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Stock Market Update, InvestWithAlex.com, January 24, 2014

Daily Chart January 24 2014

 

Summary: Continue to maintain a LONG/HOLD position. 

1/24/2014 – A horrific day in the market today with the DOW being down -318 points or (-1.96%). While not the end of the world, it got people to pay attention. 

This type of a move is consistent with the beginning of a bear market. In my earlier blog post today, MARKET TOP, I have indicated that it is highly probable that the market topped out on December 31st, 2013. Both my mathematical and my cycle work confirm the conclusion. Now, the market gapped down again leaving another 100 point hole in the structure of the market. This indicates (at least to me) that while the long-term bull market has topped out, the market is likely to bounce into the 16,400 category to close the gaps before any sustained bear market move can take place. While I do anticipate further downside over the short-term, the market should bounce in order to give us a technical indication that the bear market is indeed here. 

I will have more details on this in my weekly update tomorrow. 

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Why The Market Top Is In And What You Should Do Next

Long Term Dow Structure35

 

In my earlier blog posts I have mentioned that we had a cluster of very important turning points showing up around December 31st, 2013 and January 1st of 2014 (based on my cycle work). Indicating a significant turning point. 

Yet, my mathematical work at the time didn’t confirm. That is until Tuesday of this week. You can blame a simple brain fart or a lack of sleep on my part.  

I have shown the chart above before. To prove to you that the stock market is not random, but quite the opposite, it is exact. Showing you that there was only a 22 point variance over a 16 year period of time. Further, when we take the values on the chart above and do a few simple calculations we get a value of 12,935.

So what? 

Based on my calculations, the move between March 2009 bottom to December 31st, 2013 top on the DOW was exactly 12,836. That is an exact hit with 0.7% variance. With cycle work and mathematical confirmations coming together, I have no choice but to call for a market TOP.  

(***What calculation? Please get my book titled Timed Value coming out this Monday for further explanation. It would take too long to explain here). 

Now, even though the market top is in, we have to wait for a technical confirmation before taking our short position. Based on my previous experience that is a prudent thing to do. 

What should you do next?

Option #1: If you are in stocks, start getting out and going into cash. Earning 2-5% annually is heck of a lot better than losing 30-40% over the next 3 years (the length of upcoming bear market). Plus, you will have money when the bottom comes to buy some wonderful companies at give away prices. 

Option #2: Profit on the short side. At the same, this will be a very difficult thing to do. The upcoming bear market is unlikely to be directional. My work shows that it will closely resemble the 2000-2003 bear market with a lot of ups and downs. As such, it will be difficult to make money on the short side.

The best advice I can give you is this. Protect and accumulate cash. Once we hit bottom in 2017, the market will start its 18 year bull market.  

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!! 

Why The Market Top Is In And What You Should Do Next 

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Cycle Work Predicts A Bear Market. What Should You Do?

USA Today Writes: Aging bull faces fresh survival tests

 bull-vs-bear1

Sadly, no bull market lives forever on Wall Street. And the current bull, which was born on March 9, 2009, and has delivered a fat gain of 172%, is no exception.

The current bull is nearly 5 years old. That’s longer than the average bull, which tends to last closer to four years, according to data going back to 1932 compiled by InvesTech Research newsletter. “Not only is the current bull a full year longer than the norm, it is about to become the fourth-longest since 1932,” says editor James Stack. “If that doesn’t make you nervous, it should.”

Read The Rest Of The Article Here

I oftentimes talk about an important 5 years market cycle on this blog. If you go back and study the market in greater detail, you will see this 5 year cycle appearing constantly. 

For instance,  from 1932 to 37, from 1982 to 1987, from 1994 -2000, from 2002 to 2007. These are just the prominent and known cycles, but there are many others. In both bull and bear market legs.  In addition, we are not talking about 5 years +/- 6 months. In most cases, the cycles were exact as my earlier analysis on this blog showed. Now, we have a very clear 5 year pattern developing  within the existing bull market run. The cycle started with a V shape bottom in March of 2009 and will complete itself in March of 2014.

What does it all mean? The 5 year cycle simply confirms our overall hypothesis that the bear market is about to start. It indicates that the market is finishing up its 5 year growth spiral and should roll over shortly to start its 3 year bear leg. Get yourself ready.

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The Secret To Becoming A Great Investor

InvestWithAlex Wisdom 14

 

Today’s 5 Minute Podcast Covers The Following Topic: The Secret To Becoming A Great Investor  

    • The secret is finally revealed.  
    • The tools you will need. 
    • The number one thing you must posses. 
    • How long will it take before this approach makes you very wealthy? 

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

 

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Short Sellers Are Getting Ready. Should You?

Reuters Writes: Insight: Shorts set to pounce as stocks seen pricey, Fed pulls back

short selling investwithalex

NEW YORK (Reuters) – After years of hiding under their desks, short sellers are re-emerging – slowly.

Investors who make a living betting that stock prices will fall are happy to forget 2013: The S&P 500 gained nearly 30 percent while Credit Suisse’s index of hedge funds with a dedicated short bias lost 25 percent.

Jim Chanos, president and founder of Kynikos Associates and one of the most prominent short sellers, said the market is primed for people like him and as a result he has gone out to raise capital.

“Now I think is not a bad time to be raising capital for what we do. When we got a rough going in the mid-90s, that was exactly the time to raise capital,” Chanos said, adding it was better to do this when critics viewed him as “like the village idiot and not an evil genius.”

Read The Rest Of The Article

There was a flood of similar articles over the weekend. If you have read my blog in the past, you know that I would agree.

The investment thesis for most short sellers is right on the money. After all, by most measures the market is significantly overpriced. I know the merits of any valuation work (either for individual stocks or the overall stock market) can be debated, but one thing is not. I am unable to find anything to invest in. At least for me, this is reminiscent of the 2000 and 2007 tops where the selection of undervalued stocks was nonexistent as well.

Now, we all know that the stock market has been driven up by massive credit infusion by the FED, speculation and certain factors behind my “mathematical timing work”. There is no doubt, at least based on my work, that the market is set for a significant drop here. Yet, shorts must be very careful here. Proper timing should be their number one priority.

As such, while the article galore predicting a large drop in the stock market is right on the money, I wouldn’t short “Right Now”. Based on my mathematical work the rally is not yet over and shorts should wait for a few more months or a technical confirmation before taking any meaningful short position. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!! 

Short Sellers Are Getting Ready. Should You? 

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The Secret Behind The Wealthiest 0.01%

Belfast Telegrapsh Writes: Combined wealth of the 85 richest people is equal to that of poorest 3.5 billion

 wealth-investwithalex

 

The wealth of the 85 richest people equals that of half the world’s population, says development charity Oxfam.

Global inequality has increased to the extent that the £1 trillion combined wealth of the 85 richest people is equal to that of the poorest 3.5 billion – half of the world’s population – according to a new report from development charity Oxfam.

Oxfam chief executive Winnie Byanyima said: “It is staggering that in the 21st century, half of the world’s population – that’s three and a half billion people – own no more than a tiny elite whose numbers could all fit comfortably on a double-decker bus.

“We cannot hope to win the fight against poverty without tackling inequality. Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table.

“In developed and developing countries alike we are increasingly living in a world where the lowest tax rates, the best health and education and the opportunity to influence are being given not just to the rich but also to their children.

Read The Rest Of The Article

Indeed, this is staggering. Just think about it for a second. Just 85 of the wealthiest people control the same amount of wealth as the poorest 3.5 Billion – half of world’s population.

At least a part of me wants to say, “So what?  Work your ass off and become part of the elite.”  Yet, after starting a number of businesses and being a part of the investment community,  I now know it is a lot easier said than done.  It takes favorable circumstances and luck to get anywhere close to that level. In other words, for most of us, approaching the pinnacle of wealth is nothing but a pipe dream.

That is why I am starting to shift my point of view towards the view shared by both Warren Buffett and Bill Gates. They argue that the taxation structure in place is disproportionately setup to favor the rich. That should not be a surprise to anyone as the system is setup by the rich.  The problems begin when we have a situation where 85 people control more wealth than the lowest 3.5 billion people.  It’s bad on two fronts. 

First, it stagnates the economy. The accumulated wealth held by so very few people is not being properly allocated to benefit the overall economy. For the most part, it just sits there accumulating interest. Second, it creates social unrest. If history teaches us anything, eventually, this type of a “social setup” leads to revolutions or worst, wars.

What is the answer? I am not sure, but this cannot continue over an extended period of time.  Some changes must occur. 

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!! 

The Secret Behind The Wealthiest 0.01%

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Why Does Goldman Sachs Hates Your Money?

 

CNBC Writes: ‘No bubble troubles’ in stock market, declares Goldman Sachs

 

goldman sachs investwithalex

Goldman Sachs thinks talk of financial bubbles is misguided, and the firm is encouraging its wealthy clients to keep their money in relatively expensive sectors such as U.S. technology stocks and high-yield bonds.

“Stay fully invested—we don’t have bubble troubles yet,” Sharmin Mossavar-Rahmani, chief investment officer for the bank’s investment strategy group, said at a press briefing in New York last week.

The firm likes several relatively pricey sectors. One is U.S. technology stocks, based on strong corporate free cash flows and prospects for corporate earnings growth. The Dow Jones U.S. Technology Index has gained about 141 percent over the past five years. 

Maybe Goldman Sachs clients are too rich for their own good and are in need of a good haircut. That is exactly what they are going to get if they listed to Sharmin Mossavar-Rahmani. Instead of being risk averse she wants them to pile into highly speculative Tech stocks? You can’t make this stuff up.

The article continues,  “But she reiterated the four reasons Goldman believes equities are not in bubble territory, as outlined in a recent strategy report: Credit growth is not excessive; investors are just beginning to get back into U.S. stocks; views on the U.S. are not yet overly bullish; and stock valuations have not raced too far ahead”.

Let’s take a look at each point individually.

1. Credit Growth Is Not Excessive.  Are you kidding me? Total market debt as a % of GDP stands at 370%.  The highest in the history of mankind. As a reference point, 1929 this same indicator was at just 280% of GDP. We all know what happened thereafter. Plus, the FED is printing/monetizing $85 Billion per month to add liquidity to the market. There are credit bubbles everywhere (mortgage, student loans, credit cards, even car loans) and Goldman Sachs has the balls to claim that credit growth is not excessive? Unbelievable. 

2. Investors are just beginning to get back into US stocks: I am not sure what “investors” she is talking about, but the market is up over 150% in 5 years. If they are getting back in “just now” they are dumb and this should be used as a contrary indicator.   

3. Views on the US are not yet overly bullish: Once again, views by whom? If you take a look at the bullish sentiment indicator, it is sitting close to an all time high. That is above 2000 and 2007 levels. Plus, everyone (media, financial advisors, investors, etc…) are falling all over each other while predicting the market to go up in 2014. As far as I am concerned you can’t get more bullish than this.

4. Stock Valuations have not raced too far ahead: “Too Far” is the keyword. In a sense, Sharmin is admitting that valuations are indeed high. While this point is debatable based on your valuation metrics, personally, this market is incredibly expensive. At today’s prices I cannot find too many things (if anything) to invest in. 

The bottom line is as follows. The arguments Goldman Sachs makes are nonsense and without merit. Investors must clearly understand that before making their investment decisions. As I have said so many times before, my timing/mathematical work indicates a contrary position. The bear market is about to start and it will wreck havoc on the financial markets over the next 3 years. AKA….its time to protect yourself instead of buying up tech stocks.  

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!   


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Why You Should Love Bear Markets

InvestWithAlex Wisdom 12

Today’s 5 Minute Podcast Covers The Following Topics: Why you should love bear markets.  

    • What makes bear markets so great.  
    • The secret behind making a large amount of money in the bear market.  
    • How bear markets can surge your investment returns. 
    • What everyone ought to know about bull and bear phases. 

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

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How To Make A Killing In The Stock Market

InvestWithAlex Wisdom 11

Today’s 5 Minute Podcast Covers The Following Topics and is in direct response to one of my readers questions, “What do I have to do to make a killing in the stock market, fast?” – Robert Hitt

    • Your options and what no one else will tell you. 
    • The secret way to getting it done. 
    • How you should position yourself now. 
    • How big are you cojones? 

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

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Did Bernanke Predict The Stock Market Crash?

bernanke meme

AP Writes: Bernanke likens ’08 financial crisis to car crash

WASHINGTON (AP) — In his final public appearance as chairman of the Federal Reserve, Ben Bernanke took a moment to reflect on the 2008 financial crisis and compared it to surviving a bad car crash.

During an interview Thursday at the Brookings Institution, Bernanke recalled some “very intense periods” during the crisis, similar to trying to keep a car from going over a bridge after a collision.

The government had just taken over mortgage giants Fannie Mae and Freddie Mac. Lehman Brothers had collapsed. He recalled some sleepless nights working with others to try and contain the damage.

“If you’re in a car wreck or something, you’re mostly involved in trying to avoid going off the bridge. And then, later on, you say, ‘Oh my God!'” Bernanke said.

Read The Rest Of The Article Here

An innocent car crash Mr. Bernanke? Just an accident? I guess that’s one way to look at it. There is another. How about getting so drunk that you drive your car into a pole.  

Of course, the above is an analogy for using entirely too much credit to propel our financial system and our underlying economy right after the Tech crash. As we know, that led to the housing bubble, the stock market bubble and the credit market bubble that all blew up in 2007-09. Now, you can’t blame Mr. Bernanke for that. For the most part, another “brilliant economist” under the name of Mr. Greenspan was responsible for the financial collapse we have all suffered during that time.

You can, however, blame Mr. Bernanke for what happened between 2007 and today. It seems like he took Mr. Greenspan’s playbook, squared it and then multiplied it by 100. By pumping a tremendous amount of credit into the system since the market meltdown of 2007-09 Mr. Bernanke upped the ante for any reasonable resolution to our current financial issues.

Make no mistake………..the current stock market, real estate and economic recovery has very little to do with the underlying fundamental economy and everything to do with massive infusion of credit into the financial system by the FED.

It is a speculative illusion at best. When the credit card is finally maxed out, there will be hell to pay. Based on my mathematical work we are just a few short months away from the start of the bear leg. Get yourself ready.

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!