Bearish Markets in September?

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Markets have been phenomenal.  They seem to have become insensitive to all the adverse news – be it with what is happening in DC, or with NK or anywhere in the world – and have been staying close to record highs with investors & traders thirsting for more. However, I am expecting September to be the month that would bring a decisive turn to this market if recent volatility spikes are any indication.

Let us get this straight – the companies have been performing well and the economic data has been generally good. Jobs are getting added, unemployment rate is down & consumer confidence is up (though I have learnt to take some of these data with a pinch of salt, always). So what could possibly go wrong?

Markets run on sentiments and so I would play heed to every adverse news from here on, based on 4 indicators that are flashing warning signals.

  • Rise in demand for safe-haven assets like Gold, silver and treasury bonds over the last one month (indicates fear)
  • US 10 year & 30 year treasury yields dropping below major trend line supports as well as their respective 50 Week MA and 200 Week MA
  • CBOE put-call ratio dropping considerably in the last week of August, with put volumes among the lowest seen in the last two years (indicates extreme greed)
  • The appetite for the Japanese Yen that has been growing over the last two months (with NK threats & the Washington DC impasse, this appetite for the Yen is not going to go away soon).  After hitting a low in Dec 2016, the Yen (FXY) has now bounced back above its 50 Week Moving Average.

Markets can ignore all these warnings and keep going up, so I am not expecting a 20% crash. But surely there are enough signals that warrant a decent correction in September before the bulls can start betting on another good ER season (who knows how much damage Hurricane Harvey is going to inflict on the GDP and company performances? Right now, no one)

In anticipation of the above, will be shorting the markets (SPY, IWM and may be QQQ) and remain long GLD, SLV thru September

About Venkat Pulakkad

Entrepreneur, management consultant, blogger & forecaster. Founder of Flourish Research Media that provides insights on markets, trading strategies & risk management. Currently an active trader with 20+ years of experience trading Forex, Stocks & Options. Areas of interest: Trend / Swing trading, Macro-tech analysis, building trading strategies, deploying Risk Management techniques, and helping / coaching traders to become successful traders. Twitter link:      
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