If you’re with me at the Black Diamond Conference in beautiful Carlsbad, CA, or watching with us via the live webinar, I hope you’re finding these presentations help – and profitable.
But if you’re not with us right now, don’t worry. There’s still a chance for you to see what my colleagues and I – Michael A. Robinson, Tom Gentile, and Rick Rule, to name a few – are talking about this week. My team and I will tell you all about it next week.
In the meantime, I have a special treat for you.
You’ve been hearing the words “volatility,” or “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.
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’ masks thin volume issues, and the true lack of liquidity when selloffs 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.
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?
DUH, you’re going to short all those stocks before you get orders to sell them. Why? Because that’s how you make money for your trading desk, and that’s how you make a big bonus.
You short ahead of sell orders in those ETFs.
OOPS, that means you’re knocking down the prices of the stocks that make up the ETFs; that means they’re trading down, and that means more passive investors are going to become active sellers.
THAT’S THE ONLY THING TO WORRY ABOUT.
Oh, but it’s big!
Are we there yet? NO. But can we get there? Yes.
And, if we do, we’ll get there quickly, just like in 1987. And that’s fine!
Why? Because that was a monumental buying opportunity.
And when those opportunities arise, readers of my Zenith Trading Circle elite research service will be ready.
If there’s anything that my readers have learned in their time with me, it’s that no matter the market conditions, there’s a way to profit.
Here’s just a minuscule snapshot of the profit opportunities we’ve had this year alone:
- 98% gains on HYG puts on October 11
- 100% and 91.67% gains on two halves of FXI puts on October 11
- 100% and 206.67% gains on two halves of RIG calls on September 19 and 21, respectively
- 100% and 9.52% gains on two halves of MS calls on August 28 and 31, respectively
I’m being modest here. If I listed all the chances readers had for the entirety of 2018 so far, you might get too jealous that you haven’t been on board yet.
But, that’s what we do at Zenith Trading Circle – readers get opportunities just like this every week.
In fact, I’ll be dropping my next recommendation early next week, so it’s not too late for you.