E Distortions Within Fragile Markets

Distortions within fragile markets more and more are becoming evidenced not only by trading swings, but by statistics in real world consumption; geopolitical concerns tempering lots of endeavors; a realization that defaults among ‘submerging’ economies and energy entities is a valid concern; and a shaken the ‘junk bond’ market; more pending.

That investors and speculators have been as complacent as they have is really a phenomenon of the structural nature of investing today, complimented by the flight-safety ‘harboring’ of money in American markets. But even as Exchange Rates temporarily take the edge off Dollar strength, Oil continues heavy, while commodities barely have temporary stabilization. No central bank movement or policy bias is at this point going to change (for instance) China’s determination to ‘hoard or not to hoard’, when in reality they’ve been feeding-out supply into a saturated market (including raw materials), while everyone looks solely at Oil.

Last night I reviewed the big picture that got us to this spot; last week I pointed out the ‘fragility’ of these markets, with an expectation of erosion, interrupted at times by desperate rallies; and especially attempts to do so in the week prior to Expiration. We’re so pleased that the market allowed us to capture gains each days this week; both long and then short on Tuesday and strictly newly short on Wednesday (after any residual gains on a prior profitable short were taken) for traders. What matters here is that traders understand the need to be nimble at times; that they recognize to scale-out and harvest some profits; but retain what we call ‘skin-in-the-game’ in the event we get serious plug-pulling calamitous hits.

Today was very fortunate, in that the ‘almost routine’ effort to rally a soft opening set up the opportunity to ‘sell-short’ virtually at the day’s high, just before what turned out to be a fairly dramatic up-and-then-down day. Sure it’s tempered in the evening trade, but that doesn’t mean markets hold up overnight. What will matter here is whether any rebound effort merely rallies to the breakdown point and then heads lower. That point is the rising-daily-trend outlined in the video.