Sometimes, It's Common Sense [Must Read]

[View this email in your browser]( Over the weekend, I received a lot of emails asking what I think about the market and where I think it's headed. The truth is, I can go on and on on this particular subject, but straight and to the point seems a lot better for me. Now the truth is, there is no way to know for sure as 99% of traders are only successful at predicting where the market is going to go after the fact, but in my nearly 15 years of experience, I personally have a pretty good grasp on how I think the market operates and what that means for this year. Here's my short version. I think markets go up for two reasons. Number one, I think markets go up if there is less supply of shares the buy. Basically, when stocks buy back their own shares, that reduces the number of shares outstanding and reduces the amount of supply available. This is currently happening and certainly is "bullish". Number two, I think markets go up when there is more money in the system. Basically, when interest rates go down or when the money supply increases, there is more demand in the system. This one is at a critical juncture and is far more impactful on stock prices than the first. Let's examine. When interest rates go down...ask yourself...is that happening right now? No, it is not. Is it happening in the future? No, it is not. Right now, the market is signaling 4 rate hikes this year, 3 next year, and 3 the year after. The higher the cost of money (interest rates), the less credit gets created and the slower the money supply increases if at all. The Fed has also signaled they will be looking to reduce their balance sheet from 9 trillion to 7 trillion. Is this increasing the money supply? No, it is decreasing the money supply. It's actually pretty simple whether we like it or not. If the cost of money goes up, credit decreases, and demand decreases. If the money supply decreases, so does the demand. So, now that we know why stocks go up, and now that we know those mechanics are no longer favorable for stocks to go up as they have been, the question becomes, when will that buy signal trigger? There are two times. First, if the Fed reverses what they are doing, does not increase the cost of money, and goes back to increasing the money supply (think Q4 2018). Second, the percentage of shares removed via buybacks is greater than the percentage decrease in the money supply. This one is yet to be seen, however, is quite unlikely at this point. So yes, I do not think stocks go higher until the Fed reverses course. It's not earnings like they will tell you on CNBC, it's the Fed and nothing else. Stay small and win more trades, Steven STONY BROOK SECURITIES LLC IS A PUBLISHER AND DOES NOT OFFER TRADING ADVICE OR RECOMMENDATIONS. ALL INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND NOT AN OFFER OR A RECOMMENDATION TO TRADE FUTURES CONTRACTS, STOCKS, OPTIONS OR FOREX. GOVERNMENT REGULATIONS REQUIRE DISCLOSURE OF THE FACT THAT WHILE THE TRADING IDEAS AND TRADING METHODS SHOWN ON THIS WEBSITE MAY HAVE WORKED IN THE PAST; BUT PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. WHILE THERE IS A POTENTIAL FOR PROFITS THERE IS ALSO A HUGE RISK OF LOSS. A LOSS INCURRED IN CONNECTION WITH TRADING FUTURES CONTRACTS, STOCKS, OPTIONS OR FOREX CAN BE SIGNIFICANT. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION SINCE ALL SPECULATIVE TRADING IS INHERENTLY RISKY AND SHOULD ONLY BE UNDERTAKEN BY INDIVIDUALS WITH ADEQUATE RISK CAPITAL. AN INVESTOR COULD POTENTIALLY LOSE ALL OR MORE THAN THE INITIAL INVESTMENT. [FULL INVESTMENT RISK DISCLOSURE]( Copyright © 2021 StonyBrookSecurities LLC, All rights reserved. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](. Questions? Contact support@stonybrooksecurities.com