As of last night’s close we have massive profits of the order of 1000% on the
SPY Puts recommended in the article of 21st February as insurance for portfolio protection and / or for speculative gain. After the breakdown and deep plunge of the past 3 weeks that was highlighted as being possible in that article the market is now heavily oversold and quite some way below a still rising 200-day moving average, a circumstance that could lead to a dramatic “snapback” rally if even a slight improvement in sentiment occurs. This would be because shorts are likely to stampede for the exits if any sort of rally gains traction. What could cause a slight change in sentiment? – the current risk of a partial government shutdown for budgetary reasons being averted (decision today) or some progress with the Ukraine peace talks come to mind. These may be only superficial short-term considerations but it doesn’t matter. Longer-term the breakdown of the past 3 weeks is viewed as a serious bearish development, so if we do now see a significant rally it will be viewed as a countertrend move so we may short it when it is thought to have run its course.
The
interpretation of the 21st February that the market was rounding over beneath a giant Distribution Dome and on the point of breaking down from a large bearish Rising Wedge has been proven correct…
Here is the 18-month chart that was in the article of the 21st…
Not surprisingly, the SPDR S&P500 ETF got severely hammered as its 6-month chart shows and the Puts recommended around the $580 strike have skyrocketed in price.
You may recall that a few weeks ago
it was pointed out that Red Cat Holdings (RCAT) looked set to be slammed and that this circumstantially suggested a broad market drop. That has happened, although it didn’t quite get to our down target at $4.00 (it may later) and if we get a snapback rally now in the broad market Red Cat could have a substantial rally back to the underside of its Head-and-Shoulders top where it could be shorted.
Just before the open today an email was sent out recommending that these Puts be closed out because of the risk of a larger snapback rally gaining traction. Another reason that this might be the case was the total eclipse of the moon last night, which often synchronizes with market turns, due to the associated collective changes of emotion. This is not hocus-pocus but a statistical fact. Here are several photos of it taken by me in the middle of the night…
These photos were taken with a camera, not a telescope, and my camera could not cope with the low light levels during totality – you can find much better photos online.
What has been truly extraordinary over the past few weeks is not just the resilience but the strength of the Precious Metals sector. The reason for this is that the entire financial system is coming apart with dire implications. We will therefore be shifting our attention to the PM sector next as we for sure don’t want to miss this.
End of update.
Posted at 10.40 am EDT on 14th March 25.