8/16/2016 – A positive day with the Dow Jones up 396 points (+1.58%) and the Nasdaq up 32 points (+0.42%) 

Today’s market action was ideal in terms of illustrating what a perfect short squeeze on the Dow looks like. Over the last few days we spoke about numerous large down gaps the market has left behind, suggesting it would close them before anything interesting happens. And so it was. If you would like to find out what the stock market will do next, based on our timing and mathematical work, in both price and time, please Click Here

Now, let’s talk about who the hell is buying the US Treasury Bonds currently flooding the market.

Who Bought the $1.36 Trillion of New US National Debt over the Past 12 Months?

“Official” foreign investors – this would be central banks, governments, etc. – and private-sector foreign investors held $6.21 trillion of US Treasury Securities at the end of June, up by $61 billion from a year earlier, according to the Treasury Department’s TIC data released Wednesday afternoon.

But over the same period, the US gross national debt, fired up by a stupendous spending binge, soared by a breath-taking $1.36 trillion. So who bought this $1.36 trillion in new debt?

The largest holder of marketable Treasury securities remains China, whose holdings in June fell by $4.4 billion from May to $1.18 trillion, within the same range since August 2017, despite escalating threats and counter-threats over trade.

 

No Seller – Not Even China – Can Disrupt US By Selling Treasurys…But The “Why” Ain’t Good

In short, Bernie Madoff would blush at the farce that is now the US Treasury market (further manipulating all downstream interest rate sensitive markets).  A little lie or meddling led to more lying and more meddling…and suddenly the free market no longer exists.  It should be clear that a buyer without profit motive is intervening in the Treasury market to maintain a bid and sustain continued low rates on US debt…all this because America has matured but those in control still want to synthetically maintain growth rates (hello China) via unrestrained debt issuance.  Regardless how much debt the US issues and how few buyers remain, don’t look for interest rates to rise in kind.

We agree.

Having said that, it is a little beside the point of who is buying or selling US Treasury. As we have argued in the past, the Yield Curve itself is of much more importance here. FED Powell Confirms – Yield Curve Inversion Imminent

To very quickly summarize, the yield curve is already as flat as a pancake. The FED will continue to hike and the yield curve inversion is now imminent. Massive recession and debt implosion will come next and today’s short-term treasury buyers will look like absolute geniuses.

At least according to our work. If you would like to find out what the stock market will do next, in both price and time, based on our timing and mathematical work, please Click Here

8/15/2018 – A negative day with the Dow Jones down 137 points (-0.54%) and the Nasdaq down 97 points (-1.23%)

The stock market continues to follow our short-term and long-term forecasts. If you would like to read the rest of this forecast, based on our timing and mathematical work, please Click Here

So, is this the final blow off top everyone has been talking about? Well, it depends which index you are looking at, but one investor certainly thinks so.

‘This rally in stocks is a last hurrah!’ warns Guggenheim’s Minerd

However, Minerd, chief investment officer for Guggenheim and one of the world’s pre-eminent bond-fund managers, advised more than a dollop of caution should be employed by investors, who risk whistling through the proverbial graveyard. Via Twitter, the investment manager said: “Markets are crazy to ignore the risks and consequences of a #tradewar. This rally in #stocks is the last hurrah! Investors should sell now, speculators may do better in August”

Let me put it this way. Over the weekend I raged about foolish investors (to put it mildly) buying small cap stocks at 100+ times earnings. Shiller’s Adjusted S&P P/E ratio is rather clear in that regard as well. 

That is to say, the stock market is arguably selling at the highest valuation level in history. At the the very least, historically speaking, investors shouldn’t expect a return for decades to come.

Yet, we have to take something of significant importance into consideration here. The FED continues to hike, the yield curve is near inversion, Trump’s trade war just started and bullish animal spirits are running high.

Translation, the stock market finds itself in an explosive situation. And we would have to agree Mr. Minerd here. The explosion won’t be in the direction most investors believe. Luckily, our timing and mathematical work clearly shows what happens next. If you would like to find out, please Click Here

8/14/2018 – A positive day with the Dow Jones up 112 points (+0.45%) and the Nasdaq up 51 points (+0.65%) 

Not much new to add to our forecast. If you would like to find out what the stock market will do next, in both price and time, based on timing and mathematical work, please Click Here. 

This might come as a shock to most bullish investors out there, but…..

Fed is no longer worried about every market hiccup, economist Lavorgna says

Perhaps lulled into a sense of complacency by a Federal Reserve that previously had seemed to attend to the market’s every hiccup, investors seem unprepared for a central bank that now thinks more hawkish medicine is in order, a veteran Fed watcher said Tuesday.

“People don’t seem to realize the Fed does not have investors’ backs,” said Joe Lavorgna, chief economist for the Americas for French investment firm Natixis.

Lavorgna has spent 20 years following the Fed for Deutsche Bank Securities and other Wall Street firms after starting his career at the New York Fed.

The biggest issue today is that most investors haven’t figured this out yet, let alone priced it into the market. Some bullish sentiment indicator are hitting historic highs and very few investors, if any, think the FED will spoil the party.

Yet, the time to worry is now. Let’s assume the above is true and the FED won’t care if the market drops 10-20% sometime in the future. In other words, they won’t jawbone the market higher as Janet Yellen has done in the past. That, in addition to tightening and taking liquidity out of the market can spark a real crisis of confidence.

Throw in the following chart and we possibly have an explosive situation on our hands.

In other words, if the FED refuses to support the market, even verbally, a 10-20% loss in the market can very quickly turn into a 60-40% loss. What’s worse, such a bloodbath will only take us back to the mean in terms of historic valuations levels. Bears rejoice? 

Our work is clear in terms of identifying what the stock market will do next. If you would like to find out what the future holds, in both price and time, please Click Here

8/13/2018 – A negative day with the Dow Jones down 125 points (-0.50%) and the Nasdaq down 19 points (-0.25%) 

Short-term, the stock market continues to follow our exact trajectory.  The next larger scale move should be….. If you would like to find out what the stock market will do next, in both price and time, based on our timing and mathematical work, please Click Here 

Here is a sure bet ladies and gentlemen, if I have ever seen one……

Two possibilities for the S&P 500’s melt-up phase

Due to the higher move early last week, I have to now consider the more bullish pattern to 3,225 more seriously. I have labeled that pattern in blue, and it is an alternative pattern at this time. This pattern has a leading diagonal for wave (i) completed off the early April lows, and has us now setting up for the heart of a 3rd wave, ultimately pointing us over 3,100 on the SPX for wave (iii). However, in order to prove this is the operative count for wave (5), we will need to see a strong break out through 2,890 in the coming week or two. Should this occur, then we will likely see a pullback to the 2,870 level, and as long as we hold the 2,840 region on that pullback, it will be pointing us up toward 3,100 in quick fashion to complete wave (iii) of wave (5).

There you go, just load up on call options and ride this train to the promise land of milk and honey of massive capital gains.

RIGHT? 

Wrong. Over the last few weeks we have been discussing an important divergence between the Nasdaq/Russell/Wilshire and the Dow/S&P/NYA. It is important to note that while the former is sitting at or near its respective all time highs, the latter is nowhere close.

How do we reconcile that?

Once again, that was the exact topic of discussion in our weekly update. In order to answer that question properly Timing, Cyclical and Mathematical analysis has to be thrown into the mix. Only then can one answer an all important question of what the stock market will do next.

If you would like to find out how this divergence will resolve itself, in both price and time, please Click Here. One thing is certain, it won’t be as simple as a one directional “melt-up”

A mixed week with the Dow Jones down 149 points (-0.58%) and the Nasdaq up 27 points (+0.34%) 

Thus far, the Dow continues to follow our exact long-term and short-term trajectory. And while the market remains predominantly bullish, the situations in far from being that simple. If you would like to find out what the stock market will do next, based on our mathematical and timing work, in both price and time, please Click Here

Market sentiment remains at historically high bullish levels. For instance, Bull vs. Bears 24-to-1: What a “Meltup” Looks Like. All you have to do is open any financial media outlet and it would be story galore of how the market is about to break out to all time highs with at least another 10% rally being a sure thing. 

As accurate as that forecast might be, no one, and I mean no one is taking about the possibility of an all out crash. And considering that fact alone, is it possible that a crash will develop?  That is exactly the line of thinking explored in the following article.

8 Measures Say A Crash Is Coming, Here’s How To Time It

Since 1951, this “equity reduction” signal has only occurred 17-times. Yes, since these are long-term quarterly moving averages, investors would not have necessarily “top ticked” and sold at the peak, nor would they have bought the absolute bottoms. However, they would have succeeded in avoiding much of the capital destruction of the declines and garnered most of the gains.

The last time the Equity-Q ratio was above 40% was during the late 2015/2016 correction and the technical signal warned that a reduction of risk was warranted.

The mistake most investors make is not getting “back in” when the signal reverses. The value of technical analysis is providing a glimpse into the “stampede of the herd.” When the psychology is overwhelmingly bullish, investors should be primarily allocated towards equity risk. When its not, equity risk should be greatly reduced.

Unfortunately, investors tend to not heed signals at market peaks because the belief is that stocks can only go up from here. At bottoms, investors fail to “buy” as the overriding belief is the market is heading towards zero.

In a recent post, It’s Not Too Early To Be Late, Michael Lebowitz showed the historical pain investors suffered by exiting a raging bull market too early. However, he also showed that those who exited markets three years prior to peaks, when valuations were similar to today’s, profited in the long-run.

While technical analysis can provide timely and useful information for investors, it is our “behavioral issues” which lead to underperformance over time.

Currently, with the Equity Q-ratio pushing the 3rd highest level in history, investors should be very concerned about forward returns. However, with the technical trends currently “bullish,” equity exposure should remain near target levels for now.

That is until the trend changes.

When the next long-term technical “sell signal” is registered, investors should consider heeding the warnings.

Yes, even with this, you may still “leave the party” a little early.

But such is always better than getting trapped in rush for the exits when the cops arrive.

The above is great, yet most bulls would dismiss all of the above as premature. After all, what is there to worry about. The Nasdaq/Russell/Willshire are sitting at their respective all time highs. If anything, it is to early to worry about any sort of a crash. Simply put, the market is not setup for it.

I would agree, however, I would also point out that the Dow/S&P/NYA and many other indices are INDEED technically setup for a crash. Combine that with a fact that no one is expecting a crash and we might have a real problem on our hands.

How do we reconcile all of the above……as a bear trap or as a bull slaughterhouse? 

That is exactly what we discuss in our weekly update. Not only that, our charts predict exactly what the stock market will do next. In both price and time. If you would like to find out, please Click Here