The markets sold off aggressively on Monday, with the Dow losing 179 points, or 1%, and each major index suffering similar percentage losses.
We've been highly overbought for some time, but this correction looks to be much more about the future of interest rates. More specifically, this weakness is about the FED and the month of December...will they in fact raise rates, following their meeting on Dec 15th and 16th.
You may remember my thoughts...but let's put them in one place, just to be clear:
First, after waiting 9 1/2 years to raise rates, I see NO WAY that the FED would raise rates just 9 days prior to Christmas ...a borderline insane decision that would ruin far more than just the "spirit" of the shopping season.
Can't you just hear business leaders, from all over the country, saying the following right after holiday sales stink (once again), with the stock prices of retailers having also collapsed in price:
"Ms. Yellen, retailers all over the country depend on a solid holiday shopping season for as much as 75% of their annual revenues and profits. The FED's decision to raise rates...for the first time in almost a decade and incredibly, just one week prior to Christmas...has completely destroyed our hopes of turning a profit."
In reality, turning a profit would be most retailers last thought...staying in business would quickly become their primary concern.
Second, assuming I am correct...and I am confident enough to use 90% as my figure...here's the most likely outcome over the next 2-3 weeks...including another prediction that no one else sees coming today:
1) The stock market will continue to work off its overbought condition, with additional selling pressure coming from those that mistakingly believe a rate hike WILL take place.
2) At some point in the next 15-30 days, and on the heels of heavy selling pressure in the markets, the FED will do something that will stun the "experts".
Without even waiting for their December meeting, Yellen will make a special announcement to the world that "a December rate increase is OFF the table"...hoping against hope that their confusing indecision and God-awful timing, has not already ruined the holiday shopping season.
Should the above scenario play itself out, everyone reading this will want to STAY FROSTY:
1) Make sure you are positioned for profits on the way down
2) As the markets drop, from their current overbought levels to oversold, use that weakness to take profits on your short positions, then reverse course and go very long stocks.
Obviously, we'll use the VRA Trading & Investing System to ensure we are positioned correctly.
If my predictions hold up, we can use this advance game plan to book some incredible profits (on top of the 830% in net gains for 2015).
Until next time, thanks again for reading...
PS; I honestly cannot believe that seasoned veteran after seasoned market veteran is now saying the FED will raise rates in December. Do they not have calendars? Do they not have common sense???
I know the FED makes huge mistakes all the time...with their 1000+ economists on the payroll...but raising rates for the first time in a decade...just before the holidays??
Insanity is the word that comes to mind...but hey, I'm sure the FED will make their decision based purely on the "data" and without any thoughts whatsoever on how a rate hike might affect the stock market :))