttering during each congressional hearing and interview he had, trying to explain his "transitory" inflation measures. It wasn't until he took his foot off the gas peddle and the dollar rose and oil went down-until everyone stopped giving him grief. But to his defense, inflation was actually not as bad as some thought-when looking at it through their glasses.
What if EVERYBODY has it all wrong-then what?
So the markets have been on a complete don't look any other way but up mood and that has been since Ben came out with "we are going to keep rates low until late 2014. But yet one of the Fed governors was on cnbc saying, that is projected and nobody knows what will happen by the time 2014 comes around. That is interesting and pretty important-as it is telling us, the Fed is running blind right now-as is EVERY other Central bank. They have NEVER been here before, so how can they possibly know where they are going? They don't and this is a day to day experiment as they cross their fingers things don't get out of control.
But what IF they start to see things getting a little heated? Everybody and their grandmother is buying anything that moves because of the feds and central banks easy money policy. Remember, this is a day to day experiment for every Central bank. They know what they want, but they have NO idea what happens on the way to their wish list. So my question is WHAT IF something changes in the eyes of the Central banks and has them sucking that liquidity back in-overnight?
Everyone is all in this market with the belief that the central banks will not take back the liquidity they have handed out until late 2014. If for some reason-maybe oil at $110 as I type, up $1 in the last 30 minutes, these central banks have to remove this liquidity? How do all leave the market at once-if all are already in? Are you starting to see the danger that lurks in the horizon? The Fed was very transparent about their inflation numbers when they said interest rates will be low until late 2014. The latest inflation numbers, core reading of 2.3% is above the Fed’s 2% comfort zone. So now we have core above the Fed comfort 2% level and oil at $110. Do you think there is NO chance of the fed putting the breaks on here?
Here is a chart of WTIC and the spx. It shows what has happened to the spx each time WTIC has gotten to the levels. Is shorting now safer than falling out of bed? You look for yourself and come to your own conclusion as to whether you should be buying-selling or shorting this market.
Conclusion:
Yes, this market is strong and I may be dead wrong on my thinking and it will not be the first nor the last time. The market is always right when taking a position. But sometimes greed blinds what is right in front of traders eyes. They choose to ignore the signals because there is a belief that the Fed and Central banks ONLY care about the stock market.
That may be true and that is where I will be proven dead wrong with my belief. I do not think that is the case at all and the Fed is looking at all of their data AND OIL at all times. If oil gets out of control and runs higher, the economy freezes and the stock market will naturally roll over. If they decide to do something about these creeping higher inflation numbers and try to stop the run away train in oil prices, they will need to take back some of this liquidity that has been handed out-and that will bring down the stock market.
On top of this information, there are a numbers of charts inside the monthly newsletter that supports this theory of lower prices are in the not so distant future. But the bulls will not die easily and sometimes it is best to just let them trample each other before jumping short. But one way or another, they always end up laying dead in the street when we get this type of "herd" mentality. I do not think this time will be different.
A freebie hedge trade I would consider, but NOT recommending-as this is for informational purposes only-would be:
Buy 1 OIH April 45 call option contract
Buy 1 SPY April 136 put option contract
If I am wrong and the fed does nothing about oil, you will make money on the call end of the OIH trade. If I am correct and the Fed takes back some of the liquidity they have pushed out into the market, the OIH call option trade would end up worthless, but the SPY put option should more than make up for the OIH loss. But there is a win win trade that could play out as well. OIH continues higher and the SPY drops because of the effects higher oil/gas will have on the economy. Good luck and I hope this helped put things into perspective. G-
Hi Everyone,
SPX 1500!!
The only thing we have heard from any financial news media or blog, is how bullish this market is (and it is) don't fight the fed and when will the spx reach 1500? The way this market has been rolling, it is hard to go against it. But is NOW the time to jump on the long side or is it safer to start taking the other side of the trade?
We have gone over all of the long term timing charts in the monthly newsletter, which has some eye opening information that investors/traders must see for the sake of your portfolio. That special $39.95 offer, which includes 30 days of our premium service, ends Sunday. But even with everything that says we should pull back, the indexes have ignored and gone in one direction-UP!
Is it safe to short?
So is taking the other side of the long trade safe? I have reasons to believe it is almost as safe as falling out of bed. Let me explain-The vix is at the bottom of the bolling band here. Last time we saw this, equity markets actually paused and went down. We're back down there now, which means if the vix breaks the bollinger band, it will set up another equity sell signal. See the chart below for the last times we were down here.
Don't fight the Fed
The primary reason everyone is so bullish on the stock market, has nothing to do with the economy or growth. It is because the central banks are flooding the markets with liquidity, which is bringing up all assets. It is hard to fight that, but is there any time to fight the institution with unlimited money supply? I believe there is and I also believe this is where you can hit the creature from the east-where he expected it least right now. Have I lost my mind? That happened a long time ago, but let me explain what I mean.
Yes, the central banks have been very easy with the money supply, but something is happening that may have them sucking some of that money back in-AND SOON!! Yes, Ben and all of the central bankers are happy that the Dow is above 13K and they will take credit for that with high fives being thrown out everywhere. But what they have tried before and that failed-and are TRYING again and ALREADY getting push back, is NOT take credit for sending oil over $109, which is where it is as I type this letter.
Last time oil was at $115, Ben said the inflation was transitory and they weren't the reason for it. That went over like a balloon full of nails. The public-congress and just about every blog out there, gave specific charts and reasons the fed was the sole reason oil was at $115 last year. He was stuttering during each congressional hearing and interview he had, trying to explain his "transitory" inflation measures. It wasn't until he took his foot off the gas peddle and the dollar rose and oil went down-until everyone stopped giving him grief. But to his defense, inflation was actually not as bad as some thought-when looking at it through their glasses.
What if EVERYBODY has it all wrong-then what?
So the markets have been on a complete don't look any other way but up mood and that has been since Ben came out with "we are going to keep rates low until late 2014. But yet one of the Fed governors was on cnbc saying, that is projected and nobody knows what will happen by the time 2014 comes around. That is interesting and pretty important-as it is telling us, the Fed is running blind right now-as is EVERY other Central bank. They have NEVER been here before, so how can they possibly know where they are going? They don't and this is a day to day experiment as they cross their fingers things don't get out of control.
But what IF they start to see things getting a little heated? Everybody and their grandmother is buying anything that moves because of the feds and central banks easy money policy. Remember, this is a day to day experiment for every Central bank. They know what they want, but they have NO idea what happens on the way to their wish list. So my question is WHAT IF something changes in the eyes of the Central banks and has them sucking that liquidity back in-overnight?
Everyone is all in this market with the belief that the central banks will not take back the liquidity they have handed out until late 2014. If for some reason-maybe oil at $110 as I type, up $1 in the last 30 minutes, these central banks have to remove this liquidity? How do all leave the market at once-if all are already in? Are you starting to see the danger that lurks in the horizon? The Fed was very transparent about their inflation numbers when they said interest rates will be low until late 2014. The latest inflation numbers, core reading of 2.3% is above the Fed’s 2% comfort zone. So now we have core above the Fed comfort 2% level and oil at $110. Do you think there is NO chance of the fed putting the breaks on here?
Here is a chart of WTIC and the spx. It shows what has happened to the spx each time WTIC has gotten to the levels. Is shorting now safer than falling out of bed? You look for yourself and come to your own conclusion as to whether you should be buying-selling or shorting this market.
Conclusion:
Yes, this market is strong and I may be dead wrong on my thinking and it will not be the first nor the last time. The market is always right when taking a position. But sometimes greed blinds what is right in front of traders eyes. They choose to ignore the signals because there is a belief that the Fed and Central banks ONLY care about the stock market.
That may be true and that is where I will be proven dead wrong with my belief. I do not think that is the case at all and the Fed is looking at all of their data AND OIL at all times. If oil gets out of control and runs higher, the economy freezes and the stock market will naturally roll over. If they decide to do something about these creeping higher inflation numbers and try to stop the run away train in oil prices, they will need to take back some of this liquidity that has been handed out-and that will bring down the stock market.
On top of this information, there are a numbers of charts inside the monthly newsletter that supports this theory of lower prices are in the not so distant future. But the bulls will not die easily and sometimes it is best to just let them trample each other before jumping short. But one way or another, they always end up laying dead in the street when we get this type of "herd" mentality. I do not think this time will be different.
A freebie hedge trade I would consider, but NOT recommending-as this is for informational purposes only-would be:
Buy 1 OIH April 45 call option contract
Buy 1 SPY April 136 put option contract
If I am wrong and the fed does nothing about oil, you will make money on the call end of the OIH trade. If I am correct and the Fed takes back some of the liquidity they have pushed out into the market, the OIH call option trade would end up worthless, but the SPY put option should more than make up for the OIH loss. But there is a win win trade that could play out as well. OIH continues higher and the SPY drops because of the effects higher oil/gas will have on the economy. Good luck and I hope this helped put things into perspective. G-
