This week The Macro Trader equity risk index climbed from 11.11% to 22.22%. As great as a jump like this looks it is still quite bearish as the index goes from 0% which is very bearish to 100% which is very bullish. In a regular bull market it will usually be in the 65-85% range. As you can see in the chart below during an insane bear market it tends to hang out in the 30% and below range.
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As this is being posted Tuesday afternoon you have likely seen the huge rally we had today with the SP500 up over 6% in one day. While this will likely have everyone on bubblevision (CNBC) calling a bottom and telling us to be buying up everything we can, we take the view that in a bear market rallies are made to be shorted. In our weekly newsletter The Macro Trader we have taken a few very small long positions but are expecting a multi-day rally that will likely give us several good shorting opportunities. We are in a bear market, the domestic economy is in a recession, and the global economy is in a recession. Until we see evidence to the contrary the primary trend is down and that is where investors should be spending most of their efforts.
The Macro Trader
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