Here’s What’s Going to Happen

The S&P 500 is going to test one more time around the recent lows. Then it’s going to climb a wall of worry and easily establish new highs in 2016. How do I know? Because markets don’t enter catastrophic downturns when every investor is expecting it. That’s how you get a correction and then a resumption of an uptrend. There is plenty of technical damage to work off, but look at the facts.

The zero bound continues. Cheap money still exists and that money is going to get spread around in one last gasp to extract economic rents from as many greater fools as possible. The world is drowning in debt but that won’t matter until the last breath is drawn and the final game of musical chairs is played.

Regarding the current situation, 2010 and 2011 illustrated perfectly how the large money will sucker investors twice before supporting the next leg up of this market. Technicians call them inverted heads & shoulders. I call them inverted STFU. Observe.

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Watch for the same set-up before allocating any hard-earned capital. The reason this scenario works and will again is because of good old fashioned herd mentality. Markets correct. The experienced players advise to stay out and expect a rebound with a retest of lows before jumping back in. The low gets retested and everyone rejoices by betting on red and black, then the rug gets pulled out one more time. The strength of the current bounce is prognosticating another dip before the markets put the climbing gear back on.

Bet accordingly.