6/1/2016 – A positive day with the Dow Jones up 2 points (+0.01%) and the Nasdaq up 4 points (+0.08%).

What was unheard of in January and February is once again back on the table. Various bullish commentators are once again out in force calling for new all time highs. For instance….

• What Fed? Stocks will post double-digit returns this year, Tom Lee says

“We’ve got inflation picking up; which is good, we’ve got commodities bottoming. The dollar isn’t gaining anymore. High yield probably is the most important thing to focus on; it’s telling us that the stock market should have double-digit gains this year,” the founder of Fundstrat Global Advisors told CNBC’s “Squawk Box.”

• Strategist Jim Paulsen makes case for why stocks are about to hit record highs

Economic growth, not only in the U.S. but around the world, is picking up in a “synchronized” fashion, and deflationary concerns are fading, the chief investment strategist at Wells Capital Management told CNBC’s ” Squawk Box .”

Fair enough. Since the market is close to new all time highs it is fairly easy or convenient to make the prediction above. In essence, it is a 50/50 shot at being right.

But don’t be too eager to load up on stocks here.

• New all-time highs in stocks could be the ultimate trap this summer

U.S. stocks are making yet another run at all-time highs—at least for the S&P 500 (^GSPC) and Dow Industrials (^DJI). But even if that were to happen, that’s no reason to get uber-bullish on risk markets, as there are three significant headwinds facing the markets right now.

Here is the bottom line. The NYSE (largest index by capitalization) trades today just about where it was 2.5 years ago. And if we take recent lows into consideration, lows we are likely to revisit, nearly 3.5 years of market gains vanish into thin air.

Plus, numerous indicators are not confirming the most recent rally. For instance, we are experiencing low volume melt up days while the leadership is lagging. Neither of the leaders or supposed leaders (Nasdaq, Russell or Biotech) are confirming today’s rally. The Dow theory is certainly not giving a buy signal, with Transports barely moving off of recent lows.

The conclusion here is therefore simple. Today’s bullish market remarks are caused by recent market gains or bullish sentiment and should not be used as indicators for future performance. New highs or not.  After all, the sentiment above can just as easily swing negative.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. June 6th, 2016  InvestWithAlex.com

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How to Hold & Carry $80 Billion

It is good to be back.

While every analyst and investor stressed out over what Janet Yellen would say, a truly golden piece of advice slipped by almost unnoticed. Ray Dalio, billionaire founder of $160 billion hedge-fund behemoth Bridgewater Associates, shared his secret to investment success.

Ray Dalio: More than anything else, I attribute my success to one thing

“When I look back at my life, I am happy to have had what most people would consider a successful life, not only in terms of business, but in my relationships and in lots of ways.  More than anything else, I attribute it to meditation—partially because of the creativity, partly because of the centeredness.  TM has given me an ability to put things in perspective, which has helped a lot.  I think meditation has been the single biggest influence on my life.”

I highly recommend reading the article above in full. If you recall, I have written about this topic before How Meditation Can Improve Your Investment Returns

In short, I have made meditation a part of my daily routine and I swear by it. Investors and traders deal with incredible psychological pressures throughout the day, and mediation is the only positive tool available to lessen the burden.

And if Ray Dalio believes that mediation is the key to his success, it might be time to consider it.

On April 18th, we sold short the Aussie Dollar at 0.7733 AUD/USD.  Over the month, it has been the weakest major currency of the six we follow.  We covered the position at 0.7198 today, May 19, for a 7% gain (84% annualized).

To learn more about Demeter Research and Matt’s trading/analytical framework please Click Here.

5/19/2016 – A negative day with the Dow Jones down 92 points (-0.52%) and the Nasdaq down 27 points (-0.57%) 

Open any financial terminal today, without looking at where the market is, and you are surely to assume, on the sentiment basis alone, that we are getting close to a multi year low. An environment similar to what had happened at 2002/2003 and 2009 bottoms.

Consider the following news flow over the last few days.

• This time full of peril may herald the beginning of ‘the liquidation’
• This S&P 500 Death Cross Could Be The Real Deal
• Soros Fund Management outlines new allocations
• The S&P 500 could plummet to 1,573 this year
• The stock market is behaving the way it did back in 2000
• Gundlach Says Fed Ready to Raise Unless Economic Data Weakening

WOW….and people think I am bearish.

And there lies the problem. Considering where the market is today, just a few % points away from all time highs, we are left with two possibilities. Well, maybe three.

1. A major and violent drop on all indices. To allow the market to catch up to rotten fundamentals and to correct various overvaluation excesses.
2. A powerful rally into some sort of a blow off top. To destroy most of the bears one more time, to shift sentiment reading and finally, well, why the hell not.
3. A range bound market for many years to come.

Obviously, at the present moment both bulls and bears can make a nearly bulletproof case (fundamentally or technically), to support their points of view. But that doesn’t necessarily answer the question.

To understand what the market will do next investors must dismiss traditional analytical tools for the benefit of the tools one of the best hedge fund managers of all time discusses here. Jim Simons Gives Away His Secret To Market Timing

And what do these mathematical and timing tools tell us about the market?

Quite a bit. First, they tell us exactly what the stock market will do next. Rally, breakdown or remain within a trading range. Most importantly, this work yields exact time frames associated with all of the above. So, if you would like to find out exactly what the market will do next, please Click Here. 

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. May 19th, 2016  InvestWithAlex.com

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5/18/2016 – A mixed day with the Dow Jones down 5 points (-0.03%) and the Nasdaq up 23 points (+0.50%) 

The Dow topped out on October 11th, 2007 at 14,280. By March 6th, 2009 it was sitting at 6,460 or with a 55% loss. But here is what’s interesting. The imbalances we are witnessing today are exponentially greater than what we saw in 2007-2009. Consider the following……

2007 Imbalances: 

• U.S. government debt (as narrowly defined) stood about $8 trillion.

• The Federal Reserve’s balance sheet was under $800 billion.

• 10-year Treasuries yielded approximating 4.5%, giving the Fed had some leeway to cut interest rates if necessary to fight a crisis or business downturn.

• The subprime-mortgage bubble peaked at about $1.3 trillion.

• Aggregate government debt was under $10 trillion.

• The derivatives market’s notional value was $182 trillion.

• A homeless man named Johnny Moon was reportedly able to get some $600,000 of mortgages to speculate in the U.S. housing market.

As bad as all of that was, consider Today’s Imbalances:

• U.S. government debt totals about $19 trillion, or some $11 trillion more than it was in 2008.

• The Fed’s balance sheet is approaching $5 trillion vs. $800 billion in 2008.

• Short-term interest rates are 0.25% compared to 4.5% back in the day.  With interest rates at near-record lows, there’s little opportunity for the Fed to further expand its balance sheet.

• The derivatives market is currently larger than $500 trillion vs. $182 trillion in 2008.

• Central-bank capital has dropped to 0.8% of assets from 4.5%.

• The size of the subprime bubble was $1.3 trillion, but the size of sovereign borrowing is $7 trillion today.

• Our government has to borrow money to simply pay interest, and monetary policy is hamstrung by near-zero interest rates.

• There are no more homeless people getting mortgages to buy homes, but there’s a Danish sex therapist whose bank is paying her interest (instead of the other way around) on a loan that’s financing her matchmaking Web site.

Not a big deal???

I would certainly disagree. The imbalances above will have to be addressed one way or another. They will not simply go away. We do not live in a magical world where the FED geniuses have created a perpetual money machine.

If anything, it is highly probable, especially if you consider today’s general overvaluation levels, that the imbalances above will be addressed in a violent fashion. And I would say sooner rather than later.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. May 18th, 2016  InvestWithAlex.com

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According to Bank of America investors are exiting the market in droves.

Bank of America: We are witnessing a stock market ‘exodus’

Investors pulled a whopping $44 billion out of the stock market in the past five weeks. BAML’s Michael Hartnett, who characterized this as an “equity exodus,” noted that this was the largest redemption over a 5-week period since August 2011.

So where is that money going?

In the past week, $3.5 billion went into bond funds and $1.0 billion went into precious metals funds, which offer exposure to gold. There was also $10.9 billion poured into money market funds, the largest inflow in 13 weeks.

Here is another interesting fact. As of last week commercials (smart money) have increased their net long VIX exposure to an all time high. As per out weekly COT reports.

And that’s just the start Goldman Sachs downgrades stocks

With stocks selling near historic high valuations levels and considering today’s fundamental backdrop, it is a literal miracle that the stock market is trading where it is today.

As you can imagine, I can keep going with the bearish premise. And there lies the problem.

Everyone is too bearish. Or are they?

The setup above can fire off in one of two ways. We either get a major sell-off in capital markets or the market is able to rally higher, to climb the proverbial wall of worry.

If you would like to find out what it will actually do, based on our timing and mathematical work, please Click Here.

5/17/2016 – A negative day with the Dow Jones down 183 points (-1.03%) and the Nasdaq down 60 points (-1.25%). 

Before we get to that, consider the following.

• There’s another sign the US could be headed for recession
• Get ready for return of volatility: Bernstein CIO
• By this measure, the S&P 500 is overvalued by 72%

“The reality is, there should be a relationship between GDP growth and profit growth, and that has largely been absent. We’ve been supporting profits growth with things like share buybacks and other unsustainable factors, and fooling ourselves into thinking that that’s actually sustainable profits. What this is pointing out is that… we are paying too much for the growth that we can expect to get out of the S&P 500,”

Now, let’s take a look at the following valuation metric. Shiller’s Adjusted S&P P/E Ratio.

Coincidentally, both metrics tend to agree. The market is overvalued by 50-75%.

Now, an argument can be made that today’s zero interest rates, future earnings, lower anticipated dollar, etc…. justify current valuation levels. I don’t believe that such a “This Time Is Different” notion is appropriate here. Today’s environment is NOT that different.

Long-term metrics that measure internal health and valuation levels of the market agree. The overall stock market is in a clear bubble territory. Reminiscent of the 1929, 2000 and 2007 tops.  If so, long-term investors should anticipate no further gains from this point on. If anything, they should prepare for a big drop…..if history is any guide. Invest accordingly.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. May 17th, 2016  InvestWithAlex.com

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