Let’s talk about the Path Into Depression 2017/2018.
One theory – admittedly a bit conspiratorial – is that some market big wigs got an advance on the “Illary” news that broke last weekend.
As a result – holds the theory – a very few key Big Guns sold at the top – which is why the market declined like mad on Friday.
But there wasn’t much follow-through after the opening Monday. Instead we had a rally.
Classicists of Elliott Wave theory might make Monday the Wave 2 bounce. Which means there should be a Wave 3 larger down move as the week wears on. With Dow futures down about 100 points early on, it looks like an interesting bet – and yes, Ures truly is still short.
The reason is simple enough and I’ll use the S&P 500 levels to walk you through it.
The recent high was 2,186.48. The closing low was 2,127.81 Friday. Our Peoplenomics.com subscribers, playing along with their copy of our “brainamp.xlsx” spreadsheet can look at where Wave II (Monday’s bounce) should have taken us: 2,164.07. The tape showed 2,163.30 Monday as a high so our “brainamp”” was off less than a point.
That’s looking backwards. What stretches before us as a “possible” is that Wave III will get organized today. If/when it does, the high case is 2,076, the low case 2,061 and change.
This ought to be followed by a Wave 4 bounce. High 2,127.70, low 2,116.47.
Finally (around election time?) we get a final (for this wave) wash-out the best of which is 2,058 and the worst of which is 2,021.65. I favor the latter number.
So this gets us into the election.
But you see, there is a bigger problem ahead.
What is all this decline (the one toward election, short of Hillary “going Lazarus” and rising from the bed and looking full of vim and vigor) is really just a Wave I of a larger degree?
Unfortunately, the long wave economics of the outlook hold this miserable possibility, so we can peer into the future a bit further.
Plugging the 2,186.48 high in, and looking at the Wave 1 down of larger degree as ending around 2,021.54, we can see how the rally in the next year (to about mid March) would bounce tyo 2,123.47 for that II of a larger degree.
Wave III (the sell in May and go away 2017-style) drops to a low around 1,834.43. This would be followed by a summer rally in 2017 but the fall wash-out could be as low as 1,722.78.
Or, because we have seen previous support and resistance nearby, why not call it 1,740 on the S&P?
And finally, yet another larger degree? Well, now we’re looking into the depths of the Greater Depression in 2018-2019 with the S&P down to 932’ish, or about half what it is today.
You can see why I didn’t bail out of my short position at the Monday lows…I think there is more downside to come.
Following a simple buy&hold approach to this kind of wave action has the potential to make some really good money. On Friday, my portfolio was up more than 6% – for the day. However, with the rally on Monday, I gave half of that back, but I’m a patient fellow.
Tomorrow’s Peoplenomics report will update the Aggregate Oscillator which is extremely useful in times like these because there’s no one system of trading that is 100% reliable. They all have flaws, so you have to trade “preponderance of evidence” – or pay a professional a huge slice of your pie. I’m not inclined to share that way.
So around here, we await the decline, which could pick up steam a bit, then we will trade out and re-enter for the next wobble-which-way. It doesn’t matter to us whether the market goes up or down, we can make just as much money one direction or t’other. The trick is being nimble and agnostic. We don’t fall in love with positions, we don’t believe any of the press reports on much of anything, and the odds are already in the 40% range that we will be in recession in Q4 or Q1 at latest based on factors which, again, we’ll cover in Peoplenomics tomorrow.
DISCLAIMER: None of this is trading advice.
What you do with your money is your business, not mine. I’m just telling you my thinking on markets and how my trades are doing (which usually isn’t bad, but we do get things wrong here and there…).
On the other hand, I have learned a few things about gambling in my casino adventures, not the least of which is money management. (The MBA is less useful, lol…) Just like a casino bet, you have your lines in the sand beyond which you don’t give more money to the House, and the same thing holds for markets. Tight stops in case you’re wrong, but let the winners ride with some guidance from projections and real-time data.
Unlike a trip to Reno, Vegas, any of the fine Indian Casinos (one of my favorites is Twin Arrows and the other is Mazatzal, both in Arizona) this is a game that can be played at home or work, at whatever speed you want: Leisurely buy and hold (within limits of the waves) or frenetic in and out day trading.
This is a lot of work though and you don’t make appreciably more money. I lost my Pattern Day Trader designation because the additional effort didn’t gain me anything.
If you don’t know what a PDT is, the SEC rule is explained this way:
FINRA rules define a “pattern day trader” as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period. This rule represents a minimum requirement, and some broker-dealers use a slightly broader definition in determining whether a customer qualifies as a “pattern day trader.” Customers should contact their brokerage firms to determine whether their trading activities will cause them to be designated as pattern day traders.
A broker-dealer may also designate a customer as a “pattern day trader” if it “knows or has a reasonable basis to believe” that a customer will engage in pattern day trading. For example, if a customer’s broker-dealer provided day trading training to such customer before opening the account, the broker-dealer could designate that customer as a “pattern day trader.”
Under FINRA rules, customers who are deemed “pattern day traders” must have at least $25,000 in their accounts and can only trade in margin accounts. For more information on pattern day traders and related FINRA margin rules, please read the SEC staff’s investor bulletin “Margin Rules for Day Trading.”
If you even THINK you’re going to day trade (at this level) you need to go read up on IRS wash-sale rules and use competent software to run the Wash Sales rules against your book (of trades).
As a practical matter, my average trade period is probably running one trade per month, maybe two. Far from the Wash Sale rules because I make it a point never to trade the same security in a 90-day period so we never get into things like settlement dates and such.
My suggestion? Keep an eye on the things that are really easy to measure and track. Retirement accounts where you can flip between cash, bonds, stocks, and such give you a lot of power and very little overhead. Just read the news and try to out-guess the Fed.
Speaking of which, when they meet this month, I don’t expect them to raise, but if Hill is down for the count, no telling what they will do.
As my pal Robin Landry says, we’re in a period which is not so much about making “a return ON” your money, but a “return OF your money.”
There’s a time to be an aggressive investor and then there’s time to live by “He who trades ands runs away, lives to trade another day…”
Like this one.
Reading the News to Make Money?
Why do people read the news?
After being in “the game” for 32-years (13 in the MSM and 19 on the web) there are still two competing thoughts:
One is people go news or events to see heroics or horror…like going to stock car races to see the thrilling crash or football to see if anyone blows out a knee (or fails to stand for the anthem and instead kneels).
[By the way, I’m insulted when someone doesn’t stand for our National Anthem…kneeling is not an acceptable spin. I have started a personal boycott of the NFL until they come to their senses and return to being a professional sports organization instead of a political action league that has pounced on guilt-marketing and the myth of social justice. — Look: 99% of social justice come from hard work and brains, sorry. Not pop sociology movements, and tenured leftists. FMTT.]
The other reason – and the one that makes the most logical sense is to a) stay alive and b) make money.
With this filter on, the passing headlines of this morning are vastly simplified:
Meantime, in the Land of Denial
And through it all, what the right calls the Clinton News Network is still trying to tie the GOP to the Klan because racism is one of the few cards left to play while waiting for Lazarette to rise….
As Agitprop 401 advisor, I give that a D-. A snooze through used news.
Problem is that America’s minorities are figuring out 50+ years after the Great Society that what the US approach to poverty did was bust up families and substitute welfare dependency for genuine equality – a crooked deal for every minority out there.
Quick: Look surprised.
The good news is the Clintons do believe in borders after a fashion: Stone Walling, isn’t it?
Oh well, nothing we can do about it individually. So instead, let’s sit back with futures down almost 150 and make us some more money while this pig is still flying, shall we?