I know that this is primarily a precious metals forum but I'd love to hear from all of you your thoughts on the regular equity markets. Many analysts are saying that we have turned over and are now into bear territory. I kind of believe that myself and am toying with the idea of shorting from here on in with FAZ.
Does the end of QEII mean more downside, a slow grind or a tank?
Glad you started the thread.
I am short the russel 2000 X3. I currently have positions in TZA and RSTA.
In my opinion there is very little upside potential without more QE and there is a ton of downside potential.
We are on the brink right now. I wouldn't be suprised to see a bound off the 200 dma as we are there on almost all equities and commodities. The number to watch is the 1250's on the S&P. If we can cut through that watch out below. This market is going to tank, it is just a matter of time....
Lots of moving parts to that question, but in essence the bubble created by trillions in freshly printed FRNs is deflating.
The Keynesian Hope was that by providing such massive monetary assistance that the economy would gain a jump start and acquire a self-perpetuating growth curve again.
Unfortunately, 'hope' is not a strategy. When the spigot was turned off (end of QE2), the markets priced and continue to price it in. Virtually every major economic indicator is trending down...some of them quite badly.
Never fear however, QE3 is on the way. More hopium for the masses, at least until our creditors start calling in their markers.
The end is a forgone conclusion. Buy physical.
Gotta tell you, I think the safest option trade right now is DXD -- double inverse ETF on the Dow. Rough estimate, every 300 points down adds about $1 worth to a July options contract.
Buy a bunch for like 50 cents each, and its a 5-6 bagger if we get down to 11,000. I've ridden all the way down from about 12,600 so far. Options are always risky, but there is just too much going on out there putting downside pressure on the market.
Until and unless we get a QE whatever, the stock market going down is as close as you can get to a guarantee. I was sold when I read an interesting article that pointed out 2nd quarter earnings for many companies (esp Japanese -- Honda, Toyota etc) will just be decimated by the effects of the tsunami.
As Turd has often said, it is an ethical dilemna to make money off the hardship of others though.
I'm currently holding FAZ, DXD, and TZA. I think the trend is down until QE3 is rolling. The upside to FAZ is just too hard to resist. Take a look at the 5yr chart on FAZ.
As I understand it, money borrowed from my child's future is being used to bailout insolvent banks, and somehow that money is finding its way to prop up the stock market.
I have no qualms buying calls or holding DXD. I will take back as much as I can.
We had some DXD related discussion today in a thread regarding the Dow Gold Ratio. DXD can be one component of a trade to profit from a fall in the Ratio. Paired with UGL in my account.
cris said it best "Until and unless we get a QE whatever, the stock market going down is as close as you can get to a guarantee."
I checked out the 5 year on FAZ. Do you think it will perform better than TZA being that faz tracks the 1000 and tza the 2000.
I have noticed that rtsa has been outperforming tza quite a bit. I may switch over and go fully into rtsa.
I threw some gambling money at SPXU when it dipped to $15 to get the the financials as well as the broad market in one swoop. I'll hold till 800 and revaluate if the ass really decides to drop out. I think we're only getting started with the slide. I'd expect it to last into 2012, but then again WTFK?
I am short dow right now as well. have an put on the minis and looking for a pretty firm drop. watching oil close for exit strategy. I am in the camp of commodity/equity sell off to make room for more stimulus
Good reading if you're wearing a bear skin suit and want to gamble some fiat: https://smartmoneytracker.blogspot.com/
His last post seems to be the most likely scenario as far as the broad market is concerned, so I'm using it as a rough guide, sitting flat, patient and accumulating cash in a "wait and see" mode (like many others, too I'm sure).
If I didn't have a pile of physical, I'd be buying this sideways movement because if you're going off the zeal of Chapman or Turk, of course it's only straight up for G&S always.
I am almost certain we will see the march lows in the next 30 days, the question is will it rally back after that, then dive as he is suggesting. I may take my short off the table once we hit march lows. Lot to think about
@DrDurden - Haha! I guess I should read all the articles before I post, I'm saying almost the exact same thing as this fellow. Boy, I hope I didn't sound like a plagiarizer.
Thanks for the blog reference.
Thanks for your thoughts everyone... I'm going to chime in and please let me know your thoughts.
I have purchased one bear ETF, FAZ, and holding some cash for another, TVIX which was part of the plan. I agree with all of you and am also convinced now that the market is not going to rally enough to be back on a Bull Uptrend. End of QE2/start of QE Lite (reinvestment of maturing debt on Fed balance sheet) and when the 2nd qtr corporate results start pouring in July showing very bad numbers in relation to the 1st qtr numbers will cause stocks to really grind down. Many of these stocks are still overbought as well from commentaries I've been following.
I chose FAZ over DRV, TZA, etc because of the U.S. banks exposure to Greek debt. As the summer goes on all of them I think will make money but the U.S. Bank exposure to European based debt and CDS derivatives has a small chance to make FAZ a solid double, triple or home run using a baseball analogy.
In my humble opinion, the Fed will allow the market to do a drop, thinking the following. 1. We'll see how QE2 plays out on the inflation numbers and it's effect on the economy. We need to give it a chance before we go straight into QE3 2. We can't go straight into QE3 anyways because politically not going to be easy to justify it. If the market drops significantly in value we'll then have the political capital from the people/hill and white house to go ahead as people start to freak out.
So Market Drops in the summer, QE3 starts sometime in the fall, there will be a small bounce, and then the big grind down as the Fed is useless to stop it.
I have the same thoughts on FAZ. I'm not currently holding any but in the event of a greece default. It makes the most sense.
So today is D Day for Greece, U.S. Banks are apparently underwriting 129 billion dollars of CDS's for French and German Banks on Greek Bonds. Announcement on whatever deal they come up with or don't will be done after market closes. If there is a deal, market pops 5-7% or is some that priced in already over the last couple days? If there is no deal, market tanks 5-7%? I've bet on FAZ, so I'm holding my breath but not too tightly as I think whatever deal is made, the pop either way will be for a few days and then the slide down continues so I've bought thinking that the market has a ball and chain attached to its ankle will slide over the summer and into the fall with home run potential should there be a multi day meltdown. Just for fun, I'm going to set a limit sell order at 1000/share just in case there is a flash crash that happens while I brew a coffee from here on in.
Fed has meeting on Wednesday, notes to be published after, worst news IMHO is that they announce a form of extensive QE instead of sticking with their initial plan of letting QEII end and going into QE Lite of using the maturing debt on their balance sheet to strategically buy enough treasuries to keep interest rates down in certain parts of the curve.
Tick Tock, Tick Tock, the market waits...
I shorted the Dow a couple weeks ago as it appeared the market began to get jittery over the end of QE2. I am very, very nervous right now as the market is looking for a any sign of more stimulus. The opposite is the lemmings will be severely disappointed if the Bernank comes out and says they are going to keep the training wheels off and see how the kid rides the bike. If such an event occurs, I think the general consensus is that the kid will crash the bike and break his arm. I am content with the modest rebounds as it is still within downtrend channel.
I picked up some TZA today. Think the Fed/ECB are going to undershoot this one. Deflationary scare soon.
But don't worry, I have full faith in their ability to print us into oblivion. :/
saw your post pop up in recent comments...
it may be a bit early to put the tza on here...maybe put in on in stages as we're going to get a pop after this greek vote.
here's a trick i use to know when to apply a short on the russells. watch fas, leveraged long financials...when it starts to come down, you know financials have topped, and financials lead the market. when you watch faz, and it bounces, then you go long.
Yeah, I'm tip toeing in to shorts in stages, just not too worried about upside threat. But excellent tip on FAS/FAZ pair, I'll be watching.