In the interests of full disclosure and of keeping you abreast of my personal investment actions, I entered a short position on Friday for the first time since 2009. Yes, it’s been seven years.
I’m tempting fate here, of course, by announcing this. But that’s an occupational hazard of trying to time these “markets.”
The equity markets have been all but bulletproof for 6 years, but I think that phase has ended and we’re in for a rough ride from here on out. At least until stocks fall far enough for the central banks to have another go at attempting to print up prosperity.
Of course they will fail in those future efforts, too. But not without creating a bout of manic stock buying, before which I plan to close out my shorts and ride that last burst upwards.
After that? Well, it could easily be ‘lights out’ for fiat money-based investing for a very, very long time. The damage will be so profound and so complete I rather imagine a generation or two will have to pass before people once again dare to try their luck at storing their wealth in paper assets subject to Wall Street style speculation.
The Charts
First, I think that the stock rally of late is overdone and there’s more downside to come. I have a whole host of supporting reasons based on credit markets and global trade, but we’ll get to those soon.
The chart below shows that for the past 7 months, most of the rallies have been accompanied weak volume compared to the sell-offs. That’s not a bullish sign.
What led me to put on my short was the way the recent rally faded on both volume and momentum (see all three blue lines stocked on right side of chart):
Plus, if this latest rally is going to stall out, the 1920-1980 zone it's bumping up against right now has plenty of resistance. Going partly short at the 1950 mark seemed reasonable.
I’m pretty tolerant once I put a position on, preferring not to be shaken out. So my personal mental stop for bailing out on this trade is all the way up at 2080, the former ‘lower high’ from the end of 2015.
by pinecarr 
