DotcomJack

Negative Rate Cut? Powell Wants a Correction $SPY

Short
AMEX:HYG   iShares iBoxx $ High Yield Corporate Bond ETF
The markets are at a crucial spot and Powell is due for a decision soon... The chance of negative rates is low but definitely not out of the picture and if that happens, TLT will pump and HYG / IWM will dump (yes SPY too). Timing will be hard but the pressure is certainly building and is confirmed on the technical side of things.

$TLT tested a crucial level at $148.9 this last week which could signal weakness in the equity/bond market as well as the Dollar. Either A) things will spin out of control regarding Delta variant and TLT will breakout or we could see this melt-up continue for roughly 4-5 more months before seeing IWM and the rest of the market make its correction. If TLT were to fall the market could also very likely follow to the downside, this environment is choppy.

On the other hand, we watch IWM as it typically can signal weakness in the market via smaller cap companies. If the markets do correct, puts on IWM / HYG will pay beautifully. I'll give this 6 - 8 month then pop, otherwise my short position will get stopped and we could just continue to melt up until the next election. Also whether Crypto has it's one or two top cycle will play a part in all this as money will either transfer away or to the Crypto market (& possibly away from other markets).

It should go as followed If markets do correct to the downside:
1) TLT will breakout and possibly melt quickly as done in 2020 or flash crash. SPY /ETFs could see a gap down then trend up to retest as resistance
2) SPY will begin its bleed, IWM HYG leads the way to the downside.
3) Metals and Cryptos seem like they could move in sync. Cryptos might even lead the way. The one question I ask is if people sell out of both Cryptos and Stocks, where does their money go? Will this create the largest spending era or send us into a depression? Share your thoughts below


DCJ | Melt-Up or Short

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