KrunchieKilleen
Short

S&P: I was wrong (markets surge not plunge), but still ...

INDEX:SPX   S&P 500 Index
209 2 4
I was wrong. Instead of plunging, the markets have surged. Nevertheless:
1: The strong upward slope that brought us here, as I illustrated in a previous post, were caused by the policies of QE (Quantitive Easing) and ZIRP (Zero Interest Rate Policy). When the American economic growth is self-sustaining, these policies have to end, bringing a significant market correction.
2. The amazing recovery over the last week had two underlying stimulants: the FED's assurance that ZIRP would end no time soon, and evidence that the American economic recovery is now self-sustaining. Ultimately these are two contradictory forces, since self-sustaining economic growth calls for an end to ZIRP.
3. I can hear the cocks crowing, which always happens on the eve of a market collapse. Bear voices are drowned and the market's champions encourage the fools with promises of even greater profits to come. The louder they shout the clearer the message becomes: we want to sell at the right price!
Thanks for the info, nice to know what's going on under the hood.
Reply
Yes... "two contradictory forces, since self-sustaining economic growth calls for an end to ZIRP" I give big credit for this insight.

Suppose I have 10k$, what might I do next? Possible strategies are:
1. Buy 400 shares of SH (1xShort S&P 500) (as price at the moment is ~24$)
2. Buy 400 shares of SDS (2xShort S&P 500) (as price at the moment is ~24$)
3. Buy 400 shares of SPXS (3xShort S&P 500) (as price at the moment is ~24$)
4. Sell 2 ES December futures (as price at the moment is ~2k$, and margin requrement ~5k$)
5. Buy 10000 184.00 december 31 put options of SPY (as price at the moment is ~1$)
6. Buy 10000 195.00 december 5 put options of SPY (as price at the moment is ~1$)
7. Buy 5000 195.00 december 31 put options of SPY (as price at the moment is ~2$)

Good scenario: price of SPY drops to 180 by the end of the year
Bad scenario: price of SPY fluctuates between 195 and 205 by the end of the year
Nightmare scenario: price surges to 220 at the end of the year

That would be best possible strategy of mentioned above in you opinion?
Reply
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