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WE know a big move is coming but if unsure which way, look for cheap binary tunnels for Wall St, no need to worry about the stop and low risk.
October 20th, 2013.
Debt Ceiling Day is upon us, as Congress and the President have one more day to get’er done. Wouldn’t it be great if five people, the President, and the Democrat and Republican leaders of the House and Senate, were locked inside a room starting tomorrow morning, without food and water, and no bathroom, and were told they will not be allowed out until a deal is struck? We would know when they have struck the best deal possible when all emerged equally ticked off, famished, parched, and hustling to the bathrooms. Will they or won’t they? Wednesday promises to be volatile and one of those days to be glued to the news stations. The divisiveness and apparent insanity of the process of governing gives a glimpse into how polarized the nation has become, perhaps as polarized as du ring the Civil War. Back then they chose war over negotiated compromise. Will we see something similar again?
The Coming Economic Ice Age is being foretold by the completing Jaws of Death pattern. Could extreme polarization inside the U.S. blow up into a self-destructive civil war once again? We may be witnessing the seedlings of the crop (crap) that is coming. The pattern tells us the unthinkable is coming. McH.
Republicans and Democrats remain at loggerheads over the government shutdown – and, more importantly, the debt ceiling.
That’s got the supposed “smart money” trading scared. By that I mean, they’re increasingly selling stocks short, looking to profit from a nasty market slide.
In fact, an index compiled by ISI Group LLC, which measures hedge fund long versus short bets, fell to 48.4 last week. That’s a mere 0.2 above the lowest reading of the year. (A lower number represents a more bearish indicator.)
So with hedge fund managers so bearish, shouldn’t we – the supposed “dumb money” – be following their lead?
Not just no…But hell no!
<b>It’s Follow the Leader, <i>Not</i> the Laggard</b>
Instead of getting caught up in the headlines – and selling first and asking questions later – we need to get some perspective.
And, I’m sorry, but the bearish sentiment for hedge funds hardly qualifies as a breaking development. To the contrary, they’ve been betting against stocks all year. And the trade has completely backfired.
I mean, the S&P 500 Index is up 19% year-to-date. And a rising market doesn’t lead to profits for short sellers. It leads to <i>losses</i>. So instead of cleaning up, short sellers continue to get cleaned out.
Case in point: The average hedge fund continues to grossly lag the market, up only 9.2% through the third quarter.
Again, this isn’t a new development. Not only have hedge funds been lagging the market all year, but their struggles extend back more than <i>four years</i>.
Consider that, since the March 2009 bottom, the S&P 500 is up 111%. Meanwhile, the HFRI Equity Hedge Fund Index is up only 48% over the same period.
When it comes to investing, we want to follow the leaders, <i>not</i> the laggards. So, given the dreadful track record for hedge funds, we should look to do the <i>opposite</i>of what they’re doing.
And as it turns out, a compelling, empirical case can be made for doing just that…
<b>Smarter Than the Average Bear</b>
You see, the companies that hedge funds presumably expected to <i>fall</i> the most in price in 2013 actually <i>increased</i> the most, based on data compiled by <b>Goldman Sachs</b> (GS).
Specifically, the 50 most heavily shorted stocks in the Russell 3000 Index are up an average of 38% year-to-date. That’s double the return of the S&P 500.
Now, part of the outperformance can be explained by the fact that many hedge funds got “squeezed.”
As stocks rose in price, they were forced to cover a portion (or all) of their short positions at a loss. Of course, doing so means actually buying shares in the open market. And in the end, the added buying interest pushed prices up even higher.
“There still are people out there who are convinced the whole market and financial system is some house of cards,” says Brian Barish, President at Cambiar Investors.
That includes hedge funds.
However, the more time that passes without a correction, the more convinced hedge funds become that one is inevitable.
In other words, their stubbornness is only increasing.
Eventually, though, they’ll have to capitulate, which should lead to the most heavily shorted stocks outperforming the market even more.
Such a turn of events could happen as early as this week, once the politicians flesh out a compromise.
With that in mind, here’s a list of the 10 most heavily shorted stocks in the S&P 1500 Index at the end of the third quarter.
Thanks Gman, Not sure why you thought I would be interested in this but I am. A while back they found a gold necklace in a peice of coal estimated at 320million years old and a wooden doll est 3oo million years old. Avid Ancient Aliens watcher, fascinating stuff.
I’m hoping for a bottom today, if you know what I mean,lol
What’s next?: We should continue to decline and make an 10/4-7major Low. I don’t have any high quality Time CITs supporting thisCycle CIT Low date, but the next Solar Time CIT on 10/9 should be another Low. In general, it is the Bulls turn to stampede higher into my next proprietary Time and Cycle cluster CIT.
This is my last public post for quite some time as the coming weeks should be a wonder to behold.Rajpeeps seem to be expecting a big rally when the budget agreement happens, I wonder if the surprise will be to the downside.
<b>Today’s Blue Chip Stock Market Comments:</b>
Stocks fell sharply Thursday October 3rd. The Violence at the White House around 2:00 pm EDT Thursday fed an already down day, but the internals tell us that the PPT was concerned that a plunge could evolve, so bought the market hard, preventing a collapse in prices. Demand Power fell 7 while Supply Pressure rose 10, telling us Thursday’s decline was strong. Volume was average for the past 10 days. PPT buying prevented a 90 percent panic selling down day from occurring. That is important because had a 90 percent down day occurred, the odds increase that a bottom is near. There was a stock market buy signal set-up from the VIX Thursday, as it closed above the upper 2 standard deviation Bollinger Band boundary. Once the VIX closes back inside the bands, it will trigger a new stock market buy signal. Those buy signals have been pretty good at identifying short-term bottoms that lead to nice tradable rising trends.
Short-term, stocks are working through a correction inside large degree wave <b>c-</b>up. There are two possible patterns for <b>c-</b>up, one is a Rising Bearish Wedge, which would mean a lower upside, or an impulsive five wave rally, implying a much higher upside. In either case, this coming top will be the end of a Bull market that has lasted for centuries. Then the Coming Economic Ice Age begins.
The stress we are seeing in the daily news from Washington’s shutdown, the anger, the rage, is just a small glimpse of what financial stress could look like from this coming economic collapse. McH.
