A Little Stepping Stone today

Stock Markets Down Early

Stocks were down 7 percent early today, our 3X Short ETF up 21 percent.  This was a good place, 2722 level on the S&P mentioned a few days ago,  for very short term traders to take profits and try to replace shorts somewhere towards the 2860-2880 swing point resistance area.

However, it is important to not forget that this was a very over priced market with PE’s in the 20’s. Now we will see earnings decline and a more reasonable 15 to 16 on PE. That means lower prices going forward. So keep an S&P price level of 2266 in the back of your mind.

And maybe most importantly, the longs have and are not getting out of their positions.  It was widely know that the market was being manipulated and overdone, but their was a deep confidence that the manipulator would signal to all the followers when to get out.  But oh, that virus thing, snuck up on them. So this decline in many ways has not even started.  No doubt there will be some big plans coming out of Mara-Lago, use them as sell areas until there is a wash out.

Interest Rates

Investors have had a sweet deal since 2011 with the Bernanke QE’s. The FED has kept interest rates very low and allowed an escape mechanism for stock traders.  They could just move back and forth between bubbles.

As we mentioned late last week, when the Bond Bubble bursts, all eyes will be opened wide in a way that hasn’t been seen since 1929.

One factor lurking is: number one, when the Treasury starts selling bonds to fund MMT style infrastructure investing.

Keeping in mind that the last interest rate wave was around 40 years in length, you cannot be a short term thinker for the opportunity that is developing for an increasing interest rate wave.

As such, as we said late last week, we are buying the TBT ETF, (a short 20 YR bond) at a slow 3 percent per day of targeted position.  After today with 3 days of buying we are at 12 percent of position (made a double buy of  6 percent today at 15.00 area) giving us an average of 16.65.