We are down six out of the last seven trading days hitting a new max drawdown three days in a row without a bounce. The market continues to be extremely challenging with never ending chop. We are down on the month and down on the quarter but up on the year in the 200K and Stock Index Portfolio live trading setup.
The 200K Portfolio was down -$3,500 and the 50K Portfolio was down -$900 on the day.
We had some nice shorts going our direction with no follow through before the typical stop running price action. We continue to see a lack of follow through after a down day from a news event. The price action is not typical of the type of bear markets I have seen in the past.
I am pausing trading for now for a research break. It is best to preserve capital since we are up on the year. If you have a subscription to a portfolio then it will get extended for the amount of time that we pause our trading while we take a research break. You can continue if you wish or trade individual strategies.
My biggest concern is the market continues to be broken from where I sit. Additionally, the bear market hasn't even started yet in my opinion.
I don't believe a real bear market would constantly deny intra-day short positions and bounce. It certainly happens during bear markets but not every day. The market has only re-priced at this point to levels that are still higher than I believe we would be if there were never a pandemic or a $4 trillion addition to the balance sheet.
We still need a washout and a genuine bear market cycle.
The Fed's balance sheet was reduced by $16 Billion last week. It is down only $10 billion on the month. The Fed has 7 days left to make good on their commitment of $95 billion per month. I don't think they will honor this commitment. There are no consequences nor accountability for the Federal Reserve if their commitments are not honored. The 400 PhD's at the Federal Reserve who didn't see inflation coming, can now do whatever thy wish to stop it.
The excess and bloated liquidity causes the market to continue to levitate and trade against shorts. We only see the market going down on unexpected news events. Yesterday during the surprise hawkish FOMC statement, the market rallied all the way up to the low of the CPI news (which was also a surprise) before it traded lower. The sum of the sell off from September 13th high has all been captured during the surprise CPI release and the surprise hawkish FOMC on Wednesday. The sell off from August 26th is captured from the previous FOMC minutes.
Once the market does start to trade like a genuine bear market, I'm concerned there will be limit moves and flash crashes. Risk management is key here.