The Stock Market Bubble

 

Trader Scott’s Market Blog

Since the massive, generational low in the stock market on 3/6/2009, I have vehemently argued with anyone who has claimed that the stock market is about to crash and also that it is a bubble.

In fact, it’s almost become a meme of sorts and is accepted by so many as a certainty. I’m assuming that most of these people claim this bubble status because of the horrific economic conditions. And they are spot on about the economy. But I’ve also repeatedly stated that the horrible economy is a major bullish factor for the stock market. And please ignore the complete fallacy that economics equals markets. Most people use “fundamentals” such as economic statistics to decipher the future path for markets. And the track record for the vast majority of these folks (as most of you have already noticed) is abominable. Does economics have anything to do with markets? Yes, but not in the way that we’re taught by the establishment. It’s actually because different economic conditions have different effects on LIQUIDITY. AHA! It’s only LIQUIDITY (aka SUPPLY and DEMAND) that moves markets. That is the only “fundamental” that you should focus on. Why waste time on anything else. So if your goal is, at a minimum, modest success in markets, then you must develop some type of method that you can confidently depend upon to give you continual, real time, and TRUE readings about the perpetual battle between SUPPLY and DEMAND. Of course, I biasedly believe that my method is the best. But my point is that you must have some way to make the determination of the LIQUIDITY flow situation. That will then be your own secret weapon, but certainly not the only thing that’s needed, for true success and confidence in markets.
So back to the alleged stock market bubble. I’ve made numerous comments like these two – first from January 2015 and then the following one from August 2014 (archived):

” During the October stock market selloff I said that we have a short term selling climax and then the stock market would go to new record highs, but those new highs won’t last long. And that the selloff after those new highs could be quite serious. That has panned out, so what’s likely now. As I’ve stated repeatedly we are in a major stock bull market, but we will see several huge down waves. Those claiming a stock bubble and crash are out once more, but they’ll be wrong once again. However, after a short term rally starting soon, there is currently a lot of downside risk for stocks – 20 to 25% starting this summer.” (My edit today – I was a bit off on the 2015 selloff – it was 15%, not 20-25%, but close regarding the high – it was in July 2015.)

“For 5 plus years, the geniuses who have claimed that the stock market is about to crash — they are now getting more frantic and strident. There is almost a 0% chance of a crash anytime soon. Since 2009, my friends at….have called me every nasty name, as I repeatedly stated that the March 2009 low in stocks is a generational low and stocks are going massively higher. The Dow is eventually headed to 100K, but with several huge selloffs along the way.”
The main point is that I remain emphatically opposed to the stock market bubble and the stock market crash meme and those claiming it to be so will continue to be wrong.

As to stocks now – I began buying a large position in stocks in February and again in April of 2009. I held that until selling some of it in May 2015 and the rest in July 2015. However, currently I absolutely would not be buying stocks on an INVESTMENT horizon.The RISK and PROBABILITY situation right now sucks.
There are 3 charts included of SPY (one of my favorite trading instruments). These charts are on a 15 minute, daily, and weekly basis with the SUPPORT and RESISTANCE points drawn.

The 15 minute chart would be for a trading basis as SPY is currently in that tight range. The daily chart shows a big area of potential SUPPORT at around 181. You can also see where I sold out my long term position in May/July 2015 which I bought in February/April 2009. The weekly chart shows the long term and huge TRADING RANGE/SIDEWAYS TREND basically from 1997 – 2013. You can also see where I entered long positions in 2009.
If folks want me to go more in depth as to the “thought process” of my entering and exiting of those positions, let me know.

 

Charts:

https://www.tradingview.com/x/daADrtH3/

https://www.tradingview.com/x/g2bCYXAy/

https://www.tradingview.com/x/uu0FmHHn/

 

 



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'Trader Scott – The Stock Market Bubble – August 25, 2016' have 3 comments

  1. August 26, 2016 @ 2:52 pm traderscott

    For those of you who have asked me about my short term trading: As per the short term SPY chart attached showing the TRADING RANGE – this afternoon’s “news” (aka horse manure) from the Jackson Hole Fed conference was used as the “reason” (excuse) for the selling wave. However, the big money was gobbling up the SUPPLY (ACCUMULATING) shares into the selling waves. As such, stocks are attempting to put in a short term bottom. On a leveraged very short term basis, I am buying into the weakness. And as per RISK CONTROL, I already have a spot a bit higher to take partial profits.
    Hope that helps a bit to the curious folks.

    Reply

    • August 27, 2016 @ 5:03 am Ian

      Hello Scott. Thank you for your thoughts

      I would like to know what indicators you use to see if “the big money was gobbling up the SUPPLY” I’m sure this would help my trading to.

      Also historically we are entering the weakest months so any bounce here is just that before we find a bottom in say Oct? Our are you seeing the channel on your charts braking out to the upside with the 200 Billion p/month the central banks are pumping in?

      Kind regards

      Ian

      Reply

      • August 27, 2016 @ 12:43 pm traderscott

        Ian, I don’t use “indicators”. I learned the incredible power of the interaction of price and volume to allow an accurate deciphering of the ongoing battle between supply and demand. So that’s the foundation for it all. It took me many years to understand what the last two sentences even means. Start looking into Richard Wyckoff, like many of the great readers of this blog have done.
        As to specifically this trade, this is on a very short term time frame. You have to keep your focus on what time frame that you’re trading or investing in. The gobbling up means ACCUMULATING. ACCUMULATION and DISTRIBUTION are paramount to understand. So specifically, I already took 50% profits on the big (on a very short term basis only) intraday rally and then moved my mental stop up to break even for the rest of the position. This is only a short term trade, nothing more. Basically just a TRADING RANGE trade.
        You’re correct about the intermediate seasonals, with important highs in the August time frame and then the big selling waves into an Oct./Nov. outstanding buying opportunity.
        And I don’t use those channels for “break outs”. Ian you’ll do yourself a big favor by ignoring supposed break outs. As the years have rolled by, that term means nothing to me. As I use the “breakout” areas to go against the crowd. So I use channels only as areas of SUPPORT and RESISTANCE potential.
        And lastly I could generally care less what the Central Bankers are scheming up. I pay attention to what the manipulators are doing. They, far in advance, will “let you know” what you should be doing.

        Reply


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