Start the conversation
So here we are, heading back to 18,000 on the Dow Jones Industrial Average after dipping below the 15,500 mark in August, a 2,500 point move up.
If you've been in the market all along, if you got out during the market sell-off, if you got back in anywhere going back up, or if you've been on the sidelines all this time, there's a good chance you're wondering how to trade the market at these levels.
I'm going to tell you.
That's right. I don't do this often, but today I'm going to show you how I'm going to trade it and why. You can follow along for free.
If I'm wrong, we lose a little money. As a professional trader and hedge fund manager for many, many years, I've put on lots of trades that didn't go my way. We'll plan to get out of the trade with a small loss and get back in the trade again or switch gears and go long.
If I'm right, you'll make a boatload of dough and post a nice comment here.
Here's my thinking…
Cheap Money Brought Markets All the Way Back
Markets have been riding zero-interest-rate policies and quantitative easing for years and are duly inflated. Everyone knows that.
What we don't know is how this game is going to end.
We don't know what the "free-market" level of stocks should be because free markets have been hijacked by central banks acting like central planners.
But that hasn't mattered because more and more QE and "stimulus" programs flooded market players with more and more liquidity, meaning more cheap money to play with.
And since economic growth has been a questionable route, most of that money went into short-term positions in financial markets. They're short-term positions not because the investors who've been chasing stocks higher are necessarily short-term traders, they're short-term investments because they can be liquidated on a dime.
We saw what happened back in the summer of 2013 with the "taper tantrum," when then U.S. Federal Reserve Chairman Ben Bernanke hinted the Fed was considering winding down asset purchases.
All hell broke loose and markets tumbled.
Lots of stuff happened between then and this past summer, but not a lot of it mattered. Markets kept being fed their baby formula and kept getting fatter.
That is, until this past August…
Stocks fell globally, and very quickly, because the Fed was talking about raising rates and all of a sudden China decided it would devalue its currency.
That caused a major panic on account of a rising dollar (if the Fed raises rates, the dollar should appreciate) in the face of a falling Chinese yuan would mean other emerging markets countries, to compete for exports with China, would have to depreciate their currencies or the markets would do it for them. The panic concerned how, with depreciating currencies, foreign borrowers would pay back U.S. dollar-denominated loans to the tune of almost $9 trillion.
Oops. The Chinese backed down instantly, the Fed backed down instantly, the ECB suggested more QE to come, the Bank of Japan choked, China had to lower interest rates and reserve ratios again.
It was a mess.
Here's What's Pushing Markets Higher Now
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.