Thursday, July 21, 2016

Why Global QE-Infinity Will Not Lead To The Next Bull Market

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*QE is a sign of desperation and risk now, not a sign of success.
*The market is a CB QE hot potato, but not so fundamentally driven.
*And the QE inventor, the US might just about to be pulling back.
*To be fair, unless the economy picks up we see more downside and the breakout as a one-time event.
There is some fair attention given to the heavy global rounds of quantitative easing ("QE") and the chance that it can spark markets (NYSEARCA:SPY) to continued new highs. We think this is a very risky hot potato because underlying it is the same weak, slowing fundamentals. We want to show why we think the bull move will not last and, just the opposite, the amount of QE is a major sign of global risk.
The market broke out but we don't think it is sustainable.
We've shown that the market likely broke out as a record amount of investors post-Brexit were caught short the following weeks for the US jobs report and options expiration.
Here's the record options volume in June that we think was heavily tilted to the short side.
Source: CME
This was the scene thanks to Brexit in June. Everybody went short (around June 24th). Jobs came out August 8th and caused people to cover and then again the following week into options expiration.
The combination of huge Central Bank ("CB") liquidity and a major short position plus the jobs helped propel markets higher the three weeks following Brexit. We agree.
That said, we think that was then. It was a three pronged liquidity event that has now passed.
The market can go back to whatever it was doing.
Here's where we think the market will go.

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS