Those of you who follow me for a long time know that I was waiting for downtrend in gold market, when all were aggressively buying it, I was waiting for downtrend in oil, when all were aggressively buying it. And now again I wait for downtrend in US stock market, when all are aggressively buying it. Again those of you, who follow me for a long time, know that I started buying US stocks and US indeces after we got results of presidential elections (as I told it was great opportunity to buy cheap assets and derivatives), I was holding my position till now and reinvested my profits, but I am getting out. To be honest my expectations from these trade were much smaller than profits we got. o, I can only congratulate my clients!!!
Now it’s not an uptrend any more, it’s the way to hell and result will be worse than in 2008.
There are few main fundamental reasons for it:
– Market is overvalued. Companies don’t produce more products and don’t sell more products than it was last year. I am talking about average statistics. Let’s have look what we have – stock prices are reaching the sky, but earnings remain on the same level, that mean ROI is sharply going down. You are right, it’s bubble!
– US indices doesn’t reflect economy and stock market. They are guided by few main stocks. It always happens before crisis.
– Changes in monetary policy. After crisis in 2008 Central banks kept low interest rates to boost stock market. You know that all main central banks (specially Fed) are hiking interest rates.
– Weak dollar pushes 10 year T bonds returns higher, and as you already know returns from stocks are falling.
– Slow economical growth.
– Crazy things happening in geopolitical arena.
Among other factors I would like to point out most significant
– Cycles, oh cycles. Have a look back almost each 10 years we get new collapse. It’s always difficult to predict time and pushing power for it, but we can learn from past and read signs.
– From technical point of view (if you have a look at post crisis period) by Elliot we are in the wave 5 and very close to it’s end. The always 5th wave is most aggressive. Look we almost don’t have pullbacks here. It’s always caused by psychological factors, that’s something like agony or effect of herd running and falling into bluff. Yes, there is still some room for possible speculation and market manipulation. But buying and even holding positions now is very risky. Because no one can predict the day of collapse and no one can say will start slowly or it will be sharp. If you think, story of 1987 will not happen again, don’t be so sure. The same was in 2008 – all wanted to sell their mortgage CDO and no one wanted to buy it. Many people who had profits, couldn’t close their positions and got losses.
Many traders are confused buy uptrend these days. But I think you have forgotten that in trading you can make money only if someone is losing it. That’s the play of big players and market makers. They are hunting retailers’ stops, margin calls etc. It’s resource of their profits.