Why Stocks are Unlikely to Hold Current Gains

The Dow hit 30,000 this week, which I interpret as a sell signal, because there's nothing healthy about the world economy. There's nothing holding this stock market up except money printing by the Fed. The current enthusiasm for stocks look very similar to what we've been seeing in Bitcoin, which appears unable to hold its recent highs, as predicted.

What makes the stock marked particularly vulnerable at this point is the great number of short term speculators currently in stocks. These are people who've been rushing into the market with the intention to make a quick buck on their stimulus checks. However, time is running out for these people. The money will have to be taken out of stocks to pay for more pressing matters, such as food and rent.

Another bad omen for stocks is that it has of late been trailing Bitcoin, making Bitcoin a leading indicator for stocks. What happens to Bitcoin will soon happen in stocks, and Bitcoin is down 15% from its highs a few days back. The reason for this link between Bitcoin and stocks is that Bitcoin and stocks are both risk assets, with Bitcoin being more risky than stocks. When the appetite for risk increases, this is first seen in Bitcoin and then in stocks, and the same happens when risk becomes less attractive. Bitcoin takes a dive before stocks.

There is also a perversity in the current market. Bad news have become good news to such an extent that things have to get even worse in order for stocks to keep their current gains. This is because the Fed's money printing has been driven by bad news. However, money printing results in price inflation if done in parallel with consumer confidence, so it has to stop if things get better. With 2020 being one of the worst years on record for the world economy, 2021 is unlikely to be even worse. Things are as good as they get for stocks at the moment. There's little room on the upside, and plenty of room on the downside, which makes now a good time to take profits.

Train wreck

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