What You Ought To Know About The FED Decision Tomorrow

Daily Chart October 27 InvestWithAlex

10/27/2015 – A negative day with the Dow Jones down 41 points (-0.21%) and the Nasdaq down 5 points (-0.09%)

While I don’t necessary share the same view, most investors believe the rally off of the recent lows has been cause by a more “dovish” FED stance. Perhaps.

Yet, that notion does not address the primary issues. The recent slow down in earnings and numerous economic indicators. For instance, forward earnings guidance is down 2% on the S&P. The highest percentage drop since 2008.

Declining profit margins threaten the market: Portfolio manager

“That is going to have an effect on all aggregate earnings for the S&P 500,” warns Morganlander. “It means that you’re going to see subpar market returns as S&P [500] earning struggle to get even higher highs. Net margins, we believe, will continue to revert back to its mean, which will have a downward pressure effect on actual profitability.”

I would go even further and suggest that margin and earnings will collapse as soon as our financial market readjust lower. It was an upward driven speculative spiral up and it will work in exactly the same fashion on the way down. With the QE, zero interest rates and stock buybacks now having minimal impact, things should accelerate down.

Which brings us to the FED.

Rate hikers at the Fed are running out of ammo

“Hence risk assets have rallied for three weeks prompted by the turn to weaker U.S. data that began with the weak September jobs report, as the Fed’s rate decision is understood to be completely data dependent,” he said. “However, clearly for the market rally to be sustained it would be helpful if (the) FOMC statement tilted dovish by acknowledging this turn to weaker U.S. data.”

I have been saying this for a few months, but I guess I will have to say it again, The FED Will Not Raise Interest Rates Simply put, they cannot.

And that is the primary point most investors today miss.

The overall stock market is selling at a 3rd highest valuation level in history.
Earnings and the US Economy are on the way down. Despite zero interest rates.
The FED is now powerless. They cannot raise interest rates nor can they stimulate the economy further. Negative rates will have minimal impact, if any at all.

But, if you believe the setup above translates into a “good time” to be fully invested in stocks or to be bullish, well, who am I to stop you.

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 27th, 2015 InvestWithAlex.com

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October 27, 2015

Investment Wisdom Of The Day

investment wisdom of the day 20 investwithalex

Investment Wisdom Of The Day Google

October 27, 2015October 27, 2015

Is China About To Collapse – Drag Us All Down

Just how big is China’s bubble? What is going on there? Take it from a Bear who lives there. And YES, should China implode, it will drag us all down. Credit bubble of Epic proportions just about summarizes the whole thing. We have talked about this before Just How Big Is China’s Bubble? This Will Blow Your Mind

October 26, 2015October 26, 2015

Are Bulls Speeding To A Slaughterhouse

Daily Chart October 26 InvestWithAlex

10/26/2015 – A flat day with the Dow Jones down 25 points (-0.14%) and the Nasdaq up 3 points (+0.06%)

I continue to maintain that most investors have the wrong interpretation of today’s market. And instead of thinking about today’s market environment as the next stage of a bull market, they should acknowledge the fact that this might be an opportunity sell and/or to even go short.

Serious market practitioners should spend a few minutes on this very important article. Stock Market Remains Headed for a 2007 or 1929 Crash

The market itself is the final arbiter, though, and there is no guarantee that this echo will become the repeat, or even the rhyme, of 2007. Nevertheless, to remain fully invested in the market, not to mention leveraged, for the marginal reward of a slightly higher new high, while taking on the risk of what came in 2008 could be reckless.

Unfortunately, most investors will dismiss the article above by shifting their attention to metaphors such as “American capitalism never fails, technical analysis doesn’t work, market patterns don’t repeat themselves, etc…..”

They are wrong.

The article above is right on the money. My work confirms the same. There is something seriously wrong with the internal and mathematical composition of the market at the present moment. If that wasn’t enough, fundamental and economic gauges continue to fall. Thus far, the S&P’s forward guidance has fallen 2%. That is the biggest drop since 2008.

Not a good sign when we are selling at the 3rd highest valuation level in history.

Finally, structural or directional moves don’t tend to develop in the fashion we have seen since August 24th or September 29th bottoms. Meaning, their velocity and angular composition suggest corrective motions.

In other words, “Sell The Rally Buy The Valley” expression might work very well here.

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Are Bulls Speeding To A Slaughterhouse Google

October 26, 2015October 26, 2015

Investment Grin Of The Day

investment grin of the day 11

Investment Grin Of The Day Google

October 23, 2015

COT Reports & Weekly Market Calendar – October 23rd, 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 20th, 2015

Currencies:

USD: 2K Long Vs. 56K Short – No changes. Substantial short interest remains.
Canadian Dollar: 42K Long Vs. 15K Short – Slight increase in short interest. Significant long interest remains.
British Pound: 55K Long Vs. 21K Short – Significant increase in net short interest. British pound remains bullish.
Japanese Yen: 71K Long Vs. 25K Short – No net changes. Japanese Yen is still bullish.
Euro: 88K Long Vs. 69K Short – Slight increase in net short exposure. Euro is now neutral
Australian Dollar: 102K Long Vs. 19K Short- Slight decrease in net short position. Significant long position remains.

Conclusion: Based on the information above, commercial interests expect the US Dollar to decline while Canadian Dollar, British Pound, Japanese Yen and Australian Dollar rally. EU is neutral.

Markets/Commodities/Volatility:

E-Mini S&P 500: 550K Long Vs. 378K Short – Net neutral position remains. No major changes
VIX: 36K Long Vs. 90K Short – No major changes.
Gold: 51 Long Vs. 116K Short – Slight increase in net short position. Gold is now bearish.

Conclusion: Based on the information above, commercial interests are now net neutral the S&P. Gold is now negative.

Next Week’s Market Calendar:

Q-3 Earnings
Tuesday: Durable Goods and Consumer Confidence
Wednesday: FED Interest Rate Decision.
Thursday: GDP

COT Reports & Weekly Market Calendar – October 23rd, 2015 Google

October 23, 2015October 26, 2015

Why I Am More Bearish Today Than Ever

Daily Chart October 23 InvestWithAlex

10/23/2015 – A positive day with the Dow Jones up 158 points (+0.91%) and the Nasdaq up 112 points (+2.27%).

I am going to go out on a limb here, at the risk of looking like a complete fool a couple of months down the road, and suggest that bears should be thanking their lucky starts. That is, for an opportunity to go short as these levels.

Before we get there, let me ask you something. What has changed between September 29th bottom and today? NOTHING FUNDAMENTAL, only investor sentiment. Where on September 29th investors were freaking out and numerous commentators were calling for an all out market crash, today it’s the opposite. Apparently, the bear market is over and we are getting ready to surge higher. Consider the following.

Yet, fundamentally speaking, we are still in the same conundrum. I continue to maintain that we are witnessing a major slow down in earnings and the US Economy. Most corporates missing and guiding lower is a clear evidence of that. Sure, some companies like Google, Amazon, etc…. are outperforming, but they are an exception, not the rule. The FED remains between the rock and a hard place. Unable to raise interest rates or stimulate the economy further.

If anything, we are getting numerous confirmations that earnings and the US Economy are falling apart.

As they say, a picture is worth a thousand words. Trust me, the bulls do not want to see these charts.

Chart #1: Hey everyone, look at all of those gaps. If you think the market won’t come back to close them, sooner or later, you are living in a fantasy land. But listen, we are all adults here. Who am I to tell you NOT to buy Amazon, Facebook, Google, etc….at today’s ridiculous valuation levels. As Citigroup suggests, “Be brave and go long”.
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Chart #2: Oldie but goodie. Again, overall earnings/economy are slowing down while Shiller’s adjusted S&P ratio is at its 3rd highest level in history. Investors have paid more for stocks on two other occasions. In 1929 and 2000. But, unlike yours truly, most bulls don’t mind paying the same premium today. shillers PE Chart #3: Look at all of these non-confirmations from Russell 2000, Dow Transports and Biotech (IBB). These are just a few. There are many other. New Bull market??? Yeah, sure…..to infinity and beyond.

rut

transports

ibb

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Why I Am More Bearish Today Than Ever Google

October 23, 2015October 23, 2015

A Few Things That Do Not Make Sense

In addition to Nasdaq and Draghi ramp up yesterday, China has decided to cut interest rates. Because, you know, everything is so awesome.

Further, by this point most investors are 100% confident that the correction is over and that we are back on bullish track. WSJ: Dow, S&P 500 About to Exit Correction Territory

I wouldn’t be so fast to come to such a conclusion. For the following reasons.

The market left behind a number of massive up gaps (including today). Gaps it will have to close sooner or later.
We are witnessing extremely overbought conditions and quite a few technical divergences.
Previous market leaders are not confirming. For instance, the Dow Transports, Russell 2000, Biotech (IBB) are all sitting close the their respective lows. That shouldn’t be happening in a broad “bull”. But who knows, maybe they will pay catch up….right???
The angular rise thus far, off of August 24th low, has been an incredible 83 degrees. And even more incredible 87 degrees off of September 29th bottom. Add 3 more degrees and forget about the Dow 20K, it will be a straight shot to the moon at that point. Meaning, such sharp moves are corrective in nature, not structural.
Etc…..

That begs the question, is this a new bull market or are we witnessing the mother of all short squeezes/bounces. Time will tell, but I wouldn’t necessarily jump to a conclusion that we are back in a bull market.

A Few Things That Do Not Make Sense Google

October 22, 2015

Bulls Declare Victory – End Of Story.

Daily Chart October 22 InvestWithAlex

10/22/2015 – A positive day with the Dow Jones up 320 points (+1.87%) and the Nasdaq up 80 points (+1.65%)

I have discussed this over the last few months, but I believe Robert Shiller hits the same nail on the head as well.

Robert Shiller: THIS is the sign we’re in a bubble

Just before the dot-com bubble burst, investors had very little confidence in stock valuations, but they were confident in the market in the short term, he said.

“That’s the sign of the bubble. They’re worried but they’re thinking they’ll get out,” he told CNBC’s“Squawk Box.” “This can suddenly turn, and we’re looking somewhat like that now.”

Bingo. And as I have pointed out here at least 100 times this year, today’s Shiller Adjusted S&P P/E Ratio is the 3rd highest in history. Right behind 1929 and 2000 tops.

Plus, after a 5-7 year bull run, most investors today assume 2-3 things .

Every sell-off is a buying opportunity. “Buy the dip”.
The FED will be able to backstop any and all declines or recessions.
Someone will ring the bell at the top and everyone will exit the market in an orderly fashion. Holding hands and singing Kumbaya.

It is my hope that most reasonable people will quickly realize how ridiculous all of that sounds. And instead of adhering to such thinking, investors might want to ask themselves the following questions…..

What if we have shifted gears into a bear market and every rally should now be sold?
What if the FED is powerless….we are already at zero….what else can they do?
What if the market corrects itself in a rapid and violent fashion?

I believe those are the right questions to ask. Everything else is just noise.

Listen, as we head into the most dangerous time of the year, not many people anticipate a further correction. My friends still laugh at me when I suggest we might re-test late August lows. An ominous sign? We will soon find out.

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Bulls Declare Victory Google