Thursday Failure – Fed Fails to Assure the Bulls


Wheeeee – down we go!

As we discussed in yesterday's Live Trading Webinar, this market rally has been ridiculous and certainly unsustainable (as noted in yesterday's: "Which Way Wednesday – Nasdaq 10,000 Edition") and our plan from yesterday morning ws to short the Nasdaq when it crossed back below the 10,000 line, which it did early this morning.

As you can see, that's already paying well, as expected and now we'll see how low we can go but the stop is now 9,950 for an even $2,000 gain for the morning and we can always find a fresh horse like S&P (/ES) 3,100 if that fails. As I said yesterday, these are the best plays you can make in the Futures as it's easy to limit your losses (using a major stop line) and lock in your gains.

3,135 is the 10% line on the S&P 500 and that's the top of our expected range for the year, this jaunt above the line is only going to be a single weekly candle in hindsight.

SPX June 11 2020

Keep in mind we are not at all technical traders – we are Fundamentalist and yes, TA is a factor in our analysis but, by itself – it's worthless. In yesterday morning's PSW Report we noted why that market was over-priced and our range for the SPX is based on our projected earnings of the S&P 500, the effect of the Virus, the Bailout, the rest of the Global Economy (not all of which has sugar-daddy Central Banks) and, of course, sentiment – which has simply been stupid, not silly, the past few weeks.


Some of the investors can fool themselves all of the time and all of the investors can fool themselves some of the time but all of the investors can't turn a terrible economy into a bull market for very long – I would think that is obvious but, surprisingly, I find that I have to explain this to almost everyone I meet (not you fine people, of course!).

Fortunately, we are very well-hedged in our Member Portfolios (which we reviewed in yesterday's Webinar) and we made our aggressive adjustments to the Short-Term Portfolio on Thursday, so the only surprise for us is that it took a whole week for the stupidness to end. Hedging is how we lock in our gains – it's an insurance policy for our longs that allows us to let them ride, rather than cash them all in – as I was very tempted to do yesterday…

Meanwhile, this is a very small sell-off compared to the rally so we'll simply sit back and see how well we hold up – certainly we're not going to be buying very much if the madness persists but the hedges help us hold onto our longs until we can see if the rally is really out of gas or not.