An “O” Stock Market versus a “V” Stock Market

What is a “O” market? Best way to visualize this is to contrast it with the highly touted “V” bottom on CNBC. The “O” pattern is  best visualized as a rolling ball with segments falling off on each rotation of the ball.

The Current Picture

The markets are at a waiting and watching stage, bouncing off the down 20 % area.  Fiscal stimulus is now where to focus. This will not have a direct effect on the markets as whatever is enacted will need to be targeted relief to people losing jobs, not relief for the speculative element in the markets.  With the Fiscal deficit created by the Trump Tax cuts a couple of years ago, the underlying cause of the 2018 Economic Fracture, there is little room to be aggressive.

Low Interest rates are a fools direction

As such we continue to buy the leveraged short bond ETF TBT, now have six of 33 units in place at an average price of 16.53.  With the market looking for negative rates, this is definitely a Macro contrarian trade.  Interestingly, in the short term it seems to provides a bit of a short term hedge on days when the crowd thinks things have turned around.

Bigger Picture Now

Next leg down in stocks will be to probe 30 percent down area.

 

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