Volatile market decline to soon begin

The reopening of the world economies last week and the headlines about every economist on the planet being wrong about Friday’s US jobs report resulted in a stock market buying stampede.   Based on the total job gains representing only 21% of the US jobs lost since the beginning of 2020 and the four charts below stocks are overdue for a volatile correction.   

Subscribers to the Bear Trader, an algorithm which sends signals to buy ETF shares that go up when the market goes down are poised to benefit.   From March to May the gains for Bear Trader subscribers was a high as 44%.       

The chart depicts that the five leading tech stocks account for more the S&P 500’s market cap than during the 2000 dotcom 2000 bubble.  Record percentage highs for the indicator are followed by volatile corrections.

The first chart below depicts that investors spent $1 billion after the jobs report to drive Hertz car rental shares from less than a $1 to over $3 on Friday June 5, 2020. Unfortunately, the investors who invested did not care about the fine print.

The second chart below for May 26, 2020 depicts Hertz’s share price falling from above $3.00 to below $1.00 after it filed for bankruptcy.   Those who purchased Hertz shares on Friday are going to lose a billion. See article by Motley Fool about why.  This type of irrational behavior by the public occurs at market tops.  

The final chart depicts the put to call ratio for the S&P 500.   The gold or orange line is the S&P 500.  The blue line is the put to call ratio.  It’s a contrary indicator.   When much more call options than put options are bought as indicated by the upward spike the market is overbought.   When much more put options than call options are being bought the market is oversold. 

The ratio reached a high in January 2020, and red shaded circle just above at the S&P 500’s peak indicated that the market was overbought.   The blue shaded circle at the bottom occurred during March of 2020.   It indicates that the S&P 500 was oversold.   The yellow shaded circle on the right indicates that the market is ripe for a correction.

The Bear Trader, a trend trading algorithm that was spun off from the Bull & Bear Tracker to primarily trade inverse or short market index ETFs, enabled aggressive and conservative traders to make gains of 3.3% and 1.1% respectively for the month of May 2020. 

From March 3 to May 31, 2020, the Bear Trader’s alerts to trade triple leveraged S&P 500 and Dow 30 Industrials ETFs generated a gain of 44.7%.   Alerts to trade unleveraged ETFs generated a gain of 14.72%. 

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