Monday, June 27, 2016

Smart Money Knows Falling Stock Prices and Increasing Pessimism Are Bullish

While short-term price action supports blaming the British for a bear market in stocks, British Pound, and various other markets, it will become clear that the EU ruling elite are responsible for the turmoil. London, despite all the calls for doom and gloom, will remain the financial capital of the world unless they do something stupid like rejoining the EU.

The majority, a day late and dollar short in terms of timing, will only figure this out after trading accounts have been drained by bearish bets as stock approach their lows.  As Insight subscribers already know, US stocks as well as many other markets will flip rather unexpectedly when the majority turns extremely pessimistic (see Review of Sentiment); this is happening now. Headlines such as "Worse than any bear market you've seen in your lifetime" are turning the majority bearish, pessimistic, and preparing them to assume their historical role as the bagholders of trend transitions.  Smart money only has to recognize, wait, and fade the extreme pessimism of the majority.

The processes which could take a few weeks to months is unlikely to produce a bear market of lifetime.  If it was, Jim Rogers is far too professional of an investor to announce his position.  Be wary of these calls.

Headline: Jim Rogers on Brexit: 'Worse than any bear market you’ve seen in your lifetime'

The UK's decision to leave the European Union will lead to an economic crisis more severe than what the world faced in 2008, according to legendary investor Jim Rogers, chairman of Rogers Holdings.

“This is going to be worse than any bear market you’ve seen in your lifetime,” he said on Yahoo Finance’s “Market Movers” program Monday. “2008 was bad because of debt. The debt all over the world is much, much higher now. Stocks in the US, for instance, have been going sideways for 18 months to 24 months. That’s called a distribution by many people. When you have distribution for a year and a half, it usually leads to bad things.”



Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.