There are two rules in trading: 1) no whining 2) trade the next move, not the last.
Follow rule 1 and stop whimpering about the S&P 500's collapse from 1,420 to just under 1,300. Life is hard, buckle up and wear a helmet.
Once done weeping, the only question is how to position for the next big market move. In the attached video Breakout welcomes Todd Schoenberger of the BlackBay Group and asks him if the S&P's next Big Round Number will be a drop to 1,200 or a rally to 1,400.
"1,200, no question," opines Schoenberger the man who predicted a 35% 2012 drop two days before Christmas last year. Schoenberger then claims he "hates to be Mr. Doom and Gloom guy" immediately prior to ticking off Cassandra's greatest hits.
In no particular order, he is concerned about "debt bombs" in Europe, a slowdown in China, U.S. debt, unemployment, slowing GDP, bad earnings in corporate America, another Greek election, Italy!!, security concerns, and the "Fiscal Cliff" facing the US in early 2013.
It adds up to "chaos in the streets" and the Fed isn't going to do anything to stop it because it's an election year. As a trader Schoenberger wants "QEIII, IV and V" regardless of deleterious effects. He just doesn't think stimulus is in the cards because of the ostensibly independent Federal Reserve.
Under Schoenberger's scenario the S&P will end up closer to zero than 1,200. The problem for bears is the worst-case scenario seldom comes together just right. Even with the hideous confluence of events inflicted upon us in the last 3 weeks stocks have yet to drop the 10% needed to qualify as an official "correction."
The bearish case always seems smarter, largely because it is. Europe is going to unravel at some point, China will ultimately look out for itself at the expense of the rest of the world, and only God knows what's happening in our banking system and He's not talking.
Realistically, the European Central Bank will end up throwing unlimited amounts of capital into the abyss, forestalling the inevitable. Chairman Ben has spent four years creating and deploying new ways to stimulate. Eventually all this debt and fake money will crater the tape, not to mention the global economy. It's just not going to happen this year.
In a nod to Winthorpe and Valentine, Schoenberger and I have a $1 bet. He's says the S&P goes to 1,200 from here. I say we rally to 1,400 on little more than skepticism and stimulus.
We want to know your take: Which way is the market going to go from here? Let us know on our Facebook page or Tweet me @Jeffmacke
- Politics & Government