4/1/2016- A positive day with the Dow Jones up 108 points (+0.61%) and the Nasdaq up 44 points (+0.92%) 

As I have outlined here over the last few days, open any financial media outlet today and you will surely find a number of “The Bear Market Is Over, Stocks Are About To Fly” type of an analyses. Just the opposite of what we saw at February 10th bottom. A view outlined here How Financial Media Sentiment Can Help You Time The Market

Yet, the fundamentals haven’t changed. The overall stock market is massively overpriced. Plus, the market hasn’t yet confirmed any sort of a technical breakout. Most central bankers have gone all in and earnings are expected to decelerate. In other words, I would suggest that it might be too soon to celebrate.

Instead, consider the following analysis.

Below is a comprehensive longer-term review of the stock market and what the next few years holds. 

In the early January of 2000, the US Economy wa s booming. The Dow was fast approaching 11,800 and the Nasdaq was a stone throws away from its improbable benchmark of 5,000. Everyone was making a ton of money and as far as most people were concerned, the future looked very bright.  So much so, that very few people predicted a bear market of 2000-2002, let alone a secular 2000-2017 bear market that was about to begin.

The only way to do so was to know and to understand the cyclical TIME structure oscillating within the stock market.  For instance, an analyst working with such time cycles would know that the stock market’s 17-18 year cycle was topping out in conjunction with the 5 year cycle that started at 1994 bottom.  The bull market that started at the bottom in August of 1982 was coming to a conclusion. In fact, it would top out exactly 17.5 years after it had started or on January 14th, 2000 at 11,800. The 5 year cycle that started in December of 1994 would top out at exactly the same time; 5 years and 35 trading days after it had started.

What does this have to do with predicting a severe bear market of 2014/15-2017?

Everything.  Based on my work the stock market is a mathematically precise entity. And while there are hundreds of TIME cycles oscillating within the stock market at any one time, I will concentrate on only two to prove my point.  The 17-18 cycle and the 5 year cycles. We will look at these cycles over the last 100+ years and I will prove to you, without a shadow of a doubt, they work.

THE 17-18 YEAR CYCLE IN THE STOCK MARKET:

Long-term cycles within the stock market tend to oscillate going all the way back to the first day of trading, in May of 1790.  If you would be inclined, I would encourage you to verify that information for yourself. For our purposes we will start our analysis a little bit later or exactly 100 years ago. As the chart above indicates, the stock market tends to oscillate in clearly defined 17-18 year alternating Bull/Bear market cycles.

• 17.5 Year Bull Market (1914 bottom to 1932 bottom): The previous bear market terminated in July of 1914. At that time the US stock market shut down for World War 1. The stock market remained closed between August of 1914 and December of 1914 (a very rare occurrence). When the market finally reopened in December of 1914 it immediately began a rally that would not terminate until October of 1929. Followed by a now famous 1929 stock market crash and a massive 90% 3 year decline. The cycle terminated at the bottom in 1932, completing the 17.5 year bull market cycle at that time.

*Note: It is important to address the 1929-1932 bear market and its impact on the overall 1914-1932 Bull Market cycle. It is a complex matter to discuss without sufficient background or understanding, but the final (short-term) structural composition of this Bull Cycle inverted over the last 3 years (1929-1932). Mostly due to a massive rally between 1924-1929 and a number of down cycles converging on this time period at the same time.  Regardless, the overall cycle lasted 17.5 years.

• 17 Year BEAR Market (1932 bottom to 1949 bottom): The cycle originated at the bottom in July of 1932 and lasted until June of 1949. During this period of time we had a post great depression bounce, 1937 crash and World War 2. Yet, despite the overall upward trajectory, this clearly defined 1949 bottom remained 60% below its 1929 top and well below both its 1937 and 1942 tops.

• 17 Year BULL Market (1949 bottom to 1966 top): The market surged higher between 1949 bottom and 1966 top. This was the so called “Golden Age” of post war reconstruction and the American industrial boom. During this time the Dow appreciated over 500% in a clearly defined bull market cycle.

• 16.5 Year BEAR Market (1966 top to 1982 bottom): The market stayed relatively flat during this period of time with a few notable declines of 30-50%. With the 1972-1974 mid cycle decline of 54% being the largest one.  This clearly defined bear market completed in August of 1982. Approximately 25% below its 1966 top.

• 17.5 Year BULL Market (1982 bottom to 2000 top): A very well known period and a clearly defined bull market. The market surged higher from its August of 1982 bottom to reach its historic top in January of 2000. During this time the Dow appreciated over 1,400% in one of the strongest bull markets in history.

• 17 Year BEAR Market (2000 top to 2017 bottom): Even though the market is sitting near all time highs (as of this writing in January of 2014) and even though most people have assumed that the new bull market has started, in relative terms the market hasn’t appreciated very much since its top in 2000. The Nasdaq is still down. Plus, with the final down leg of this bear market being ahead of us (based on my mathematical and timing work), the BEAR market of 2000-2017 should complete itself in a negative territory or below its 2000 top.

It is important to note that the small variation (of +/- 1 year) in duration of these cycles is caused by smaller or larger cycles arriving at the same time. As such and based on the cycles above, we are no longer working in an arbitrary fashion when it comes to predicting the stock market.  In other words, if the stock market repeats a clearly defined 17-18 year Bull/Bear cycle over a 220 year period of time (since 1790) and does so without interruption,  it is safe to assume that the future is predictable and not random.

THE 5 YEAR CYCLE IN THE STOCK MARKET

One other easily identifiable cycle within the stock market is the 5 year cycle. These 5 year cycles represent one completed growth pattern or one completed Bull or Bear cycle. Typically, they tend to appear for 5 years, disappear and then reappear at a certain point in the future. While they are not sequential as the 17-18 year cycle above, once their place within the overall stock market is understood, they show up at exactly the right time.  For instance,

• 1914 -1920: Bull Market
• 1924-1929: Bull Market (followed by a 1929 crash)
• 1932-1937: Bull Market (followed by a 1937 crash)
• 1937-1942: Bear Market
• 1966-1971: Bear Market
• 1982-1987: Bull Market (followed by a 1987 crash)
• 1994-2000: Bull Market (followed by a 2000 crash)
• 2002-2007: Bull Market (followed by a 2007 crash)
• 2009-2014: Bull Market

One thing to understand about these 5 Year cycles is that they are exact. They have much lower level variance as compared to their longer counterparts. Essentially, we are NOT talking about 5 years +/- 6 months. We are talking about 5 years +/- a few days. For instance, the 2002-2007cycle started on October 10th, 2002 (at 2002 bottom) and terminated on October 11th, 2007. If you are counting, that is exactly 5 Years and 1 day or scary accurate. I encourage you to study the other cycles outlined above in order to prove to yourself how shockingly accurate they all are.

 CONCLUSION: 

In summary, predicting a bear market of 2015-2017 is rather simple.  All 17-18 year bear cycles end with a 2-3 year bear market. For instance, 1912-1914, 1946-1949 and 1979-1982. And while most believe that the secular bear market ended at 2009 bottom, it is not the case. The secular bear market of 2000-2017 is still in effect and will terminate only when the year 2017 is reached. Although the final price bottom will be higher than the mid-cycle bottom reached in March of 2009.

Further, the 5-Year cycle that started on March 6th, 2009 bottom terminated on July 16th, 2014. Suggesting that the stock market is now ready to initiate its bear leg (despite recent higher highs). When I combine this cyclical analysis with the rest of my mathematical and timing work, the outcome is crystal clear. A severe bear market of 2015-2017 is just around the corner.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014/15-2017. 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 2014/15-2017 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. April 1st, 2016  InvestWithAlex.com

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Why A Bear Market Of 2015-2017 Is Unavoidable Google

3/31/2016 – A mixed day with the Dow Jones down 31 points (-0.18%) and the Nasdaq up 0 points (+0.01%) 

What a difference a few weeks make. On February 10th, just a few hours prior to a February 11th bottom, I brought the following matter to your attention. Financial Media Predicts Armageddon – Time To Go Long?

At that time I suggested that everyone was extremely bearish, with not a single bullish data point to be found. Here is just a small sample of articles from that day alone.

• The U.S. May Be Even More Broke than You Think
• Shock slump across European industry bodes ill for 2016
• The head of trading at Morgan Stanley just confirmed Wall Street’s worst fear
• David Stockman: Markets Going to Be Mauled by Bear
• JP MORGAN STRATEGIST: Central banks tried to control the world … and failed miserably
• Companies lose billions buying back their own stock
• Cramer: Extreme valuations point to a recession

Now, flip the above headlines on their heads and you get a fairly accurate representation of where we are today. Let’s see what is trending out there today…..

• Tom Lee: Why I expect new stock records
• Why a volatile Q1 can be bullish news
• Get ready for this market to take flight thanks to tech stocks
• Cautious Yellen pushes back on Fed officials eyeing hike
• Trader: Listen to Yellen, ignore fundamentals
• ‘Dollar will fall faster than US stocks rise’

So, let’s review. The market rallies and all of a sudden Janet Yellen goes from zero to hero while all economic and financial imbalances that were so prevalent just a few weeks ago disappear into thin air???

Sheer nonsense…..all of it.

As I outlined in last night’s update (The Fundamental Shift That Did Not Happen), the fundamental picture hasn’t changed. If anything, it continues to deteriorate.

As a result, we should come to a simple conclusion. Financial media sentiment is nothing but a reflection of the market’s underlying state of being at any given moment. It shouldn’t be taken at its face value, but rather, as a TIMING tool.

When we see excessive bearishness, as was the case on February 10th, some sort of a bounce is just around the corner. And when the pendulum swings the other way, as is the case today, it is time to be cautious……very cautious.

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. March 31st, 2016  InvestWithAlex.com

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My best short idea remains Facebook (FB). In late January I told you to get ready to short Facebook shortly after it opened up a massive gap right after its earnings report. The stock later came down, but missed closing the gap by a few dollars.

Since then the stock has recovered and is still sitting near its all time highs Providing aggressive investors with a wonderful entry point on the short side. In short, my analysis remains exactly the same.

Previous Analysis:  

Let me tell you a quick story first. As most indices pushed to their respective all time highs in April and May of 2015, I was building a heavy short position. Most investors thought I was crazy. Even perma bears like Marc Faber were throwing in the towel at the time, suggesting the markets might never go down again due to the FED’s intervention.

At one point I got so excited that I published this Why Short Sellers Should Be Thanking GOD At least one of my readers didn’t have a sense of humor, sending me a few choice words in return.

Nevertheless, it was a great call. The higher the market pushed the better of an opportunity it was to short.

I feel the same way about the Facebook (FB) today. I continue to maintain that this is one of the best short opportunities out there. And the higher the stock goes…. the better. I have outlined my reasoning for shorting Facebook (FB) here What You Ought To Know About Shorting Facebook & Getting Rich

And with Thursday’s massive $10 gap higher, it’s nearly a certainty that Facebook will have to close this gap and push below $90 a share. Perhaps on the way to another massive gap it left behind. At $20 a share.

Now,  the only remaining question is WHEN? If you are long-term investor, willing to ride this short position out, anytime would be a good opportunity. If you want more exact timing, when the market completes today’s bounce and reverses again. If you would like to know when that happens, please Click Here. 

Facebook Shorts Should Thank Their Lucky Stars Google

At least for the time being the bulls are celebrating Janet Yellen’s “dovish” stance. Well, maybe they shouldn’t. At the end of the day the FED has nothing left in its arsenal. Just a bunch of empty words to propel our economy into financial abyss.

Negative interest rates, QE, currency wars, helicopter money, banning cash and Ferrari’s for everyone…….don’t make it laugh. He is a good summary on why none of that will work.

Central banks will never admit they’ve run out of ammunition, but they have

It is no good just telling people you have plenty of ammunition left in your arsenal. At a certain point, you actually need to say what it is, and explain how it will work.

And if you can’t? It might be better to say that central banks have done what is possible to stimulate their economies, and that it is now up to governments to do their bit, either with expansionary fiscal policy, or structural reforms, to make their economies more competitive. Sooner or later, they will work that out for themselves anyway — and they won’t thank you for lying to them.

I couldn’t agree more. Here is what the FED really did, at least in terms of today’s capital markets. The FED created a massive liquidity based valuation bubble and then proceeded to assure investors that everything will be fine. No matter the cost. A promise that they cannot possibly keep.

In other words, corporate earnings and the economy are decelerating at a fast clip while stocks remain incredibly expensive. It appears a bull trap of epic proportions has been put in place. Thanks Janet.

3/28/2016 – A positive day with the Dow Jones up 98 points (+0.56%) and the Nasdaq up 80 points (+1.67%). 

As is evident from today’s market action, most market participants are obsessed with what the Fed will or will not do and/or what Janet Yellen has to say. Yet, they are missing the big picture.

Before we get to that, here is just a quick look at how crazy today’s environment is.

• YELLEN: The Fed is in no rush to raise rates
• Gundlach says April rate hike ‘inconceivable’ after lower GDP forecasts
• Another U.S. rate hike may be around corner: Fed’s Bullard
• Fed’s Williams urges U.S. central bank to stay on track with rate rises
• Fed Chair Yellen has a mini revolt on her hands

So, none of the above should come as a surprise to the readers of this blog. I have been arguing for close to a year that the FED will not raise interest rates in any meaningful way. Why The FED Will Not Raise Interest Rates

Why? 

They cannot. Even a 100 bps hike here would send the US Economy into a tailspin. Plus, the FED is now entirely market dependent, not data dependent. They’ve admitted that much in their last policy statement. Finally, they want inflation and a weaker USD, and that requires loose monetary policy.

With that said, I continue to maintain that most investors are missing the big picture here. Sure, these “Dovish” statements cause market rallies, buy they are becoming increasingly insignificant. The first problem has to do with the chart below. As it clearly shows, we are basically in a massive overvaluation bubble.

But the bigger issue here has to do with the fact that the FED is out of tools. With the US/Global Economy slowing down, there is very little they can do with interest rates at zero.

In other words, Central Bank Mafia Goes All In…Stocks Rally…A Little

Now what?

Do you really think the stock market can generate a sustained rally here given the fact that stocks are incredibly expensive, the FED has no stimulus tools left and the global economy is rolling over into a recessionary environment? If you do, you are clearly seeing something that I do not.

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. March 29th, 2016  InvestWithAlex.com

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