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Twitter (TWTR) Is Breaking Down. Is Social Media On Death’s Door?

The original post is from May 6th. Then there was this post from February, Why Twitter (TWTR) Should Go On Your “Stocks To Short” List, when Twitter was sitting at around $50 a share.

Since then, Twitter (TWTR) has clearly broken below wedge support. Suggesting that there is much more immediate downside ahead. Facebook (FB) is holding on, but barely so. When we combine all of the above with the fact that the overall stock market is in a massive bubble and overdue for a correction, it doesn’t look good. Well, unless you have a short position in both stocks.

Original Post: 

Let’s take a quick look at two charts. Facebook (FB) and Twitter (TWTR).This is rather simple. Fundamentaly speaking, both companies are massively overpriced.  Technically, Twitter is on the verge of breaking below a massive muti-year rising wedge.

Should it do so, I wouldn’t be surprised to see Twitter below $15 a share over the next 12-18 months. Facebook is about to break below a major/important support level. The problem is, Facebook has massive gaps all the way down to $20 a share. Gaps that must be closed sooner or later. That is not a good sign.

Hmm, I wonder what happens next. 

Twitter TWTR - InvestWithAlex

Facebook FB - InvestWithAlex

z32

Twitter (TWRT) Is Breaking Down. Is Social Media On Death’s Door? Google

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COT Reports & Weekly Market Calendar – June 13th, 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 9th, 2015

Currencies: 

  • USD:  1K Long Vs. 72K Short – Significant short interest remains. No change.
  • Canadian Dollar: 43K Long Vs. 36K Short – Neutral
  • British Pound: 77K Long Vs. 32K Short – Commercials decreased their short position – more long now.
  • Japanese Yen: 160K Long Vs. 1K Short – Sizable increase in net long exposure.
  • Euro: 129K Long Vs. 38K Short – Significant long position.
  • Australian Dollar: 108K Long Vs. 18K Short- Significant 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: 212K Long Vs. 597K Short – Slight decrease in short interest. A heavy short position remains.
  • VIX: 117K Long Vs. 16K Short – Heavy long position suggests market turbulence ahead.
  • Gold: 73K Long Vs. 93K Short – More neutral now.

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

Next Week’s Market Calendar: 

  • June 17th – Fed Interest Rate Decision
  • June 18th – Consumer Price Index

COT Reports & Weekly Market Calendar – June 13th, 2015 Google

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The Most Resilient Or The Most Dangerous Bull Market Ever?

Daily Chart June 12 InvestWithAlex

6/12/2015 – A down day with the Dow Jones down 140 points (-0.78%) and the Nasdaq down 31 points (-0.62%)  

The stock market continues to perform as forecasted here. 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. 

Here is some light reading material before the weekend hits.

Get ready for a 4,000-point Dow drop

The stock market has an empirical rule: interest rates lead stocks. And the current interest rate environment is pointing to a massive decline for the U.S. market. Are there parallels to this current market environment? Yes — 1987.

This article brings out a number of important issues. Primarily, the fact that interest rates often lead the stock market. Consider this. Since its bottom in January of this year, the 10-year note yield is up 43%.

Did interest rates start their ascent, regardless of what the FED does? Will the FED need to play catch up?

Both scenarios are possible. Further, should the yield break out above 2.60%, it will break out of its long-term bearish pattern. That, in turn, might spell doom for the FED, the overall economy and the stock market. Checkmate.

The Fed accidentally created the most resilient bull market ever

Resilient or extremely dangerous? Let’s explore.

My July 2014 article ‘Bears Cry Wolf‘ included this message for everyone vying to be the next Great Bear: “A watched pot doesn’t boil and a watched bubble doesn’t burst. Stocks are not yet displaying the classic warning signs of a major top. There will be a correction, but the bull market won’t be over until most bears turn into bulls or the media stops listening to crash prophets.”

Fair enough Simon, but what exactly did your “watched bubble” do since July of 2014? As far as I can tell, the overall stock market, as measured by the NYSE, is slightly down since then.

People shouldn’t confuse the calm before the storm with the actual stability. I argue this point every single day on this blog. 

And as all of my writings suggest, the FED has created the most dangerous market environment since, well, arguably 1987. Stability and resilience? Don’t make me laugh. Today’s market environment is more like a 40ft container full of TNT, with a lit fuse disappearing inside of it.

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 12th, 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 Most Resilient Or The Most Dangerous Bull Market Ever?  Google

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The Best Trade Out There?

VIX Short Position InvestWithAlex

We have talked about VIX/VXX before. As is evident from the chart above, there is a massive short position against the volatility index near its all time lows. Plus, consider this. According to the COT reports……

  • Commercial Interests (smart money): 116K Long Vs. 13K Short
  • Leveraged Fund & Speculators (dumb money): 43K Long Vs. 176K Short

As I have indicated in my COT Weekend update, commercial interests tend to win. Although, the timing is not always exact.

So, we have a massive “smart money” long position and a massive “dumb money” short position. And at the time when VIX/VXX hitting all time lows.

Something tells me that as soon as this period of low volatility ends, VIX will stage a massive rally to the upside. As much as 100% or more and within a short period of time. And I am not the only one who thinks that. You Can’t Keep the Panic Out of Stocks Forever, VIX Traders Say

So, is this the best trade out there today? Well, that’s for you to decide.

Z31

The Best Trade Out There? Google

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Wishful Thinking & Delusional Bulls

Shiller pe investwithalex

The chart above is rather simple. Based on the long-term historical data, and not the opinion of “CNBC Pros”, given today’s valuation levels, don’t be surprised to see a net loss of 25-40% over the next 3 years. Rather, it is to be expected.

If the ratio is above the long-term average of around 16x, the stock market is considered expensive. Currently, this measure is just above 27x, a level we’ve seen only before stock market crashes in 1929, the dotcom bubble, and the global financial crisis of just a few years ago.

However, before I could praise this mainstream financial outlet for being honest and reasonable, it does a complete 180 and goes full retard.

But it’s a mistake to assume we’re doomed for an immediate crash.

But actually, the lesson there is that if you combine that with a good market diversification algorithm, the important thing is that you never get completely in or completely out of stocks. I think it looks like stocks should be a substantial part of a portfolio.

In other words, don’t dump stocks and hide in cash because the CAPE is at 27. Rather, buy less, be cautious, and expect lower returns for years to come.

And while I don’t anticipate a crash either, I think it’s criminal to encourage people to maintain their stock positions here. Particularly, at today’s valuation levels. You can’t have it both ways. We are either extremely overvalued and due for a correction, or we are not.

A view that the market will stay at today’s levels while earnings catch up is a delusional one at best. If you haven’t noticed, the US Economy is rolling over into an “official recession” and earnings are shifting into a negative growth territory.

So, I will tell you what they won’t. Not only should you “get the hell out of stocks…all stocks”, you should seriously consider a large allocation to a bear fund.

Z30

Wishful Thinking & Delusional Bulls Google

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Why The FED Is Terrified

Daily Chart June 11 InvestWithAlex

6/11/2015 – An up day with the Dow Jones up 39 points (+0.22%) and the Nasdaq up 6 points (+0.11%) 

I can’t tell you how refreshing it is to find an economist who “gets it”. Instead of blowing smoke, in conjunction with the brain dead talking heads on CNBC. The article below is definitely worth 5 minutes of your times.

The Fed fears lifting interest rates, ex-insider says

Let me mention why I am worried about the current cycle. Monetary policy operates with a substantial lag and it is very important to be preemptive in policy action.

On this occasion what is the striking difference is that the Fed has not done anything to start the process of normalization yet, and, indeed, until last year it was injecting additional monetary policy accommodation in the economy and the economy has reached a situation where it is very close to its full strength.

Here is the difficulty. This is one of those situations where the longer the Fed waits to start the process of normalization, the more likely it is that the Fed will face a nasty dilemma. And what is that dilemma? The dilemma will be that they will realize that they need to tighten policy very abruptly to control inflation. Etc…

There you have it, from the horse’s mouth. In other words, the FED is screwed, the US Economy is screwed, the us equity/bond markets are screwed…..well, technically, everyone is screwed.

The final question is, if the FED refuses to raise rates and even attempts another round of QE, will the bond market do the job for them? The scary part is, it might be already doing so since the beginning of this year. Bond crash across the world as deflation trade goes horribly wrong

Needless to say, none of the above is currently being discounted by the stock market. YET!!!

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 11th, 2015  InvestWithAlex.com

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

Why The FED Is Terrified  Google

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Was Warren Buffett Just Lucky?

warren-buffett-investwithalex

That is the question this article attempts to explore: Stockman: ‘Warren Buffett Economy’ Will Meet Day of Reckoning

During the 27 years after Alan Greenspan became Federal Reserve chairman in August 1987, the balance sheet of the central bank exploded from $200 billion to $4.5 trillion. Call it 23 times. Let’s see what else happened over that 27-year span.  Well, according to Forbes, Warren Buffett’s net worth was $2.1 billion back in 1987 and it is now $73 billion. Call that 35 times. During those same years, the value of non-financial corporate equities rose from $2.6 trillion to $36.6 trillion. That’s on the hefty side, too — about 14 times.

So, it appears that Mr. Buffett was one of the primary beneficiary of the FED induced bubble. Starting with Greenspan in 1987. And while he is still a great investor, doubling the return of the above mentioned bubble, it definitely helps when the entire financial system expands just about as much as one’s net worth.

Here is another thing most people don’t realize. Buffett’s timing throughout his life was almost perfect. He started his hedge fund in 1956, just 6 years into a 17 year bull cycle. Ending it right at the top in 1966. The same goes for the above.

In other words, if you wish to replicate Mr. Buffett’s success, you will need the following: Luck, smarts and perfect timings.

z32

Was Warren Buffett Just Lucky? Google

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Is Alibaba (BABA) Getting Desperate?

Alibaba BABA InvestWithAlex

Since it’s IPO, I have argued that Alibaba (BABA) is one giant overpriced and over hyped stock. By comparison and considering it’s valuation, Amazon (AMZN) is being given away. For instance, Alibaba Stupidity and Alibaba (BABA): More Money Than Brains?

Here is what peaked my interest.

Jack Ma, sparking America’s next gold rush?

“We want to connect small business in the West with the largest, fastest-growing market in the East,” he wrote. The strategy, according to Ma, is “simple and clear.” “Chinese consumers will get to buy the American products they want,” and this, in turn, he said, “will help create American jobs and increase U.S. exports.”

While that sounds good on paper, I believe it is to be an impossible task. At least at this time. About 3 years ago I was part of a group that was trying to identify what European or American consumer products we could sell in China (not commodity or industry related). We couldn’t find any. Whatever products we did identify, domestic Chinese suppliers were offering the same at 30-70% our costs.

So, a gold rush? I have my doubts. Perhaps another conclusion. It appears that Alibaba is getting desperate for growth. Considering its overall and massive overvaluation, it is not a good sign.

Z30

Is Alibaba (BABA) Getting Desperate?  Google