Will corporate buybacks save this aging bull market? Let’s explore. 

S&P 500 companies expected to buy back $800 billion of their own shares this year

That will far exceed the $530 billion in share buybacks that was recorded in 2017, analysts led by Dubravko Lakos-Bujas wrote in a note. Companies have already announced $151 billion of buybacks in the year to date.

“There is room for further upside to our buyback estimates if companies increase gross payout ratios to levels similar to late last cycle when companies returned >100% of profits to shareholders (vs. 83% now),” said the note. “Corporates tend to accelerate buyback programs during market selloffs.”

That is an illusions. It is a well known fact that most corporates behave just as individual investors do. That is, they buy at the top and sell at the bottom.

The chart above is a perfect illustration of that. Just look at the 2007-2009 period of time. Corporate buybacks were hitting all time record highs just right before the bottom fell out. And God forbid they buy their own shares at highly discounted 2009 prices.

Point being, projected massive buybacks this year should be viewed with a skeptical bearish eye. Especially if you consider the FED is cutting liquidity and the stock market is sitting at arguably its highest valuation level in history.

Now, to today’s stock market.

– State of the Market Address:

• The Dow is back below 25,000
• Shiller’s Adjusted S&P P/E ratio is now at 32.856 Off highs, but still arguably at the highest level in history (if we adjust for 2000 distortions) and still above 1929 top of 29.55.
• Weekly RSI at 53 – neutral. Daily RSI is at 42 – neutral.
• Prior years corrections terminated at around 200 day moving average. Located at around 18,900 today (on weekly).
• Weekly Stochastics at 51  – neutral. Daily at 46 – neutral.  .
• NYSE McClellan Oscillator is at -19 Neutral.
• Commercial VIX interest is now 10K contracts net short.
• Last week’s CTO Reports suggest that commercials (smart money) have, more or less, shifted into a bullish positioning.  For now, the Dow is 2X net short, the S&P is at 3X net short, Russell 2000 is net neutral and the Nasdaq is now 2X net long.

In summary: For the time being and long-term, the market remains in a clear long-term bull trend. Yet, a number of longer-term indicators suggest the market might experience a substantial correction ahead.  Plus, the “smart money” is positioning for some sort of a sell-off.

If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here. 

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ATTENTION!!! Please note, we have moved most of our free editorial content to our new website MarketSpartans.com Please Click Here to view it.

We had a fascinating article in MarketWatch over the last few days. This Trump vs. JFK chart has nailed it so far, and if it continues, the market is in trouble 

According the article, today’s stock market has been following the trajectory of JFK’s early 1960’s market. And if the synchronicity continues, we should expect a major sell-off in the very near future.

Perhaps. 

I find the above fascinating because I have been comparing Trump’s stock market trajectory to another “Trade War Genius” Herbert Hoover. Who was elected in 1928 and rode the market all the way down from 1929 top to 1932 bottom. Only to be kicked out of the office in 1933.

Anyway, here is what I said in September of 2017

What Do Presidents Trump & Hoover Have In Common??? – Meet The Stock Market Trajectory

It can be argued that, Tulip or Bitcoin manias aside, the overall stock market and the US Economy are so out of sync with reality that upcoming crash will make 2007-2009 look pale in comparison.

What is happening here?

Let’s start with the following chart. The chart is rather self explanatory and it doesn’t take long to figure out what or who is behind today’s stock market bubble. While everything is crashing, due to Ponzi Finance of QE expansion losing velocity, central bankers around the world are keeping the party going, at least for the time being, by buying everything hand over fist.

Downright Crazy Valuations: 

When we look at today’s valuations the picture is even scarier. Earlier in the week Shiller’s P/E Ratio on the S&P has pushed above 30 (median 15-16) for the first time ever. Especially if we adjust for the lack of earnings in the index during the tech bubble. 

Allow me to rephrase that. The stock market today is selling at the highest valuation level in human history. Higher than 1929, 1937, 1966, 1972, 1987, 2000 and 2007.

Now, most bulls would argue that today’s valuation are justified by low interest rates. Not so fast there…….

• Do Low Rates Justify Higher Valuations?

While there is much to debate about the current level of interest rates and future stock market returns, it is clear is the 30-year decline in rates did not mitigate two extremely nasty bear markets since 1998, just as falling rates did not mitigate the crash in 1929 and the subsequent depression.

Do low-interest rates justify high valuations?

History suggests not. It is likely a trap which will once again leave investors with the four “B’s” following the next recession – Beaten, Battered, Bruised and Broke.

Take that Warren Buffett

Incredibly Bullish Sentiment

Open any financial media outlet today and you will be greeted with the following nonsense.

• Nasdaq 10,000 and What Could go Wrong?
• Bitcoin could hit $100,000

Please note something of significant importance here. People are now making “sure bet” prediction about highly speculative bets. In other words, shoe shine boys are now sure “this thing” is going higher.

Scary similarities between President Hoover 1928 election/market and Mr. Trump. 

On November 6th, 1928 Republican Herbert Hoover won the US Presidency. The stock market took off like crazy after Mr. President has offered the moon. Instead, what he delievered was a trade war that deepened the great depression. Trump, Trade Wars, And The Traumatic Example Of The 1930s. Sounds familiar?

• EU Mulls A Trade War With Trumperica -1929 Again? 
• Find Out Why Trump’s Tax Plan Is Dead On Arrival

Who said history doesn’t repeat itself. That is to say, replace Hoover with Trump and we have ourselves a perfect match.

Growth – What Growth? 

Now, I would be the first one to admit that today’s valuation levels can be justified if the US went on some sort of an economic or earnings growth spurt. Yet, as I have argued here On Friday The S&P Hit Its Highest Valuation Level In HISTORY – Find Out What Happens Next, that is nearly impossible. And I am not the only one who thinks that way. Consider this……

• Not A Snowball’s Chance In Hell The Economy Grows 4%

Don’t fight the FED. 

Finally, most bullish investors today will dismiss all of the above based on a simple premise. The FED will backstop any correction and/or flood the system with money in case of an emergency.

Perhaps they will and that might even work. At the same time, consider the following data point

• Find out why the FED is now openly hostile to equity markets

But I think that if your investment mantra is “don’t fight the Fed”, you now must have a short bias to both the U.S. equity and bond markets, not the long bias that you’ve been so well trained and so well rewarded to maintain over the past eight years. This is a sea change in how to navigate a policy-driven market, and it’s a sea change I expect to last for years.

Make no mistake, an absolute bloodbath in equity markets is steaming our way. The only remaining question is…… when? If you would like to find out exactly when this sell-off will start, based on our mathematical and timing work, please Click Here. 

In July of 2017 we entered into a long position on the Euro at $1.1502. Why? Well, at that juncture the Euro broke above major resistance line, suggesting much further upside to come. This entry point was also confirmed by a TIME turning point.

Just recently we liquidated this position at $1.2459. Why? The Euro run into a major Time/Price resistance line. Plus, our other work suggests a major move in the currencies market that has something to do with the USD. If you would like to find out what move is, please Click Here. 

Forget Syria, Ukraine, Iran, Israel, etc….. These countries represent irrelevant small potatoes in terms what is just around the corner.

This is truly mind numbing. Consider the following news flow……

• US Lowering Threshold of Using Nukes Hinders Security – Russian Security Council

– State of the Market Address:

• The Dow is back at 25
• Shiller’s Adjusted S&P P/E ratio is now at 32.83 Off highs, but still arguably at the highest level in history (if we adjust for 2000 distortions) and still above 1929 top of 29.55.
• Weekly RSI at 58 – neutral. Daily RSI is at 47 – neutral.
• Prior years corrections terminated at around 200 day moving average. Located at around 18,900 today (on weekly).
• Weekly Stochastics at 56  – neutral. Daily at 83 – overbought.
• NYSE McClellan Oscillator is at -10 Neutral.
• Commercial VIX interest is now 15K contracts net short.
• Last week’s CTO Reports suggest that commercials (smart money) have, more or less, shifted into a bullish positioning.  For now, the Dow is 2X net short, the S&P is at 3X net short, Russell 2000 is net neutral and the Nasdaq is now 3X net long.

In summary: For the time being and long-term, the market remains in a clear long-term bull trend. Yet, a number of longer-term indicators suggest the market might experience a substantial correction ahead.  Plus, the “smart money” is positioning for some sort of a sell-off.

If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here. 

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ATTENTION!!! Please note, we have moved most of our free editorial content to our new website MarketSpartans.com Please Click Here to view it.D