Yo Pit Crazies,
Below is a two-year S&P 500 chart, dating back to before the 2020 elections.
More importantly, it starts right before the vax got folks to go back outside again.
Also note, at that point tech stocks were flying and oil and gas stocks were in the basement.
That is the exact opposite now.
Markets have fads like anything else, and usually there is a demand reason for them.
Right now, folks don’t want stock … and there is a reason for that, too.
I’ll tell you why …
Bond Investors Are Demanding Yield!
The Fed can jawbone all they want, but the UK over the last two weeks is instructive.
Clean up the fiscal house or traders will demand higher rates. When the USA goes to roll its debts over, the same thing will happen.
That has folks spooked.
Investors and traders are spooked because the G7 governments keep spending like its 2008-2020.
The bond market is trying to shut that tap off, and remember they were driving rates higher at the start of the year.
The worry is if the government tries to restimulate via QE. My opinion is that would cause a massive spike in inflation expectations.
And that would be a real problem.
Stocks are weak because the Federal Reserve has sent the message it is no longer around to make equity traders happy.
The Easy Button is the G7 gets fiscal policy in line with central banker policy. That will be near the bottom in my mind, since things will be on a sustainable course.
The US government is over the limit re: what is an effective stimulus at this point.
Way over.
That might – I say might – happen after Nov. 8 in a divided Congress with some check on spending.
Neither party running both houses has historically done well in terms of holding spending down.
That also means we are in for more rough sledding for the next three weeks.
The Rundown
OP Mentoring
I made a 100%+ return on risk in Altria Inc (Ticker: MO) and 15% return on capital in three weeks. If you want to learn how to buy stocks with less risk, check out the Div+.
Power Income Trader
Bill closed some SPDR S&P 500 Trust (Ticker: SPY) put butterflies for an 18% gain Friday.
Pro Chat Room
Traders taking some dough into the weekend.
To Your Trading Success,
AG