The Entry Points
The following post is from 9/16/16, the bond chart is updated:
Let’s begin with the (updated) bond chart, which I will keep constantly referring to over the years. We all need to be well acquainted with this chart showing the massive distribution (this chart is actually the inverse of the bond price itself) of the long US Treasury Bond market. This chart gives the graphical representation of what folks are constantly talking about. And that is – how long can the central banks (CBs) postpone the inevitable. Most people have now resigned themselves to the belief that the games can continue forever. I completely disagree with that belief. I have zero confidence in the ability of CBs to be able to endlessly keep bailing things out. And that is because I have total RESPECT for the TREND of the market – we have a horrific bear market market approaching in bonds and there is nothing that the CBs will be able to do about it, except to slow it down at times. And if CBs had any understanding of how markets actually operate in the real world (they don’t), then they would completely understand all of this.
Many years ago when people kept pondering about if/when the CBs will lose control, a light bulb went off in my head. All of this talk about the CBs losing control is only a concept, a notion, but we can’t see it actually happening with our eyes. We can only visualize it in our brains. When it comes to markets, I don’t do academic exercises, but try to do the least amount of thinking as possible. I need to act, to enter positions and exit positions unemotionally, obviously preferably with gains. So that’s when it hit me that we should be actually able to see that (the CBs losing control) on paper by viewing a chart of the bond market, and then watch the distribution/topping process unfold before our very eyes. And then this would be a visual representation of the whole elitist world putting in a massive top.
Instead of focusing on shorting bonds, I believe that a better focus would be on what would benefit the most from a multi-decade, grinding, relentless (with intervening rallies), powerful bear market in bonds. That’s where most of my focus will be rather than on shorting bonds. Being/staying long is tough enough, but being/staying short is much tougher. It’s usually much more effective to be focused on what/when/where to be long rather than being short. So, in markets, most times the “easier” trade/investment is to do the “leg work” necessary to decide what market(s) would benefit the most from another market/industry, etc. which is in a secular decline. And then just buy that alternative, but once again I’ll repeat “only buy it at the “right” price/time”. So the main general beneficiaries will be PMs, commodities, and the stock market. (But only, only when entered at the lowest risk/highest probability price/time. Put your main focus into the entry point, the outcome will take care of itself. And don’t let anyone scare you into buying/shorting any asset, because they’ve convinced you of a scary future.)
So as to the question of shorting bonds, I use a small position and actively manage that short position, by (hopefully) covering all or part of my position into price weakness at times and then (hopefully) re-shorting them on rallies. At least that’s the plan, but when it comes to markets, I often screw something up along the way.
And as to the US$ – as I’ve stated many times, I am intermediate term still very bullish and very long the US$. But yes this Fall, there is a very good possibility of both a weak US$ and weak global stock markets. But, if that scenario unfolds, I would be a buyer (stocks). But only when there are signs of ENDING ACTION. And then using SUPPORT zones for better timing of entry points.
Lastly, I’m not completely sure what a slingshot move is, but it probably is referring to the same thing as discussed here and several other times – a Wyckoff spring. A spring basically refers to a situation where there is a solid support area built below a market. But the “manipulators” are not done accumulating and thus they’d like to force a selling wave to “break support”. So then these strong handed “manipulators” can gobble up all of the shares thrown out by the weak handed public when the support area is “broken”. The market continues lower briefly and then it rockets back up. This market is then a very strong market, because it’s being controlled by the strong handed “manipulators”. As I’ve detailed many times, markets which have allegedly “broken support” are one of my favorite entry points into a trade/investment.
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About
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day. Scott returned to markets over fifteen years ago where he continues as an independent trader.
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