Dear fellow bears, did you recognize that logic and valuation currently doesn`t help? Currently short positions, whenever taken, just vapotize into thin air rather quickly. As explained in a previous post, stock markets do not function by value. It is a fight of banks (perma bulls) vs Hedge Funds & Speculators (attempting to be bears from perceived overvaluation). The bank is perma bull by its function, as previously explained: bank client cash deposits and savings are used (legally through the small print in a bank`s general business terms) as the bank`s own money to buy stocks and engage in long derivative positions in all stock indices in order to inflate stocks and index values in order to inflate banking products`prices in order to generate profits. Banking products such as Funds and Structured Products can not generate profits unless these products increase in value. The banker`s personal profit, which is his yearly bonus, can also only increase if Banking Products increase, especially with customers holding the products or signing off on new products through the wealth management and investment divisions of the banks. At low interest rates, banks can borrow indefinite money from central banks as long as the printing machine runs. Even if the printing machine runs only (value) fumes, there is not much the Hedge Fund or Speculant can do. This is especially true in regards to the European Stock Markets, as the ECB borrows on negative interest rates. Imagine that US Brokers require for EUR cash deposited as margin the customer to actually PAY 5.570 EUR yearly per 1.000.000 EUR deposited over 100.000 EUR. yes, that 0.557% of your deposits on an annual rate over 100K. Quite a few institutionals are still holding European Shares as collateral or even put their cash into EUR-Stocks when using Margin Capital. Which is the reason why European Stocks such as UK Stocks curently hit new all-time highs as they are paired with a 30-year low sterling. We all know that by now. The EURUSD is between 1.11-1.12 that most currency traders have given up and are looking towards the much more volatile JPY currencies to capture profits.
Is there light at the end of the tunnel for bears? Well, yes, but it is still quite far away. Especially before the US election, Wall Street will defend stocks at least into early November. When the first rate hike by the FED occurs in December, don`t expect too much. Market Participants will claim the hike was priced in. The first real light can only occur in January 2017 after the new US president has been sworn in, if it were to be Trump, be sure the news will put all blame for a weak stock market on this event. If it were Hillary, it may be as late as March 2017 until a bear market occurs. It seems clear to those with eyes and ears that by March 2017 another interest rate hike will occur and much more importantly, both the FED`s and ECB`s buying program will stop, maybe even over night. This might be the trigger the bears are waiting for. So unless there are two (2) rate hikes AND the support program, now called Quantitative Squeezing by Hedge Fund Insiders, is abandoned, the bulls will slaughter the bears further and with ease as currently happening effortlessly.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.