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If you were with me at the Black Diamond Conference in beautiful Carlsbad, Calif. last week, or if you watched with us via the live webinar, I hope you found the presentations helpful – and profitable.
But if you weren't with us last week, don't worry. There's still a chance for you to see what my colleagues – Michael A. Robinson, Tom Gentile, and Rick Rule, to name a few – and I were talking about. My team and I will tell you all about it later this week.
In the meantime, I have a special treat for you.
You've been hearing the words "volatility," "crash," or "catastrophe" so often that it's probably starting to get old. That, or worry you more. Either makes sense.
But today, I'm going to share with you something I usually only reserve for readers of my elite trading research service, Zenith Trading Circle. And I don't do this often, folks.
Today, I'm going to give you a peek inside Zenith.
I'll tell you what you shouldn't be worried about, what you should look out for, and, most importantly, how you can profit in the face of it all…
Market "Mechanics" and What They Mean
What's going on may seem a little frightening.
But what's really frightening is what I've been railing about for years: market "mechanics."
Now, there's nothing wrong with the U.S. economy, earnings, or valuation metrics of the market.
What's wrong is how the market trades, what moves it, how mechanically incremental trades by high-frequency traders mask thin volume issues, and the true lack of liquidity when sell-offs happen.
But that's old news.
The new news, what I've been railing about for a few years now, is about the so-called "passive investor movement" and the products they employ.
We might be where I've said we could get to. But the jury's far from in on that yet.
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The real deal is this: There's more than $2 trillion in passive investment instruments, meaning indexed mutual funds and indexed ETFs. If those "passive" investors become "active," we could get another 1987 kind of moment.
We're not there, but we could get there.
The mechanics roll like this: Take ETFs, because they're the trigger instruments here, just like portfolio insurance was in 1987. If passive investors in indexed ETFs liquidate them, the "authorized participants" who run those portfolios must liquidate the underlying stocks that make up those ETFs.
Think about it. If you're running a trading desk that's getting tons of sell orders to dump ETF shares, and you know you must sell all the stocks that make up every unit of all those ETF shares, and it looks like there's going to be more panic selling, what are you going to do?
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
He helped develop what has become known as the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of 10X Trader, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade.
Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps.
Shah is a frequent guest on CNBC, Forbes, and Marketwatch, and you can catch him every week on Fox Business's "Varney & Co."
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.