eudotong1

Why I'm Shorting the S&P 500

Short
AMEX:SDS   ProShares UltraShort S&P500
Macro-economic Overview
Essentially, it’s looking like the bear market is becoming more probable month after month. Tons of macro-economic bearish signals:
  • Euro economies taking hits (Germany narrowly avoided a recession last quarter but has seen 0 growth; UK recession looming as well especially w/ no Brexit deal)
  • We’re currently in the longest US economic expansion ever. What goes up, must come down.
  • US-China trade deal going sour.
  • Manufacturing production going down.
  • The Fed raised interest rates several times last year.
  • The list goes on and on. And that’s without me even looking at a chart.

What exactly is going on here?
When we look high-level at the charts (see above video for technical analysis ), at the end of 2018, the US stock market took its biggest plunge (-20%) since the financial crisis… Now, we’ve climbed back to the previous high for the third time and are again struggling to break through it.

What appears to be propping up our economy despite these bearish signals is lip service: Statements by Trump like “Our economy is in its best state ever!” and “We’re gonna have an epic trade deal with China!” And statements by the Central bank saying that they are not going to raise interest rates again until 2020.

But covering the wound is not stopping the bleeding. The blood is accumulating and there is a point when it starts to leak. We don’t know what specific event is going to trigger the blood to gush this time around. In 2001, it was the tech bubble. In 2008, it was the lack of regulation in Wall Street and the housing bubble. In 2019/2020, it could be a failed China deal, the Fed reneging on their promise not to raise rates this year, or something we haven’t caught wind of yet…

Perhaps the specific trigger is worth speculating and helpful for folks who want to say, “I called it!“, but at the end of the day - the bearish signals are very clear. And big money knows it, else we wouldn’t hit the same price peak 3 times in a row over the course of 18 months and still fail to break through it. 18 months is quite a long time to maintain the same peak in a bull market. That is a clear bearish signal.

Our Opportunity
We’re in an advantageous position where we can see the red writing on the wall, we can see the blood beneath the bandages, but prices don’t reflect it yet. This is when smart money enters. The masses wait for headlines to say "We've entered a recession." Let's think like smart money, not the masses :)
Twitter: @UdotongE

Comments

Thanks for the insights.
+1 Reply
Very detailed and carefully considered analysis, tyvm 4post!
+1 Reply
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