We are seeing some of the WORST numbers possible for the economy and the stock market is UP. What the hell?
Seriously. I sometimes think this is an entire operation that's just trying to take all the money from right wingers.
DWAC? Down massively. Conservatives? Shorting the market. Election frauds? Keep happening.
This is just conjecture on my part, but I used to be a futures trader, and I have a good suspicion of what's going on.
It is known that large trading houses are holding massive short positions in gold and silver, artificially suppressing those prices. They are also using those paper contracts as margin on their trading positions. If the markets fall, margin calls will force them to cover. As you know, in a falling market, precious metals tend to rise, so it's a double-edged sword. The paper contracts are worth less, and they will have to then sell some or all of their long positions in equities when those prices are falling as well.
So, what they do is manipulate the market indexes with futures contracts, mostly in the S&P. Those contracts control highly leveraged dollar-amounts of those indexes. By placing upwards pressure on the indexes, they prevent a correction to the downside.
But you also have to examine why the equities are so high in the first place. When I was trading, I was both a technical and fundamental analyst. Nothing has changed in the past several years. By my reckoning, the Dow should be in the 15,000 to 18,000 range. What's going on? The explosion of ETFs has allowed an unregulated corruption of equities, where many, many multiples of outstanding shares are allowed to be "owned." If all those phantom shares of ETFs were sold, there would be a crash of epic proportions...instantly.
There is much, much more going on, but that's the low-hanging fruit.
Some questions if you have time:
Why 15-18? Is that because of the sudden huge jump in volume from Nov 2016 onward?
How do ETFs facilitate phantom shares? Lack of auditing?
Seems to me like the prevalence of Market Makers with "infinite liquidity" are one of the main drivers of phantom shares.
You're correct in your observations. Take a look here, and expand the chart to 10y: https://www.barchart.com/stocks/quotes/$DOWI/interactive-chart Fundamentally (that is, in terms of TRUTHFUL market share, growth, etc.), markets have not grown significantly since 2016. See the wild swings, evidenced by the long OHLC lines, compared with pre-2016 levels? That's not normal volatility -- that's manipulation. That's Quantitative Easing on steroids.
Remember when Trump was campaigning, and he said that the markets were in the biggest bubble he'd ever seen...in 2017? Why, all-of-a-sudden, would that not be an issue any longer, if there wasn't a subsequent correction? The covid selloff wasn't a correction...it was just a minor blip.
The SEC is corrupt. No one has placed a mandate on their desk to limit ETF trading, so no one takes it upon themselves to do it. Perhaps there are payoffs happening to get them to look the other way (like what happened during the mortgage meltdown and the Standard and Poors, and Moody's bond ratings).
The ETFs aren't the only investment vehicle causing phantom shares. Futures markets in the S&P, Dow, and Nasdaq, do it too. There are many, many more contracts issued than can be supported by the underlying securities. The reason this has happened is because there are just too many institutional traders with ridiculous amounts of money allowed into the game. There just aren't sufficient places available for them to put their money to earn any sort of return, so the way they do it is collusion between partners to manipulate the system, and get regulators to look the other way. Your comment about the "infinite liquidity" is right on the money.
Another factor influencing markets to the upside is corporate buybacks. Corporations borrow money at low rates to purchase their own outstanding shares, which they "lend back" to themselves by selling when rates are higher. Their very purchasing of their own shares triggers buy orders from other institutional traders. This is part of the collusion I mentioned. CEOs get big bonuses if their stocks outperform. It's all a game.
My advice to traders, especially those who are new, and have limited funds, is learn how to scalp. Don't "buy and hold." If you do, you let yourself become vulnerable to market dynamics you don't understand. Plan the trade, trade the plan. If a trade doesn't go as planned, cut losses short. There's a complete method to this.
Thanks for the answers.
I think some of the uptick is also due to inflation so I could reasonably see an additional 15%~ "growth" but not true value increase from the 15-18k.
Most of my money is out of the market except for true long buys and some GME for the short play. I will look at scalping but I am concerned about market crash exposure and have no idea where to start on good picks. My friend did it for a while by focusing on daily high volume stocks that show up on charts across brokers.
Here's a tip for you if you're looking for stock picks. This is the best free screener out there: https://finviz.com/screener.ashx However, a HUGE caveat. Always keep in mind overall market risk/vulnerability when using a screener. You might find an awesome "flavor of the day" using a screener, but if the overall market is at a top, or a big selloff occurs, your good pick will go south with the downdraft. If you use the screener a bit, and get used to the peculiarities with market ups and downs, you'll see patterns...the most basic being more results with your identical variables in "healthy" markets vs. market tops.