We expected the markets to correct last year, but it was projected/expected to occur in two phases. The sanctions against Russia and not the war have exacerbated the situation. Hence, it appears that the market is experiencing both these corrections simultaneously. Does this mean the markets won’t experience a secondary correction? If the energy crisis in Europe is not resolved, then despite this strong corrective phase, the odds are very high that the markets will experience another correction in the 4^th quarter. Stable energy and food prices are essential ingredients for growth and market stability. Market Update June 15, 2022

The stock market rally we expected and projected would occur coming to fruition. However, unless the picture changes dramatically, this rally will fizzle out around October.
 

The monthly chart of TQQQ

(Click on image to enlarge)

TQQQ is a highly leveraged ETF (3X). Notice anything interesting; despite all the crazy action since 2017, you would still be in the black if you had held through thick and thin. The low in March 2020 was around 8.50. Let’s assume you paid an average price of 15.00 for your shares. This ETF soared to the 90 range. A tactical Investor always takes some money off the table once an investment shows healthy gains. However, that is not the main point. The main issue we are trying to convey is that even a highly leveraged instrument such as TQQQ has trended upwards over the years with all the slippages involved. Bear markets offer investors limited opportunity, but the opportunity factor is almost limitless in a bull market.
 

The monthly chart of LLY

(Click on image to enlarge)

Let’s look at a boring company such as LLY as TQQQ is not something most would hold for years on end. One look at this chart puts an end to the ‘World is going to end argument”. You could have purchased this company before one of the worst stock market crashes (2008 to 2009) for around 60 dollars and still made out like a bandit.

Inflation in the 70s was far worse, and the markets resolved that issue. The same analogy applies to today’s markets. There are only two easy hedges against inflation: real estate and the stock market. The former is out of the average person’s reach and requires more significant amounts of money, leaving the stock market as the primary option for the masses. Many experts claim this is the end of everything; this should be music to your ears. Hedge funds were also busy dumping shares over the past few days.

The smart money dumped stocks at the fastest pace on record as a vicious selloff sent the S&P 500 into a bear market. Hedge funds tracked by Goldman Sachs Group Inc. offloaded U.S. equities for a seventh straight day Monday, with the dollar amount of selling over the last two sessions exploding to levels not seen since the firm’s prime broker began tracking the data in April 2008.

The exodus came as the equity rout worsened amid concerns that the Federal Reserve would need to hasten its inflation-fighting campaign at the risk of causing an economic recession. As stocks careened and Treasury yields spiked, the fast money rushed to double down on bearish wagers.

The smart money dumped stocks at the fastest pace on record as a vicious selloff sent the S&P 500 into a bear market. 

Hedge funds are not smart money; some are better positioned than the average joe, but by far and large, they fall under the umbrella of dumb money. Hence by far and large, they will miss out on the summer rally of 2022.

The Geopolitical situation is on turbocharging now as the dumbest humans alive happen to be the leaders of the Western World. Calling it a recipe for disaster would almost sound quaint. The situation could change on the fly but never forget this slogan. The larger the deviation (from the norm), the better the opportunity. The top players are greedy, and the end game is always to make more money, and there is no way they can make more money if the markets crash permanently. They will create the illusion of a permanent crash, but it will only be an illusion, and those that fall prey to it will cry for years to come. You can bank on that. Market Update May 30, 2022

Historical Sentiment values

Clearly, sentiment data is being manipulated. How is it possible for bearish sentiment to be lower on May 1 than today? Secondly, how is it possible for bullish sentiment to be higher today than it was on April 17 and May 30? The only simple explanation is the data is being manipulated on multiple fronts. This is a silver lining, for it indicates that big money must resort to these types of shenanigans to deploy all the capital they accumulated after the COVID crash. Massive amounts of money were deployed during the COVID era, and we estimate that each prominent family at least doubled its net worth during that short phase. To get out after deploying so much money, they must create a boom cycle that lasts at least 3X longer than the bust cycle. We feel they might even extend the next cycle by a factor of 6.

A final selling wave will set the bedrock for the next massive rally. Investors don’t understand that the best time to buy is when everything looks bleak; instead, they wait for things to look bright before jumping in and feel very grim when the bottom falls out. Market Update May 30, 2022

The strong selling wave the markets experienced over the past week should culminate with a selling climax. Everyone and his grandmother are now in a panic phase and are having doubts, ultimately culminating in a sharp reversal and furious stock market rally. Nine months ago, everyone was waiting for a pullback to jump in. Almost everyone complained that prices were too high and that it would be fantastic if many of the high flyers, like AMD, NVDA, TSLA, GOOGL, AAPL, WMT, TGT, etc., let out some steam. But now, the mantra has changed from how high stocks can go to how low they will trade. When opportunity knocks, be sure not to shy away. In the short term, the outlook will remain volatile, but as history indicates, the best time to buy is when you and everyone you know are scared to press the buy button.

Instructions on how to utilize the above gauge are reserved for paying subscribers. The markets are trading in the oversold zone, and the risk-to-reward ratio is now in the buyers’ favor.
 

Conclusion

You have to be in it, to win it, or out of it, to lose it. The early bird gets the worm, the late bird the bullet. Nothing ventured, nothing gained. Remember these sayings when it comes to investing, for the masses are notorious for buying and selling the stock at precisely the wrong time. While history does not repeat itself it often rhymes. Summer Stock Market rally 2022 is becoming a reality but don’t be enamored by this rally, for unless the trajectory changes dramatically, it will fizzle around October. However, there is plenty of time to book serious gains between now and October.

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