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If The Market Crashes, How Will The ETF’s React?

1-c

August 24th gap down (or mini crash) of 1,000 points on the Dow was incredibly important from another angle. It has exposed a weakness in ETF’s that not many were aware of. Still not aware of. An in depth discussion can be found here…..

Wild Trading Exposed Flaws in ETFs

For our purposes and since we follow the Dow so closely, let’s take a look at DIA (chart above). But keep in mind, the analysis below was evident throughout the  stock market and across most financial instruments the morning of August 24th.

The Dow and DIA typically move together (+/- 20 cents). That morning the Dow bottomed 5 minutes into trading at 15,370, while the DIA bottomed at $150.57. That’s a 2% discrepancy or arbitrage that can be recovered in a matter of minutes.We saw the same on QQQ/NDX and SPY/SPX, plus numerous other ETF’s.

Here is what I am thinking. Should the market crash over the next few months, something that is possible given today’s overvaluation/speculation environment, enterprising investors/traders might want to look at ETF’s to boost up their gains. On both the short side and subsequent reversals.

Who knows, the next discrepancy could be 2-5%, depending on the size and speed of the primary move. That is to say, put this arbitrage on your “To Watch List” and be ready to act if the market is crashing and/or moving fast.

Z31

If The Market Crashes, How Will The ETF’s React? Google

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How We Nailed May 19th, 2015 Top – To The Day.

Daily Chart September 11 InvestWithAlex9/11/2015 – An up day with the Dow Jones up 101 points (+0.62%) and the Nasdaq up 26 points (+0.54%) 

May 19th was incredibly important. First, the stock market was celebrating its 225th birthday. The first official day of trading in the US was May 19th, 1790. Second, the Dow put in an important mathematical, timing and structural TOP at the time.  Finally, it was also my birthday. Which explains why I am obsessed with the stock market. Since our birthdays are the same, we tend to vibrate at the same frequency.

Anyway, as the Dow pushed higher in mid May, 95% of market pundits, money managers and economists were predicting the Dow 20,000 by the end of the year. I was NOT in that camp. Not by a long shot. On the contrary, I was building into 100% short position at the time and so were my subscribers. Here is why…..take a look at the chart below.

My subscribers first saw this chart in early April of 2015.

STOCK MARKET

At that time, April of 2015, my basic forecast was as follows (without getting into intricacies of it). 

  1. The Dow will remain within the confines of the elliptical structure above until the ellipse terminates at the right hand side mid-point in late July of 2015.
  2. The market will not move fast or we will remains within the confines of a low energy market until we terminate the ellipse in late July. But as soon as we do, energy levels and volatility should spike higher. In other words, we will move fast.

Here is the actual outcome:

1 ellipse

Pay particularly close attention to the following.

  1. We had a very powerful TIME turning point arriving on May 19th (+/- 1 trading day)
  2. The market ran right into elliptical resistance at the same time.
  3. Plus, wedge compression line terminated at the same time.

All of that was indicative of a major top being put in place. So, while everyone was extremely bullish, I was telling my subscribers….

“Do not wait for elliptical termination point, go short NOW. We are unlikely to see these top levels again anytime soon”

Finally, notice what has happened right after the market fell out of the ellipse. Just as suggested above, we have had a major spike in volatility and the market covered more ground to the downside in 7 trading hours, than it did in the 3 months prior.  I have posted quite a few blog posts prior to that, warning people of the same. For instance, Is Our Historically Boring Market About To Get Exciting? You Bet – Published on July 31st, 2015

If you would be interested in this type of an analysis and/or if you would like to find out what happens next, please Click Here

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. September 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!!!

How We Nailed May 19th, 2015 Top – To The Day.  Google

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COT Reports & Weekly Market Calendar – September 18th, 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 September 8th, 2015

Currencies: 

  • USD:  1K Long Vs. 68K Short – Slight increase in net short position. Substantial short interest remains.
  • Canadian Dollar: 70K Long Vs. 4K Short – Slight net decrease in commercials net long position. Significant long interest remains.
  • British Pound: 84K Long Vs. 8K Short – Slight increase in net long interest. British pound is now bullish.
  • Japanese Yen: 125K Long Vs. 101K Short – Substantial net increase in short interest. Japanese Yen is now neutral.
  • Euro: 134K Long Vs. 55K Short – Slight increase in net long exposure. Significant long position remains. No changes.
  • Australian Dollar: 140K Long Vs. 1K Short-  Slight increase in net long position. Significant long position remains.

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

Markets/Commodities/Volatility: 

  • E-Mini S&P 500: 596K Long Vs. 485K Short – Net neutral position remains. Commercials took profit after later August sell-off.
  • VIX: 49K Long Vs. 87K Short – Slight increase in net short position. Still net neutral.  Commercials took profit after late August sell-off.
  • Gold: 69K Long Vs. 65K Short – Slight increase in net long exposure. Still neutral.

Conclusion: Based on the information above, commercial interests are now net neutral. This is consistent with the market remaining in a tight, relatively speaking, trading range. Gold is likely to remain within its trading range. 

Next Week’s Market Calendar: 

  • Tuesday: Retail Sales
  • Wednesday: Consumer Price Index
  • Thursday: FED Interest Rate Decision 

Z30

COT Reports & Weekly Market Calendar – September 8th, 2015 Google

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Which Way Will The Market Flow?

Daily Chart September 10 InvestWithAlex

9/10/2015 – A positive day with the Dow Jones up 78 points (+0.48%) and the Nasdaq up 40 points (+0.84%) 

Billionaire hedge fund manager David Tepper has quite a few things to say about the market. To watch the video, Click Here 

Tepper: Every dip should be bought, but that is no longer happening. If the market has reversed, then every rally should be sold. I am not sure which way the river is flowing right now. Nobody knows, hence the volatility.

My Comment: I did my best to outline on this blog, over the last 12 months, exactly where this river is flowing. Things like NYSE, largest index by capitalization, distributing for over a year. Us being stuck in a tight trading range on the Dow. The 5 year bull market cycle terminating. Interest rates, QE, the FED, etc…. The fact that all secular bear markets, including this one of 2000-2017, terminate in a 2-3 bear market. I don’t know about you, but I think its fairly clear where the river is flowing.

Tepper: I am not a bull, but I can’t call myself a bear. I have problems with earnings growth and problems with multiples.  Take cash off the table.

My Comment: That’s quite a statement from a permabull like David Tepper. If he is starting to turn bearish, it won’t be long before a 10% correction turns into 20….30….40% correction as most bulls begin to sell everything in sight. Most likely at a fairly fast pace.

And as Tepper, I have quite a few problems with growth and multiples. Particularly, that most of the growth (or speculation) has been driven by zero interest rates and QE. All while valuation are at historic bubble level highs. They will come crashing down together, just as they perpetuated each other on the way up.

Tepper: Market should correct, but no one is talking about a crash here. No one knows what that level of correction might be….10-20% corrections should be normal and I would probably be a buyer.

My comment: Maybe they should. That is, talk about the possibility of a crash here. I am certainly talking about it. There were only a few times in our history that we have been as mispriced as we are today. To be exact, in 1929 and 2000 (more so on the Nasdaq). We all know what happened. Why is it impossible to believe that the market readjusts itself in a violent fashion once again? Did you see what has transpired just three weeks ago?

If you have already forgotten, 2.5 years worth of capital gains (on the Dow) were wiped out in 7 trading hours. Beware, this could continue on a much bigger scale.

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. September 10th, 2015  InvestWithAlex.com

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

Which Way Will The Market Flow? Google

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Is Russia About To Annihilate ISIS?

putin-plane

My mother lives in a very nice and safe suburban neighborhood in San Diego. Yet, she is terrified of terrorists and ISIS. Thanks Fox News!!! I mostly laugh, but it is indicative of how insane most things are in this day and age.

For close to two years I have maintained that the New Cold War has started and that Russia will retaliate for Ukraine. It appears that Mr. Putin is finally ready to make his move.

U.S. warns Russia on military buildup in Syria

John Kerry was overheard saying: “God damn commies, who do they think they are? Only the US is allowed to destabilize the region and bomb the crap out of a sovereign nation without the declaration of war”.

On a more serious note, if they really go after them, Russia will be able to wipe out ISIS and all associated terrorist parties (American backed “freedom fighters” on Monday and just regular terrorist by Friday) within a few months. That should stabilize the region and stop the humanitarian/refugee disaster we are all witnessing today.

And the downside?

The profitability of American Industrial Military complex is likely to decline. There is no money in dropping expensive bombs in the middle of nowhere if there is no “perceived” threat. At least not until the next hot spot is re-ignited. Your move Mr. Obama. Tell us all again how Russia will destabilize that region, if that is even possible, and up the ante on our path to war with Russia.

z32

Is Russia About To Annihilate ISIS?  Google

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I’ll Have What They Are Having

EconomistsMessedUp

You know that a bear market is just getting started when you see something like this…..The U.S. Economy Is Just Starting to Tap Into a Big Source of Dry Powder

There’s a big reason to believe that the U.S. economy will be able to withstand the start of the Fed tightening cycle: There’s still plenty of pent up activity in the housing sector. And it’s hard to see the U.S. economy running out of steam with this much upside left in residential investment, according to some economists and analysts.  Going back to the 1940s, the U.S. central bank has never embarked upon a tightening phase with housing having so much room to run to the upside.

Room to the upside? Have they heard the phrase “blow off top” and/or “dead cat bounce”. That is exactly where real estate is today. The primary top was reached in 2006, we are now putting in a secondary top. There is nothing fundamentally good with housing being unaffordable. Which is the situation today.

“Business cycle expansions are likely when residential investment is low as a share of GDP,” wrote Doyle. “Recessions typically only transpire when residential investment becomes elevated as a share of GDP.”

What? First, this is utter nonsense. Second, someone forgot to tell this guy that most of the FED’s stimulus went into the stock market and share buybacks this time around. Not towards any sort of productive GDP growth.

“What is interesting about this is that the housing market is accelerating at a time when the labor market is near full employment,” he said. He suggested that any shortage of construction workers could be remedied by displaced mining employees and higher wages to attract additional labor.

You see, anyway you twist it, it comes up roses. All of those displaced $100K+ oil patch workers can move to San Francisco to build houses for all of those Uber millionaires. That will surely cause our GDP growth to skyrocket.

Dutta concurred with the demographic support for construction activity, pointing out that children born in the 1980s, when the birth rate was climbing, will make up the next batch of first-time homebuyers. He also noted that cyclical forces, such as easing lending standards and rising homebuilder confidence, buoy the outlook for the sector. “Bad things do not happen to America when housing is moving up and to the right while Americans are finding jobs,” said Dutta.

There is only one response to that. People did not believe the stock market can go down in 1929,1937, 1946,1972,1987, 2000, 2007, etc….. If anything, primary economic indicators were surging at the above dates. Yet, the market/economy turned around and proceeded to collapse with stunning speed. So much so that Mr. Dutta would be better off studying blow off tops.

That is to say, I’ll have what they are having.

z33

I’ll Have What They Are Having  Google