Investment Wisdom Of The Day Google
Why This Analysis Scares The Bejesus Out Of Bulls
10/30/2015- A negative day with the Dow Jones down 93 points (-0.52%) and the Nasdaq down 20 points (-0.40%)
After a scary August and September, bulls have been able to declare victory in October. Erasing most of the earlier losses while leading the market to one of the best performing months in years. So much so that most investors now believe the correction is over and that the Dow 20K is just around the corner.
I would hate to rain on everyone’s parade……BUT…..parabolic moves like this, off of September 29th lows, are typically corrective. Not directional. In other words, the market is correcting its down cycle before turning lower again. That SHOULD cause some concern. Then, there is this analysis……
Below is a comprehensive longer-term review of the stock market and what the next few years hold.
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- July of 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, that 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 (Look at NYSE for confirmation). 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 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. August 7th, 2015 InvestWithAlex.com
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COT Reports & Weekly Market Calendar – October 30th, 2015
COT Reports: If you are not familiar, the Commitments of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions. In other words, it gives us a preview of what commercial interests are buying or selling. As the theory goes, we want to be on the same side of the trade as the big guys.
While not a good timing tool, currencies, commodities and the stock market (to a lesser extent) tend to move in the direction of the bets made by the commercial players. Not always, but often enough.
Latest data, as of October 27th, 2015
Currencies:
- USD: 3K Long Vs. 54K Short – No changes. Substantial short interest remains.
- Canadian Dollar: 40K Long Vs. 18K Short – Slight increase in short interest. Significant long interest remains.
- British Pound: 55K Long Vs. 19K Short – Slight decrease in net short interest. British pound remains bullish.
- Japanese Yen: 89K Long Vs. 2K Short – Significant increase in net long exposure. Japanese Yen is now very bullish.
- Euro: 112K Long Vs. 55K Short – Significant increase in net long exposure. Euro is now bullish.
- Australian Dollar: 103K Long Vs. 20K Short – No changes. Significant long position remains.
Conclusion: Based on the information above, commercial interests expect the US Dollar to decline while Canadian Dollar, British Pound, Euro Japanese Yen and Australian Dollar rally. This is consistent with our view that the FED won’t raise rates.
Markets/Commodities/Volatility:
- E-Mini S&P 500: 473K Long Vs. 382K Short – Net neutral position remains. Sizable decrease in net long exposure.
- Nasdaq 100-Mini: 26K Long Vs. 186K Short – Sizable short position.
- VIX: 44K Long Vs. 81K Short – Slight decrease in net short exposure.
- Gold: 51 Long Vs. 116K Short – No changes. Gold is now bearish.
Conclusion: Based on the information above, commercial interests are now net neutral the S&P. We have also witnessed a decline in net short exposure in VIX. At the same time, commercials now have a very large short position on the Nasdaq. That is important. Gold is now negative.
Next Week’s Market Calendar:
- Q-3 Earnings
- Friday: Unemployment/Payroll Date
COT Reports & Weekly Market Calendar – October 30th, 2015 Google
Happy Halloween Everyone
What You Ought To Know About Stock Buybacks Slowing Down
Just imagine for a second that your plane is cruising at 30,000 ft, or in the case of the Dow at 18,000 ft, when one of its engines suddenly blows. Let’s call that engine “zero interest rates and QE”. Not a big deal. Most planes will land without a problem with just one of its engines being operational.
But, what happens when the other one blows. Well, it’s a long way down. Buybacks no longer work to boost stock prices.
Stocks with big buyback programs are struggling this year, and according to one technician, a similar lag has previously preceded two market crashes.
As was mentioned here before, when it comes to the stock market and buybacks, Corporates tend to behave in the same fashion as most individual investors. They buy at the top and sell at the bottom.
Sure, it is easy enough to borrow at zero interest rates and then use that money to purchase stocks. Artificially driving up the prices. But there is another ominous sign to watch for. Credit spreads. Should credit spreads continue to widen, as has been the case lately, our proverbial second engine might blow too. If it hasn’t already.
That is to say, the stock market finds itself in an incredibly vulnerable place. At dizzying valuation heights and with no fuel/engines left to support its flight. I doesn’t take a genius to figure out what happens next.
What You Ought To Know About Stock Buybacks Slowing Down Google
Just A Friendly Reminder From Carl Icahn
10/29/2015 – A negative day with the Dow Jones down 24 points (-0.13%) and the Nasdaq down 21 points (-0.42%)
A rather uneventful day. As a result, I figured I would replay this very important video from Carl Icahn.
I don’t know about you, but I am absolutely fed up with the US Government and Media. It is nice to see someone of Carl Icahn’s statue to come out and put them on the spot. Directly. And wait till you hear what he has to say about our financial markets.
“God knows where this is going. It’s very dangerous and could be disastrous. It’s like a movie theater and somebody yells fire. There is only one little exit door. The exit door is fine when things are OK, but when they yell fire, they can’t get through the exit door…and there’s nobody to buy those junk bonds. Stocks are way overpriced.
I found myself agreeing with 95% of what he had to say and I command him for coming out and speaking his mind. If you participate in financial markets and/or care about what happens in the US, the video below is a MUST watch.
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. October 29th, 2015 InvestWithAlex.com
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Investment Grin Of The Day
Why Some Bears Are Staying Put
We have previously covered Crispin Odey, his hedge fund and his bearish stance on the US Economy/Markets. According to Bloomberg he did not have a good October.
Considering the above, one would believe Mr. Odey is covering his short positions. One would be wrong.
Not only that, I firmly believe that the only people investors should be listening to right about now are the people who got 2000 and 2007 meltdowns right. Everyone else is just blowing smoke. Crispin Odey, the founder of London-based Odey Asset Management, is one of those people. He does not hold back….
“I just think that you and I have got grandstand seats here [to an imminent market shock] and my point is having found myself in the second quarter of last year selling a lot of equities and starting to go short, I found out just how illiquid it all was. You never actually see it until people try and get out of these things.”
That’s quite a powerful statement and I wholeheartedly agree. He goes on to say…
“For me, what I find very interesting is given the risk of recession, how is it the West stock market can be hitting all-time highs? History tends to be not very generous in this regard. If you get a recession in a low inflation environment it tends to impact the ratings of stocks dramatically. It was akin to “watching the markets take drunken bow after drunken bow. It’s amazing that nobody else is on the same page.”
Finally…….
We are in the first stage of this downturn. It is too early to see what will happen – a change of this magnitude means the darkness and mist is very great. We will make some mistakes but with our thinking we won’t make the major mistakes. The problem is where you stand – I am amazed to see so many are fully invested given that equities are already fighting the downtrend. Mid and smallcaps have moved into bear markets and much relies on large caps to keep the whole thing going and they are very exposed to international trade.
To summarize his view….
- He thinks equity markets will get devastated.
- Major economies are entering a recession that will be remembered in a hundred years.
- Bearish opportunity to short stocks looks as great as it was in 2007-2009.
The upcoming recession and the approaching stock market meltdown are so easy to see, no matter what the FED does, I am not sure why the 99% go on missing it. The attitude was exactly the same at 2000 and 2007 tops. Greed or stupidity? I am not sure, but it is amazing indeed.
The FED’s End Game Is Finally Unveiled.
10/28/2015 – A positive day with the Dow Jones up 198 points (+1.12%) and the Nasdaq up 65 points (+1.30%)
Excuse my language, but the FED continues to BS the market. And as far as I can tell, the FED is attempting to maintain the market within a certain range. At the same time, it is now crystal clear what their actual game plan is. It goes something like this…..
- Can’t raise or won’t raise. Today’s economy or financial markets won’t be able to digest any rate increases at this juncture. Period. As talked about on this blog so many times before. Why The FED Will Not Raise Interest Rates If the FED members have even an ounce of intelligence, and I believe they do, they realize the same.
- If the market declines, issue a “Dovish” statement. Bring it up.
- If the market recovers, issue a “Hawkish” statement. As they did today. Remember, they don’t want things too overheated.
- Rinse and repeat while praying the market and/or the US Economy won’t implode on their own.
That about covers it. There is only one fatal flaw with the plan above. It only works until it doesn’t. It only works until the FED has any credibility left. The problem is, more and more people are beginning to realize all of the above.
And while the stock market continues to rally for the time being, the real economy (Global/US) is accelerating down. Steel demand ‘evaporating at unprecedented speed’
But hey, who needs steel demand for as long as iPhone sales are strong and/or Facebook user growth goes parabolic….Right??? Point being, FED or not, the economic/earnings/overvaluation reality will catch up to this market 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. October 28th, 2015 InvestWithAlex.com
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Shocking: The Real Story Behind Apple’s (AAPL) Decline
Apple (AAPL) has reported yet another great quarter last night. Yet, despite their outperformance, Apple’s stock price is barely up in the afterhours. So much so that most investors, market pundits and money managers are dumbfounded by company’s recent decline. After all, it was not supposed to happen. Apple is the best performing company in the world (which is technically true) with like a zillion dollars in cash on their balance sheet.
What gives? I will simply repeat here what I first said on May 21st. When AAPL was putting in its top.
May 21st Update: Alert: Smart Money Is Trying To Distribute Apple (AAPL) To Fools
I firmly believe that the overall market and Apple (AAPL) will crack at the same time. Hence, overwhelmingly bullish coverage of the company and recent analyst upgrades should cause some concern. For instance…..
- CARL ICAHN: Apple is worth $240 per share
- Morgan Stanley says Apple shares could rise 50%
- Here’s the top stock pick from each of 50 biggest hedge funds – Quite a few of these hedge funds have a massive long Apple position.
There is another name for all of the above. Distribution. The smart money is trying to unload their massive positions to unsuspecting retail investors in an illiquid market. A game that is as old as the stock market itself.
Listen, I don’t have anything against Apple. It is one of the best performing companies out there. Yes, it is overvalued, but its valuation is not as bad as some of the junk floating in the market today.
I am merely pointing out that retail investors shouldn’t be sucked into a game that they cannot win. Make no mistake, once Icahn, Morgan Stanley and the rest of the big guys unload their long positions (if they are smart), Apple’s stock will fall like a brick. Just as the market will. That is to say, the opportunity with AAPL might be on the short side of the trade, not the long.
Shocking: The Real Story Behind Apple’s (AAPL) Decline Google