The Stock Market Bubble
Trader Scott’s Market Blog
Since the massive, generational low in the stock market on 3/6/2009, I have vehemently argued with anyone who has claimed that the stock market is about to crash and also that it is a bubble.
In fact, it’s almost become a meme of sorts and is accepted by so many as a certainty. I’m assuming that most of these people claim this bubble status because of the horrific economic conditions. And they are spot on about the economy. But I’ve also repeatedly stated that the horrible economy is a major bullish factor for the stock market. And please ignore the complete fallacy that economics equals markets. Most people use “fundamentals” such as economic statistics to decipher the future path for markets. And the track record for the vast majority of these folks (as most of you have already noticed) is abominable. Does economics have anything to do with markets? Yes, but not in the way that we’re taught by the establishment. It’s actually because different economic conditions have different effects on LIQUIDITY. AHA! It’s only LIQUIDITY (aka SUPPLY and DEMAND) that moves markets. That is the only “fundamental” that you should focus on. Why waste time on anything else. So if your goal is, at a minimum, modest success in markets, then you must develop some type of method that you can confidently depend upon to give you continual, real time, and TRUE readings about the perpetual battle between SUPPLY and DEMAND. Of course, I biasedly believe that my method is the best. But my point is that you must have some way to make the determination of the LIQUIDITY flow situation. That will then be your own secret weapon, but certainly not the only thing that’s needed, for true success and confidence in markets.
So back to the alleged stock market bubble. I’ve made numerous comments like these two – first from January 2015 and then the following one from August 2014 (archived):
” During the October stock market selloff I said that we have a short term selling climax and then the stock market would go to new record highs, but those new highs won’t last long. And that the selloff after those new highs could be quite serious. That has panned out, so what’s likely now. As I’ve stated repeatedly we are in a major stock bull market, but we will see several huge down waves. Those claiming a stock bubble and crash are out once more, but they’ll be wrong once again. However, after a short term rally starting soon, there is currently a lot of downside risk for stocks – 20 to 25% starting this summer.” (My edit today – I was a bit off on the 2015 selloff – it was 15%, not 20-25%, but close regarding the high – it was in July 2015.)
“For 5 plus years, the geniuses who have claimed that the stock market is about to crash — they are now getting more frantic and strident. There is almost a 0% chance of a crash anytime soon. Since 2009, my friends at….have called me every nasty name, as I repeatedly stated that the March 2009 low in stocks is a generational low and stocks are going massively higher. The Dow is eventually headed to 100K, but with several huge selloffs along the way.”
The main point is that I remain emphatically opposed to the stock market bubble and the stock market crash meme and those claiming it to be so will continue to be wrong.
As to stocks now – I began buying a large position in stocks in February and again in April of 2009. I held that until selling some of it in May 2015 and the rest in July 2015. However, currently I absolutely would not be buying stocks on an INVESTMENT horizon.The RISK and PROBABILITY situation right now sucks.
There are 3 charts included of SPY (one of my favorite trading instruments). These charts are on a 15 minute, daily, and weekly basis with the SUPPORT and RESISTANCE points drawn.
The 15 minute chart would be for a trading basis as SPY is currently in that tight range. The daily chart shows a big area of potential SUPPORT at around 181. You can also see where I sold out my long term position in May/July 2015 which I bought in February/April 2009. The weekly chart shows the long term and huge TRADING RANGE/SIDEWAYS TREND basically from 1997 – 2013. You can also see where I entered long positions in 2009.
If folks want me to go more in depth as to the “thought process” of my entering and exiting of those positions, let me know.