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China’s Nasdaq 2000 Crash Is Set For A Bounce

Nasdaq 2000 Crash Nasdaq 2000 crash investwithalex China Today
SSE Chart Investwithalex

I have been warning people to stay away from the Chinese market since at least the beginning of this year. You know it is time to get out when street vendors and housewives start telling everyone how easy it is to make money trading stocks. In the meantime, Shanghai Stock Composite continues to follow the exact trajectory of Nasdaq’s March of 2000 initial crash.

Even the index print is the same. And while we are likely to get a bounce off of 50 day moving average, the jig is up. Once any such bounce plays itself out, the real sell-off will start. The US Equity markets are likely to join the party as well.

Just how big is China’s bubble and/or malinvestment?

Here are just a few more bits that should scare the bejeezus out of you.

  • Chinese corporate borrowers owed $14.2 trillion at the end of 2013 Vs $13.1 trillion owed by U.S. corporations.
  • This means that as much as 10 percent of global corporate debt is exposed to the risk of a contraction in China’s informal banking sector.
  • Cash flows and leverage at Chinese corporations are the worst among global peers, having deteriorated from being the best in 2009.

As I have mentioned in the past, most of China’s economic growth over the last 5-6 years has been financed by massive credit expansion. The likes of which we have never seen before. The result? 

  • $21 Trillion Debt Mountain. Roughly the same size as the entire US Banking Sector. It took the US 220 years to get to that number, it took China just 5 years of explosive credit growth.
  • $6 Trillion In Shadow Banking. Actually, no one knows how large this number is. I have read good data/reports putting this number at $10-15 Trillion range.
  • Empty cities, shopping centers, massive speculative bubble in real estate, built out infrastructure, rising cost of labor and export driven economy.

How much longer can this go on? Well, that’s a Trillion dollar question…..or a $40 Trillion dollar question. Apparently, it is unraveling in front of our eyes.

z32

China’s Nasdaq 2000 Crash Is Set For A Bounce  Google

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The S&P Would Have To Drop 80% To….

Daily Chart Uly 7 InvestWithAlex

7/7/2015 – A positive day with the Dow Jones up 95 points (+0.54%) and the Nasdaq up 5 points (+0.11%).

The S&P would have to drop 80% to re-recreate an environment when interest rates were this low last time.

Most bulls (most investors today) will argue that today’s high valuations are very well justified. Due to low interest rates. For instance….

Stocks aren’t expensive: Fidelity

In fact, because interest rates are so close to zero, some people believe that stocks deserve infinite valuations. This premise is also know as, “this time is different”.

This chart brings that assumption into question.

shiller pe with rates investwithalex

Simply put, just because interest rates are low, doesn’t mean P/E multiple cannot go down. For instance, in 1941 interest rates were at around 2% (exactly where they are today) while the P/E ratio rested at 8.

If such an environment was to repeat itself today, the S&P would have to take a 66% haircut.

But wait, it gets even worse. In 1941 we were at the bottom of that particular economic cycle. The earnings have already contracted and stocks were selling at a massive discount. In fact, they were about to stage a 5 year WW2 rally.

Today, the situation is reversed. Earnings expansion is at its peak (thanks to the FED and their little QE liquidity party) and the P/E ratio has only been higher on two other occasions (1929 and 2000). In other words, for the S&P to reach 1941 levels it would have to fall 80%.

Let me put it this way.  Anyone who believes that this stock market rally will continue hasn’t studied history nor appropriate market valuation metrics. Plus and just FYI, “this time is different” is a terrible investment strategy.

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. July 7th, 2015  InvestWithAlex.com

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The S&P Would Have To Drop 80% To…..Google

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InvestWithAlex Projects: Hillary Clinton Will Be The 45th President

Hillary Clinton InvestWithAlex

Now, before you freak out, I am no longer affiliated with any political party. When I was growing up in the Soviet Union, I was a member of a Junior Communist Party. When I moved to the US I became a Democrat, then a raging Republican, then an Independent. Thankfully, all of that nonsense is behind me now.

My thinking behind this forecast is fairly straight forward.

  1. Hillary will win the Democratic nomination. She has no real opponents. That gives her a 50/50 shot at the presidency.
  2. Republican field is a circus without a head clown. If this continues they stand to chance.
  3. Hillary Clinton called Mr. Putin “Hitler”  Plus, she continues to slam China every chance she gets.

Point #3 is why I am going out on a limb to make this prediction. As you know, my World War 3 forecast calls for a significant deterioration in relationship between the US and Russia/China over the next 10-15 years. There is no question in my mind that Hillary will get that job done.

I assure you, no Russian man, particularly Mr. Putin,  will deal with a woman who has compared him to “Hitler”. There is no way in hell. I know the type. Since Mrs. Clinton is unapologetic about her statement, not only that, she continues to go after the Russian leadership, our relationship with Russia will continue to deteriorate at a fast clip.

This aligns perfectly with my overall forecast. Should Mrs. Clinton remain in the office for two terms, our relationship with Russia and China will be beyond repair by 2024. In other words, we should be on a clear path to war by that point.

Z31

InvestWithAlex Projects: Hillary Clinton Will Be The 45th President Google

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The Worst Case Scenario For The FED Is Becoming A Reality

Daily Chart Uly 2 InvestWithAlex

7/6/2015 – A down day with the Dow Jones down 44 points (-0.25%) and the Nasdaq down 17 points (-0.34%). 

A massive and rather rapid stock market decline is coming later on this year. And while we won’t have a crash, considering the amount of margin debt out there, quite a few people will get wiped out. If you would like to find out exactly when this move will develop, to the day, please Click Here. 

What is the worst case scenario for the FED? 

Imagine the following setup.

  1. Interest rates remain at zero or below 1%.
  2. The stock marker rolls over and initiates a decline. A decline that has the capability of turning into a flash crash later in the year.
  3. The US Economy “officially” goes negative as corporate earnings collapse.
  4. The FED introduces QE 4 to stabilize the market/economy.
  5. Bond market reacts in a negative fashion as yields surge.
  6. Negative self sustaining loop is now in place.
  7. Checkmate and game over!!!

Impossible?

Far from it. I would argue that points 1-4 are already baked in and will fire off over the next 6-12 months. The only thing I am not as confident about is the bond market. In such a case, yields can react in either direction and it is a little bit more difficult to predict at this time.

That is to say, the FED has already missed their opportunity to reload. When the next crisis hits, soon, there is very little that the FED will be able to do. Well, they will be able to watch the market meltdown, but they won’t be able to do anything about it. I am afraid that their nightmare is about to become a reality.

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. July 1st, 2015  InvestWithAlex.com

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

The Worst Case Scenario For The FED Is Becoming A Reality Google

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Is It Time To Buy Greek Stocks?

Greek Stock Market InvestWithAlex

Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that “The time to buy is when there’s blood in the streets.”

Today’s Greece is a definition of just that. Well, maybe not quite yet. But the question remains, is it time to buy Greek stocks?

Robert Shiller thinks so: Robert Shiller’s shocking call: Buy Greek stocks!

The real answer is, NOT YET!!!

You don’t want to catch a falling knife here. As the chart above suggests, Greek market remains in a clearly defined down channel. Plus, there is no sign of a bottom and there are too many uncertainties. Finally, it would be ideal if the Greek market tests 2012 bottom at around 500. Which is 40% lower from today’s prices. Yet, given the market’s undervaluation level, this index should definately go on your “To Watch List”. In case of a technical turn.

By the way, Greek ETF trades under (GREK)

z32

Is It Time To Buy Greek Stocks?  Google

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Investment Wisdom Of The Day

Some of Murphy’s Laws:

  1. If anything can go wrong, it will.
  2. Nothing is ever as simple as it seems.
  3. Everything takes longer than you expect.
  4. Left to themselves all things go from bad to worse.
  5. Nature always sides with the hidden flaw.
  6. Mother Nature is a bitch.
  7. It is impossible to make anything foolproof because fools are so ingenious.
  8. If everything seems to be going well, you have obviously overlooked something.
  9. If you can keep your head when, all around you, others are losing theirs, you just don’t understand the situation.
  10. For every human problem, there is a neat, simple solution — and it is always wrong.

Z30

Investment Wisdom Of The Day Google

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COT Reports & Weekly Market Calendar – July 3rd, 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 June 23rd, 2015

Currencies: 

  • USD:  1K Long Vs. 59K Short – Significant short interest remains. No major change.
  • Canadian Dollar: 44K Long Vs. 37K Short – No change. Neutral
  • British Pound: 45K Long Vs. 7K Short – Commercials decreased their short position – more long now.
  • Japanese Yen: 129K Long Vs. 1K Short – Large long position in Yen remains.
  • Euro: 125K Long Vs. 8K Short – Significant long position remains. Slight increase in long position.
  • Australian Dollar: 74K Long Vs. 3K Short- Significant long position. Slight increase in long position

Conclusion: Based on the information above, commercial interests expect the US Dollar to decline while British Pound, Euro, Yen and Australian Dollar rally. 

Markets/Commodities/Volatility: 

  • E-Mini S&P 500: 237K Long Vs. 482K Short – Significant decrease in net short exposure. Although, a substantial short position remains.
  • VIX: 94K Long Vs. 15K Short – Slight decrease in long position. Still, heavy long position suggests market turbulence ahead.
  • Gold: 69K Long Vs. 95K Short – No change. Still neutral.

Conclusion: Based on the information above, commercial interests expect the stock market to decline as volatility surges higher.

Next Week’s Market Calendar: 

  • Q-2 Earnings.
  • July 8th – FOMC Minutes

COT Reports & Weekly Market Calendar – July 3rd, 2015 Google

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Advanced Mathematical & Cycle Analyses Point To A Severe Bear Market Ahead

NYSE Chart investwithalex7/2/2015 –  A slight down day with the Dow Jones down 28 points (-0.16%) and the Nasdaq down 4 points (-0.08%). 

Considering today’s overwhelming bullish sentiment, the chart above tells a different story. A much simpler story. The NYSE Index (largest stock composite by capitalization) hasn’t gone anywhere in exactly 1 year. In fact, the index is down 2% since July of 2014. So, are we in a period of distribution and this is your last chance to sell -OR- is the stock market getting ready for a massive leg up. To answer that question, consider the analysis below.

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 Dow Structure3

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, 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 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 5th, 2015  InvestWithAlex.com

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

Advanced Mathematical & Cycle Analysis Points To A Severe Bear Market Ahead  Google

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It’s Hard To Be A Bear When Everyone Is Bullish. Part 5

bear market thinking investwithalex

Explanation: Being a bear while everyone else is bullish is one of the most challenging propositions in investing. For instance, ‘Short selling is an incredibly lonely proposition,’ billionaire hedge fund manager Bill Ackman says.  Yet, it can pay off big time if you get your TIMING right. However, since most people, even professional investors are terrified of shorting, I will introduce a quick series about short selling, proper risk management when short selling and the best way to maximize returns. This was to be a part of my never finished book (no time to finish it)…….

Part 4.

  1. Most Stocks & Markets Are Long Centric.

Indeed, they are. However, this means very little to an investor who is going through a pro-longed bear market or a significant decline in one of his or her securities.  For instance, this idea becomes meaningless to someone who was fully invested in 1929. As by 1932 that portfolio had lost 90% of its value. Or to someone who had to endure a 16 year bear market between 1966 and 1982. Or to someone who has seen miniscule results since the 2000 top. As outlined earlier.

Once more, short positions should not be viewed as a long-term investment. They should be viewed in the light of hedging and maximizing returns when the market is not cooperating with its overall “long centric” premise. As was outlined and explained in one of my earlier books “Timed Value”, the stock market tends to move in 17-18 year alternating Bull/Bear market phases.  And while it would make perfect sense to remain fully invested and 100% long during bull markets, it would make very little sense to continue on with the same strategy in a bear market.  After all, doing so would lead only to frustration and losses.  Short selling helps us avoid both problems in the proper market environment.

  1. Additional costs associated with taking a short position.

Depending on your broker, the transactional costs associated with taking a short position are typically equal to you taking a long position.  However, you do tend to pay more though margin interest and dividend payments.  For instance, if the short position begins to move against you, money will be removed from your cash balance and into your margin account. If you do not have enough cash to cover the losses you begin to borrow on margin, thereby accruing margin interest charges. Otherwise, if you do have enough cash in your account to cover your short losses (if any), no margin interest costs will be inquired.

When it comes to dividend payments you are responsible for paying underlying stock’s dividend if you are holding the stock short ex-dividend date.  Without getting into the details of the entire process, you must pay the dividend on the underlying security if 1. The underlying security has a dividend associated with it and 2. You are holding this security short on ex-dividend date. At times, such costs can be significant.

Yet, for the most part, both costs can be mitigated or largely eliminated when short selling is approached in an appropriate fashion. When it comes to margin interest, simply maintain a cash balance big enough to cover your short positions and any losses that you might inquire if the positions move against you.  That way your margin account is never triggered and no interest charges occur. In terms of dividends, either avoid shorting stocks that pay dividends or get out of your position before the ex-dividend date is triggered.  Plus, unless you are shorting a specific stock for company specific reasons, you shouldn’t be shorting stocks that pay dividends. Simply choose another non dividend paying stock in the same industry and short that one. And if you are to do both, the costs of going short become equal to the costs of going long.

In summary and as the points above show, when short selling is approached in an appropriate way, the risks associated with the practice are reduced to a bare minimum. And while the overall risk profile might be slightly higher than going long, when executed properly, going short is not nearly as risky as the investment industry makes it out to be. If anything, the practice plays a crucial part in a powerful investment approach discussed bellow.

To be continued next week. 

z32

It’s Hard To Be A Bear When Everyone Is Bullish. Part 5  Google