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Created on: 4/6/2020 2:16:24 PM Last Update: 4/6/2020 3:42:25 PM Posted by: RTT
WARNING: This entry is 402 days old. It may contain broken links, out-dated or misleading content. Please read on with caution.
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The Big Short movie guides us to what is next for the stock market
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 There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.
Previous Post Dow 2020 Crash Watch , Dow, Three strikes and your out!
It is important to understand major WallStreet players do not want to miss out on a money making moves.
In the movie 'The Big Short' some market players got ahead of the crowd and shorted the US housing market.
When the US housing market began to crumble the majority of WallStreet was long and wrong, and losses on the longs were going to be incredible, they had to get short. WallStreet needed to load up on shorts to participate in the money making down trend.
There is a scene in the movie where Dr Michael Burry is on the phone expressing his frustration as to why the banker had marked up the housing bond index when the mortgages themselves were crashing, the index should have been marked down, of course this was banker fraud to allow the bankers themselves to short the same index as Dr Michael Burry. POINT: Wallstreet does not want to miss out on major market moves.
Roll forward to 2020 and the SP500 suffers its worst 30% down move since 1929 (Wyckoff terms this as a 'Sign of Weakness'). Wallstreet has not made any money on this move, if fact like the housing market they are long and wrong, and like 2008 they need to get short. The question is how?
The answer is simple, re look at 2001 and 2008 SP500 price actions (chart below), after price had fallen to the red line (250 weekly SMA), a bounce was organised to near the blue line (150 weekly SMA) to allow WallStreet market players to short the coming down trend.
The stock market has not had all the bad news yet, earnings slump, supply chain issues, derivative blow ups, bank risk news, c19 news. There is plenty of ammo for WallStreet to blame a down trend on while they profit with shorts. The chart below shows how we can expect a rinse and repeat of 2001 and 2008 organised bounce.
Of course the FED is printing and TRUMP is trying to get trillions passed to stimulate the economy, however will it be enough or quick enough. Some say the FED balance may need to go to $10 to $20 trillion, some say modern money theory is required. The doubt and delay around these programs will add to the market uncertainly.
The next play to watch for is the WallStreet bounce to allow shorts to be loaded up.
In Wykoff terms a low volume weak bounce (like 2001 and 2008) will be named the 'Last point of Supply', and if a price slump follows, price will break the ice near the 2200 level to lower lows. Of course if we get price strength shown by high volume and wide spread the 'sign of weakness' can be discounted as abnormal.
We are waiting and watching.
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Changes in the world is the source of all market moves, to catch and ride the change we believe a combination
of Gann Angles,
Cycles,
Wyckoff and
Ney logic
is the best way to ride the change, after all these methods have been used successfully for 70+ years.
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Investing Quote...
.."Your goals are to select only stocks that move soonest, fastest and farthest in bull or bear markets. Limited losses and let profits run."..
Richard D Wyckoff
My experience has been that in successful businesses and fund management companies, which performed well over the long-term, some courageous decisions were taken. Courageous fund managers reduce their positions when markets become frothy and accumulate equities when economic and social conditions are dire. They avoid the most popular sectors, which are therefore over-valued, and invest in neglected sectors because being neglected by investors they are by definition inexpensive. The point is that it is very hard and that it takes a lot of courage for a fund manager to avoid the most popular sectors and stocks and to invest in unloved assets. Finally, every investor understands the principle ‘buy low and sell high’, but when prices are low nobody wants to buy.
Marc Faber
Unless you can watch your stock holding decline by 50 per cent without becoming panic stricken, you should not be in the stock market.
Warren Buffett
."Buying stuff people hate, that's the business we are in, right!"..."you may need to have a longer time horizon"..."be patient"..
Mark Yusko
.."Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception"..
George Soros
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We at readtheticker.com hold the view that a mix of stock chart technical analysis, Richard Wyckoff, William Gann and Jim Hurst methods plus market fundamentals allows the investor to formulate a very sound market opinion. These attributes are mutually inclusive and must be weighted equally before investing or trading in any Stock, ETF, Currency, Bond, Commodity, CFD or Mutual Fund
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