President Trump said Wednesday that “so-called ‘rich guys’” may be “speaking negatively” about the stock market to profit from its decline.
Trump’s tweet came after billionaire investor Stanley Druckenmiller said the risk-reward relationship in stocks has never been worse. Trump didn’t identify Druckenmiller in his tweet, and there’s no evidence that the professional investor recently short-sold equities.
Trump is only half right. Let’s explore this issue with the help of a chart.
Please click here for an annotated chart of the Dow Jones Industrial Average ETF DIA.
Note the following:
• The chart shows that the stock market opened below the resistance zone in May, and that after repeatedly bumping against it, it failed to make a deeper penetration.
• The chart shows that 65% of the rally resulted from short-squeezes. I had said this influence might exhaust itself in mid-April. It does not mean that a new short-squeeze cannot start at any time.
• The foregoing is a good setup for short-selling.
• But such a setup is not a secret exclusive to the wealthy.
• Some investors put a lot of faith in 13F filings with the Securities and Exchange Commission by the so-called rich guys — investment pros with a lot of money. The filings show their holdings at the end of each quarter.
• That faith is misplaced. First, the filings are delayed by six weeks. (First-quarter positions should be unveiled any day now.) Second, there are loopholes that enable the rich guys to obfuscate their true holdings….Read more at MarketWatch.
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