Stock market under pressure (bull trap forming?)
In this video I discuss both the shorter term picture as I see it and the potential long term direction for the market. I take a look at the US indicies including the Russell 2000 have a look at the what the Dow transports index is telling us and also a look at volatility. I have added a couple of new small short positions to the BEAR FUND portfolio shorts on the TLT and IEF (bonds).The positions are only very small at the moment and will grow over time. Why have I started shorting bonds? Well with the recent panic, yields have dropped to new all time lows in the bond market which has left them very overpriced. If a bull trap is forming in the stock market it will coincide with a sell off in bonds as confidence starts to return and a risk on attitude to some small degree comes back into play and so bond prices will fall. However I also want it to be part of a longer term strategy, It is no secret I have been bearish for a long time but I only get more so as time goes on. If the global economy is heading into a major recession which I believe it is we should witness a huge deflationary event as asset prices accross the board could collapse in the coming months including real estate and even gold and silver . This will in turn intiate a response from both government in fiscal stimulus and the FED in monetary stimulus huge bail outs and money printing will follow which I beleive will result in mass downgrading of credit including soverign debt. High yeild corporate debt i expect to impode completely and alot of what is currently "investment grade debt" held by the main buyers which are pension funds will see a down grade to junk, as this happens the pension funds will go bust resulting in even further bail outs and money printing leading to massive inflation. This in turn will crush the dollar,
this mass inflation will result in interest rates going sky high which of course means bond prices will collapse.