Both a fundamental and solid technical opportunity with great Risk/Reward. The economy is in a dire situation due to Covid-19 pandemic, but also with an oil price crash due to a massive oversupply. Jobless claims in the US and UK are on the rise and it is highly likely that the economy is going into a recession. Estimates are that due to the entire world being locked down with massive disruptions in supply chains, it may take a long, long time for the economy to even be similar to the previous decade. Worse still is that central banks have interest rates at historic lows, which gives them less firepower to fight a recession. As opposed to lowering rates, central banks have been buying up assets to try and provide stimulus to the economy.
Saying all this, and considering the negative effects of Covid-19, the S&P and other markets have been very bullish. The S&P is up approx. 30% since the March 23rd lows. I believe this to be for a few reasons.....
1. There is nowhere (besides bonds) that investors can get a good return on their capital besides the markets.
2. Stocks have been (since 23/3/20) very cheap in comparison to the previous decade. The smart money bought during the period from 23/3/20-26/3/20 by looking at buying volumes on the daily chart. The bullish behaviour of the market tends to make me believe there has been a herd mentality.
3. Caught in a Bull Trap. With such a surge, investors may have got the "if I don't get in now, it maybe too late" concept and may have been panic buying.
What does this mean to us? Well, there is a solid short selling opportunity as the market has lost connection with whats actually happening to the US & global economy. The world has been thrown into a complete shock, by something we have never seen before. Schools are closed, workers are at home, retail sales are down and unemployment figures are growing. People are struggling to pay their mortgages, airlines are not operating and supply chains are being heavily stretched etc.
In my opinion the economic backlash is going to continue to be massive, and the ripple effect is going to continue. The global economy is highly likely to go into recession (which generally last 12-18 months, while the average bull market lasts 4.5 years. THE BULL MARKET AFTER THE HOUSING CRISIS OF 2008 LASTED OVER 10 YEARS. So based on those numbers we were well overdue for a correction.
This is for educational purposes only and is not investment advice. All ideas are my own and they are just my opinion.
Saying all this, and considering the negative effects of Covid-19, the S&P and other markets have been very bullish. The S&P is up approx. 30% since the March 23rd lows. I believe this to be for a few reasons.....
1. There is nowhere (besides bonds) that investors can get a good return on their capital besides the markets.
2. Stocks have been (since 23/3/20) very cheap in comparison to the previous decade. The smart money bought during the period from 23/3/20-26/3/20 by looking at buying volumes on the daily chart. The bullish behaviour of the market tends to make me believe there has been a herd mentality.
3. Caught in a Bull Trap. With such a surge, investors may have got the "if I don't get in now, it maybe too late" concept and may have been panic buying.
What does this mean to us? Well, there is a solid short selling opportunity as the market has lost connection with whats actually happening to the US & global economy. The world has been thrown into a complete shock, by something we have never seen before. Schools are closed, workers are at home, retail sales are down and unemployment figures are growing. People are struggling to pay their mortgages, airlines are not operating and supply chains are being heavily stretched etc.
In my opinion the economic backlash is going to continue to be massive, and the ripple effect is going to continue. The global economy is highly likely to go into recession (which generally last 12-18 months, while the average bull market lasts 4.5 years. THE BULL MARKET AFTER THE HOUSING CRISIS OF 2008 LASTED OVER 10 YEARS. So based on those numbers we were well overdue for a correction.
This is for educational purposes only and is not investment advice. All ideas are my own and they are just my opinion.
