Category: Invest with Alex

The Dow futures are down 300 points as of this writing. Pointing to yet another gut wrenching trading day.

Is China to blame? The short answer is……NO.

Understandably, that is not what you will hear from the mainstream financial media.

• Offshore Chinese yuan plunges to five-year low against dollar
• Global Stocks Sink on China, U.S. Growth Concerns
• Investors are worrying too much about China

The real answer is a lot more complicated. Sure, China plays its role, but the overall composition of the stock market is being driven by certain cycles. The real cause and effect behind all market movements.

Let me give you an example. As the market stages a massive rally off of August 24th and/or September 29th lows my subscribers knew that the next TIME turning point of great importance was due at the end of November. That is precisely the time frame when most major indices put in an important top and started failing. The Dow is now down over 1,000 points.

Sure, China will get the blame, but the real cause of today’s sell-off was on my TIMING sheet over 9 months ago. And if that type of analysis is of interest, please Click Here.  

Is China To Blame For The US Market Trouble? Google

Last year millions of Chinese “novice speculators” rushed into the stock market with tens of thousands of new accounts being created on the daily basis. We have covered that on this blog before.

It appears that these same speculators can’t get out of the market fast enough today.

• Chinese investors swearing off stocks after price turmoil

Yang Lihua was one of millions of small investors Beijing encouraged to join a stock-buying frenzy last year. But the Shanghai newspaper editor sold after prices collapsed in June and she vowed never to return. In November, Yang was coaxed back in after a multibillion-dollar government intervention stabilized prices. Then on Monday, the benchmark Shanghai Composite Index began the new year by plunging nearly 7 percent. “I do not want to invest anymore,” said Yang, who has lost 350,000 yuan ($55,000) in total. “This is just too miserable. It hurts, emotionally, a lot.”

In October and November of 2015 a number of prominent analysts have proclaimed that China’s correction was over. I did not share in their enthusiasm. Instead, I showed you this chart (3-year Chinese Large Cap ETF (FXI)) and asked……

Does it look like the worst is behind us?  

Well, one can argue that the bottom has been put in place and that the Chinese market is now ready to stage a come back rally.  Yet, I can just as easily argue that we are in the early stages of a more severe decline. Think 2000-2002 on the Nasdaq. There are no technical confirmations either way. At least not yet. As a result, we have to rely on the fundamentals. And the picture there is kind of scary.

• China’s factory growth weakens, retail sales stay strong
• Just How Big Is China’s Bubble? This Will Blow Your Mind
• Is China About To Collapse – Drag Us All Down
• Marc Faber Laughs At China, IMF/FED & The Stock Market Stupidity

In other words, it is kind of presumptuous to assume that China has somehow bottomed. If anything, their fundamentals continue to deteriorate. In July of last year I have suggested the following China’s Nasdaq 2000 Crash Is Set For A Bounce  And while I was a few weeks early, we did get that bounce. A bounce that might now be over.

And that appears to be the case here as China is now approaching August’s lows. And should the Chinese market break below key technical support levels, it has quite a bit of downside ahead. An unfortunate development that most investors, here or there, are ill prepared for.

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1/4/2016 – A big down day with the Dow Jones down 276 points (-1.58%) and the Nasdaq down 104 points (-2.08%). 

The Dow has just suffered its worst year opening loss, at least Intraday, since 1932. And while this is yet another meaningless data point, here are some important facts that most investors continue to miss.

• Despite a mass delusion to the contrary, “buying the dip” hasn’t worked in over a year. Thus far, the Dow has put in an important top at 18,351 on May 19th. The NYSE (largest index by capitalization) hasn’t moved in over 18 months. Numerous other indices have done much worse.
• There are numerous signs and divergences suggesting the market has been distributing (not consolidating) over the last 12-18 months.
• The FED is raising interest rates.
• Global economy is slowing down.
• Q-3 forward earning guidance was lowered by 2.4%. Largest compression since 2008.
• The yield curve continues to flatten – suggesting that recession is directly ahead.
• Signs of real stress in the junk market.
• Geopolitical tensions.
• Etc…..

Combine all of the above and you begin to realize just how grim today’s environment is. Yet, that in itself doesn’t mean very much. As you very well know, markets tend to climb such walls of worry.

The best piece of evidence we have for the REAL trouble ahead is this simple chart.

Either way you twist it the market is selling at extreme valuation levels. Only 1929 and 2000 tops where higher and we all know how that ended. That is where the real picture truly begins to emerge.

That is to say, if you expect to see a bull market roar back to life in 2016, well, good luck with that.

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.January 4th, 2015  InvestWithAlex.com

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