Shorting the Dow is expensive

[786Trader]

Don't fight the Fed, which should be amended to also include, don't mess with Robin Hood. Dow is again flirting with 28500 plus, despite the lack of the ever elusive  stimulus, seriously high unemployment, whole sectors of the economy moribund or absent without leave (hospitality, air transport, entertainment such as movies, live events), plus Covid still has not had the temerity to exit stage left, as cases continue to rise. Not to mention the massive deficit and corporate debt, which they frankly don't seem to give two turds about.  Equity traders ignore all of these details in favour of a rose tinted future where the only way for the Dow is up. And up. The market corrected in September, took stock for exactly a day and then headed for the heights again. Dow futures do not reflect the state of the US economy, they reflect a casino in full risk on mode. And Casino it is. Hence, shorting the Dow is expensive, as it is defying logic or common sense, there is so much liquidity and is, it seems the only game in town. 

Logically, the Dow should be sitting around the  25500-26500 mark, maximum. That price more fairly reflects the state of the economy. Apparently not though and equity is worth whatever the market will pay, such is the power of free/cheap money, market forces and an army of traders purchasing more and more equity, even if that equity will only yield a dividend of 1%. In many cases dividend will be negligible and it is the expected increase in value of the stock that will be the yield. All of which makes eminent sense, when not in a recession. However, the inconvenient truth that America is struggling economically, is nursing mass unemployment, has a health crisis and is barely moving  is being willfully ignored. It's like the world has gone a bit mad, in this crazy 2020 year. All of this has made shorting the Dow an expensive business. 

Oil on the other hand has behaved in a consistent manner according to supply and demand. As has gasoline, which is a relief. Storm Delta has proved that nicely (supply shrunk as 3.4 million BPD were cut off from supply and prices adjusted accordingly). Not everything is as crazy as  American equity, which is ironic as oil and gasoline traders are rarely the personification of probity or common sense.

Crazy 2020. Totally crazy.

[dmedin]

13 minutes ago, 786Trader said:

Equity traders ignore all of these details in favour of a rose tinted future where the only way for the Dow is up. And up

 

The whole of Western civilization hinges on the performance of the American stock indices.  Believe me.  The biggest drop in the history of EVAR lasted only a few weeks and has already been corrected.  Buy and hold the U.S. indices. 

[786Trader]

Interesting, until western civilisation finds alternatives to American indices and the USD. Wont be long. Your are right to recommend buying and holding US equity indices for now. It is still horribly over valued and over bought (imo). But it is also the biggest game in town (the planet) atm. It is in full on casino mode. Risk on and on and on. And the Fed will underwrite it all.

[Kodiak]

"How The Fed Is Using Financial Engineering Alchemy And Leverage To Boost Stock Prices Without Buying Any"

https://www.forbes.com/sites/vineerbhansali/2020/07/01/how-the-fed-is-using-financial-engineering-alchemy-and-leverage-to-boost-stock-prices-without-buying-any/#722964ac1e16

 

[THT]

Only trade what you know not what you think you know - The direction is upwards regardless of the funymentals

Markets defy logic and logical reasoning for 1 pure reason:

1. Markets confirm to the movements that the cycle in play force it too

I cannot tell you how much sense the markets make once you understand cycles and know when they are happening - The American markets are performing EXACTLY as expected 

If we rise into Feb 2012 expect another plunge, if we fall into Feb 2021 expect a rally - either way the market will be going up - BECAUSE it HAS to, the USA markets aren't doing what most people think they are doing

 

 

Edited October 9, 2020 by THT

[THT]

10 minutes ago, THT said:

If we rise into Feb 2012 expect another plunge, if we fall into Feb 2021 expect a rally - either way the market will be going up - BECAUSE it HAS to, the USA markets aren't doing what most people think they are doing

2021

[dmedin]

The only people making money consistently are the advisers, brokers and others who get salaries and commissions.

Besides that, a few tricksters selling courses and books and 'analysis'.

The punting public gets shafted time and time and time and time again.