As summer winds down, we want to take a look at the next 3 months, which are expected to be extremely volatile. The election, Covid, and the Federal Reserve will provide the ammunition for wild swings in both directions. We also expect a major intermediate degree correction, ICL, during the next 3 months which will scare most investors enough to panic sell.
Institutional money is trailing the market this year and attempting to play catch-up by taking excessive risk. We all know how that story eventually ends.
If there is one company that projects the broad market's future, it is Apple. It is part of the mega- cap tech stock group that is bought constantly buy the Fed through its members to keep markets on an upward trajectory. In past weeks, we have gone over the simple fact this is not a broad market rally. It is being led by just a few names and the overall breadth of the market is terrible. All of this is indicative of a market fueled by artificial liquidity.
Apple has had a parabolic climb. Unless this market is in a blow-off bubble phase, we are going to get a nasty tech correction. We do not see a bubble in the stock market at this time. The bull has many years to run led by the innovation cycle of robotics, AI, biotech, nanotechnology etc.
Let's take a closer look to how overvalued Wall Street's favorite stock is (charts courtesy of RIA):
The Fed and US Treasury had no choice but to inflate the market as high and as fast as possible. The alternative path would have led to global depression. However, for every action there is always a reaction. You are going to see that reaction over the next few months.
We will start to reveal hedging strategies into the fall and early winter months to our gold members.
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