Market Update – the Twilight Zone

 

Trader Scott’s Market Blog
The hit song “Twilight Zone” by Golden Earring was written by George Kooymans.

I am going to continue to hammer this home. The brain surgeons at the Central Banks (CBs) have recklessly distorted investor’s acceptance about RISK. Meaning that we are now in a Twilight Zone where people en masse believe that the CBs will bail them out of any position. The quest for any kind of yield is rampant. There is virtually no due diligence paid to RISK. Why worry about RISK when any minor selling wave will result in CBs freaking out thus engaging in more monetization of worthless debt which can then be piled atop the rest of the tens of trillions of worthless debt already outstanding. And to emphasize that now most of the corporate debt and all of the government debt being issued is going towards completely economically unproductive purposes. We are currently in a debt issuance and CB monetization orgy.
We are in a Twilight Zone where countries around the world are at “full employment” based on the unemployment rates, but: wages are stagnant or falling; NIRP or ZIRP policies are omnipresent;

these low rates have been here now for 8 years running; even the steady job growth is accompanied by the lowest labor participation rates in decades; etc.
But what concerns me greatly about this Twilight Zone, thanks to government and CB policies, is the incredibly high level of complacency currently rampant in all markets, especially global stock markets, but even PMs.
So what does my spiel have to do with markets going forward? As a contrarian, what concerns me the most here is the apparent ignorance about RISK. RISK should always be the #1 consideration when trading or investing. Just because markets believe that the Fed, etc. have their backs doesn’t mean that will always be the case. What’s separating this eerie calmness from an economic and market implosion (mainly centered on debt markets), is the level of confidence in both governments and CBs. If I could draw a price chart of the level of said confidence it would resemble a massive area of DISTRIBUTION. But while we can’t actually chart the confidence levels directly, we can look to the one market which will almost exactly mimic what that massive area of DISTRIBUTION would look like. And that is the global bond market. That gargantuan topping formation in bonds is almost directly correlated to the level of confidence that market participants as a group have in both governments and CBs. So for those folks who believe that the CBs have the power to never allow the bond markets to implode, I completely disagree. But, at the same time, I understand why those same folks are so tired and disgusted of hearing the constant fear mongering from the clowns who for 8 years running have been completely wrong about this issue. They have been claiming that the end is almost upon us, and then nothing happens, so they just repeat their incorrect predictions, and yet continue cashing their subscribers’ and clients’ checks. Well I am disgusted by those clowns also. And I want them to have to answer for their total incompetence. But I have not been issuing those pronouncements of the end being right before us. I have said several times in my own position update that I have a very big position in Government bonds. So, I have had, for 16 years now, my own money on the line in the bond market, with the belief that the end is definitely not here (yet).

For 8 years, I have believed and have publicly stated (some of it archived), that the beginning of the end is 2015 and that 2016 will be the transition year. But it’s not until 2017 when we will see the long awaited beginning of the unraveling and the loss of confidence. And this timeline actually correlates nicely with something which many people have thanked me for (and I do much appreciate those who have). And that timeline that I’m referring to is the path of the gold market since the September 2011 highs into the Sep/Dec 2015 lows. And when I finally turned outright bullish on gold in Dec. 2015.
And now quickly on markets.
As stated, I have a big long position in bonds. But any one who buys bonds now as an INVESTMENT is INSANE.
I’m still intermediate term very bullish on the USD. I will continue to use weakness in the USD to add to my position.
I’m wildly bullish long term on agriculture and to repeat – I believed/still believe that March 2016 was the major bottom. Then there would be a rally into Summer and then a retest of the major lows into Fall. So specifically for me, as I stated previously, I bought RJA into the big low in early March. And then, as I told some of my subscribers in June who were asking about specifics, that I was getting a bit concerned about the sharp rally – and that I am selling half of my position into the price strength into early June. And I am now using price weakness to slowly add back on to my position.
In a post from last Friday, which I chronicled basically in real time, I wrote about a short term trade when I bought the SPY. I took profits on half of that position, and then I moved my mental stop up to break even for the rest of the position. However, until there is a substantial sell off in the stock market, I will have no position on an INVESTMENT horizon. The RISK of being long stocks currently is way too high.
And for PMs, we are finally seeing a substantial correction in PMs, especially the mining stocks. Since March, I have advised to avoid buying PMs on an INVESTMENT basis, but this selloff is quickly raising the fear levels and the bearishness. I’m watching for a selling climax to warn me that the selling will shortly be coming to the end. A selling climax basically shows a big change of ownership from weak hands to strong hands and it is a bullish sign. I will update this as necessary.
Contact me: [email protected]

 

About

img_0074bwcrsmTrader 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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'Trader Scott – Market Update – the Twilight Zone – August 31, 2016' have 3 comments

  1. August 31, 2016 @ 5:21 pm munnyhunny

    Interesting to read not-for-now even *contemplation* of PMs as an investment – Mike Stathis says PMs are only EVER there to TRADE, and then via ETFs, futures and options. Gold’s risky volatility isn’t smoothed because it has no price metrics, pays no dividends and has storage and insurance costs if you insist on buying physical (and then some via ETFs etc anyway). But there won’t be another 20-25 year-long wait for PM prices recovery now that we’re in the ZIRP twilight zone – it’s different this time? !

    What’s your take on Peter L. Brandt? Any big lessons learned from him?

    Reply

    • August 31, 2016 @ 10:48 pm traderscott

      First of all, I don’t know anything about Peter Brandt. But I did learn some great lessons from my two mentors when I was a young floor trader in Chicago.
      As for PMs, most of the readers know that I already have a very large INVESTMENT position in PMs from Dec. 2015/Jan. 2016 (archived). But on an INVESTMENT, not TRADING basis, I haven’t seen that low RISK situation like 9
      months ago. We could be setting something up over the next several weeks though.
      As for only ever trading PMs, I don’t understand that – any market is neither better nor worse as an INVESTMENT vehicle. Trading equals investing, only the time frames and profit/loss taking strategies are different.
      It just depends what the internal technical structure of the market is at any particular point in time.
      BTW, munnyhunny, cute name.

      Reply

  2. September 5, 2016 @ 3:21 pm John

    The June 2015 to February 2016 time period for the PM sector (i.e mining stocks) will probably go down as one of THE greatest buying opportunities in ALL financial markets since the beginning of recorded time. If you were not buying then and have been waiting for the BIG correction, well you may be out of luck.

    Reply


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