VRA Investment Letter: VRA Trading Strategy. Signs of Capitulation. Our Biggest Risk: "Get Trump".
/Good Tuesday morning. Markets are sharply higher this AM, with gains of more than 3–4% in each index. European markets are up, with nearly identical gains, while Japan closed up a big 6%, with gains of approx 1.5% in China.
Market Update
Yesterdays “flub” from Kevin Hassett sent the S&P 500 up more than 8% in mere minutes, followed by an immediate reversal after the White House corrected his on-air statement about a 90 day extension on Trump’s tariff strategy. At first, my reaction was that Hassett should be fired, on the spot. In retrospect, I believe it was a purposeful act meant to stop an end of day market crash, the risk of which was real. And, it worked. The Hassett lows served as an important trading bottom, at least for the short term.
Know this; this is about stopping China…everything else is secondary. I believe it’s this singular point that may mean yesterday’s panic lows will serve as THE lows.
Signs of Capitulation
In our Sunday evening and Monday morning Letters we wrote about the VIX breaking 45 on Friday and what that meant for the markets, in the short and long term:
Parabolic Spikes in the VIX (Volatility Index) Produce Exceptional Buying Opportunities
On Friday the VIX ended the week at 45.3, among the highest weekly closes in history. Here’s what has happened in the past, following a close over 45; the S&P 500 has rallied 100% of the time over the next 1–2–3–4–5 years, with exceptional total returns of 39% (1 year) to 139% (5 years).”
The same holds true over the short term: Going back to 1997, here’s what happened 1 day to 2 weeks later, each time the VIX hit 45. These stats support a near term move higher, should they hold up, with solid gains across the board.
- In addition to the “VIX at 45” buy signals, the Fear & Greed Index hit a low of “4”, a classic contrarian buy signal.
- And there’s this buy signal; the percentage of S&P 500 above the 200 dma now sits at 20.2%, with the percentage above the 50 dma sitting at just 7.8%. These readings place this selloff among the worst readings of the last 5 years. Again, a contrarian buy signal.
The Latest From Rich Ross: Ross sees signs of a bottom as well, while placing stops in key indexes/stocks which would lead us lower still
Our Biggest Risk: “Get Trump”
Thank you very much for your emails, phone calls, texts and DM’s. Many/most of the messages are supportive of the presidents actions, if not the execution. For our newer Members, in March of 2020…as the plandemic was picking up speed… we told you DAILY that we disagreed with the presidents actions. We COMPLETELY disagreed with shutting down the country as well as Operation Warp Speed and the creation of the jabs. Had Trump not been the father of the jabs, Biden would have never been able to force them on more than 150 millions Americans who were at risk of losing their jobs and livelihoods. These same jabs are still on the market, with more than 10 million babies to 18 year olds still taking them at least once/year. Why Trump hasn’t taken these death/injury causing vaccines off the market is one of our biggest mysteries.
We were right to oppose Trumps and Bidens actions and I believe we may be proven right about Trumps execution of tariff strategies. But also know that we back the use of tariffs to stop China and the devastation they’ve caused to the middle class, from the birth of NAFTA. Again, it’s about execution here.
We have a highly leveraged global financial system, that should it break down, systemic meltdown risks are very real. Should Trumps enemies choose to take the markets and economy down…to Get Trump…the losses we’ve experienced to date may look small.
Keep an eye on 10 year bond yields, which have begun to spike higher.
Note: Central banks, the head of the most dangerous cartel on the planet, may begin forcing rates higher. Should interest rates skyrocket, the global financial system is at peril.
Not a prediction, but if this is how they choose to Get Trump, markets are at risk of falling 50%, with a long term painful recession (or worse) with unemployment that could top 10%. This is whats at stake here. Again, not a prediction.
Until next time, thanks again for reading…
Kip
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