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Just How Stupid Is Nasdaq’s Bubble Valuation?

Daily Chart Uly 21 InvestWithAlex

7/21/2015 – A down day with the Dow Jones down 180 points (-1.00%) and the Nasdaq down 11 points (-0.21%) 

I’ll give you just one example. Facebook is now worth more than General Electric

  • FB: Market Cap – $ 275 Billion on $13.5 Billion in revenue.  P/E = 95
  • GE: Market Cap – $270 Billion on $144 Billion in revenue.   P/E =17

Still too blind to see the bubble? Fine…..

I often talk about Shille’s S&P P/E being at 27 or at the 3rd highest level in history. Right behind 1929 and 2000 bubble tops. What is it for more speculative indices or stocks out there?

  • Russell 2000: P/E of 76
  • Google:  32
  • Netflix: 205
  • Amazon: 171
  • Tesla: 79
  • Twitter: What earnings?

You get the idea. At least the companies above are somewhat profitable and/or leaders in their respective arenas. That cannot be said for 50-75% of the companies found on the Nasdaq/Russell indices today. And that is during the good time or at the end of this Credit Expansion cycle.

That is to say, I do not see how this is any different from 2000 and 2007 bubble level tops. I was there when it happened and what I saw back then is exactly what I am seeing today. It is as simple as that. And even if market participants end up celebrating Apple’s (AAPL) earnings later today, the laws of physical can only be circumvented for so long.

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 21st, 2015  InvestWithAlex.com

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

Just How Stupid Is Nasdaq’s Bubble Valuation?  Google

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Will Black Box Trading Replace Traders/Investors?

Black-Box-Trading-Investwithalex

Quite a few people believe that most money managers, financial/investment advisers, traders, etc….will be replaced by ever smarter machines and software over the next 10-20 years. That is exactly the topic discussed here How the most powerful female hedge fund manager sees trading changing in the next 10 years

I don’t buy it. Here is why……

The stock market is a much more complex environment. It is based on emotions just as much as it is based on hard data or analysis. As a result, it is only as good as human beings programming the machine. That is to say, you cannot program away emotions of fear and greed.  Sure, the machine might not feel it, but it will behave just as a human being would. Probably more so by intensifying volatility and market swings. That is yet to be seen.

In other words, there will always be a Warren Buffett or George Soros or etc….. But with one primary benefit. The models above, black box trading or systematic trading, can greatly improve the performance of outliers when used properly.

z32

Will Black Box Trading Replace Traders/Investors?  Google

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What You Ought To Know About Upcoming Interest Rate Hikes

A fairly good overview of the market. Definately worth two minutes of your time. Jim Paulsen is right on the mark in terms of historic Fed interest rate increases and subsequent market action.

With that in mind, I will go out on a limb here and say that the Fed is too late to the party. Why? Today’s capital markets will react to the Fed’s proposed rate increases with a massive sell-off while interest rates remain below 1%. At least based on my timing and mathematical work.

This would be the worst possible outcome for the Fed as they won’t have any countermeasures in place to either backstop or alleviate any such financial or economic trouble. QE-4? Sure, but this time around the bond market might react in a negative fashion. Making matters even worse. That is to say, checkmate and game over for the Fed!!!

Z31

What You Ought To Know About Upcoming Interest Rate Hikes Google

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Is The Nasdaq Setting In A Blow Off Top?

Daily Chart Uly 20 InvestWithAlex

7/20/2015 – A positive day with the Dow Jones up 14 points (+0.08%) and the Nasdaq up 8 points (+0.17%) 

Over the last few months a number of market pundits have suggested that we won’t see a major market top until some sort of a blow off top occurs. Here is my question……

Would recent market action on the Nasdaq and Nasdaq 100 constitute just that?

For instance,  last week the Dow was up 1.78% for the week, while the Nasdaq 100 pushed up 5.5%. I don’t honestly remember the last time we had such a massive divergence. Then, take a look at the following reading from today.

Nasdaq 52 Week High/Low: Highs-64 Lows-97

This shouldn’t be happening in a bull market that is setting all time highs.

We all know that the largest stock index by capitalization, the NYSE, hasn’t moved an inch in over a year. Now, Mark Hurbert brings out an important point

Here’s one bear market sign you’ve never seen before

That’s because the degree to which stocks move together in unison is a function of the market cycle. In bear markets the vast majority of stocks do so, whereas in bull markets stocks tend to march to the beat of their own drummer. It’s at market tops, therefore, when stocks’ moves in step with the overall market tend to be at the lowest point.

Such as it is now. Last week, even as the broad market averages rose to within shouting distance of their all-time highs and some secondary averages actually did so, just 7.2% of stocks on the New York Stock Exchange hit new 52-week highs. A slightly greater percentage of stocks — 7.3% — hit new 52-week lows.

That is excellent and precisely correct. It is only a “stock pickers market” until, as Mike Tyson puts in, a bear market punches you in the mouth.

Here is something to consider. During a typical bear market about 60-70% of all stocks decline, 15% stay flat and about 15% advance. When we have severe bear market sell-offs, as we did in 2007-2009, about 80% of all stocks decline, 10% stay flat and about 10% exhibit some sort of an advance.

Point being, it is pointless to pick stocks at market tops. Particularly today. Everything is overvalued and the chances of you finding that winning stock is 1 in 10. And even if you do, it is unlikely to go up very much. Stocks should be picked at the bottom of the market cycle, not the top. That’s when you find future 10 Baggers at giveaway prices.

At the top, everything should be sold and moved into cash. Better yet, invested in bear funds with a proven track record. The fact that today’s investment advisers promote stock picking is yet another sign that the top might be near.

As for the Nasdaq, I’ll let you come to your own conclusion, but the index does bring up more questions than answers.

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 20th, 2015  InvestWithAlex.com

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

Is Nasdaq Setting In A Blow Off Top Google

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Jim Rogers: Central Banks To Panic…..Major Correction Ahead

There is only a handful of people worth listening to when it comes to investing. Jim Rogers is one of them. Below is the podcast he did a few weeks ago and it is definitely worth a few minutes of your time.

Jim talks about equity markets, Russia, China, Greece, oil and gold. Plus, bureaucratic idiots in Washington. I’ll tell you one thing, it is nice when Jim’s views match my own.

In short, Jim anticipates major….major problems in the US Equity markets. Should you?

z32

Jim Rogers: Central Banks To Panic…..Major Correction Ahead Google

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COT Reports & Weekly Market Calendar – July 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 JULY 14th, 2015

Currencies: 

  • USD:  3K Long Vs. 72K Short – Significant short interest remains. No major changes.
  • Canadian Dollar: 52K Long Vs. 2K Short – Net increase in commercials net long position.
  • British Pound: 45K Long Vs. 23K Short – No changes. Remains neutral.
  • Japanese Yen: 131K Long Vs. 48K Short – Net increase in short interest. Yet, a large long position in Yen remains.
  • Euro: 131K Long Vs. 10K Short – Significant long position remains. No change.
  • Australian Dollar: 110K Long Vs. 1K Short- Significant long position. Slight increase in long position

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

Markets/Commodities/Volatility: 

  • E-Mini S&P 500: 229K Long Vs. 509K Short – No changes. A substantial short position remains.
  • VIX: 75K Long Vs. 43K Short – Decrease in net long exposure. Still, a substantial long position suggests market turbulence ahead.
  • Gold: 80K Long Vs. 76K Short – No change. Still neutral.

Conclusion: Based on the information above, commercial interests expect the stock market to decline as volatility surges higher. Gold is likely to remain within its trading range. 

Next Week’s Market Calendar: 

  • Just Q-2 Earnings.

Z31

COT Reports & Weekly Market Calendar – July 18th, 2015 Google

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Is Nasdaq Breaking Out Or Playing A Cruel Joke?

Daily Chart Uly 17 InvestWithAlex

7/17/2015 – A mixed day with the Dow Jones down 34 points (-0.19%) and the Nasdaq up 47 points (+0.91%)

Most people believe that the bull market is back on track. After all, the Nasdaq has broken out to a new high, Netflix is wipping out countless shorts, Google is surging and Facebook is expected to take over the world. What’s not to like?

Well, if I may, most of the other primary indices are not confirming this Nasdaq extravaganza. For instance, the Dow is still 300 points lower than its May 19th top. VIX/VXX are hitting their all time lows. The market is overbought and most primary indices look like a pound of Swiss cheese (too many down gaps).

So, is this a breakout or a false breakout that will reverse and fail. I will let you decide that, but it might be worth studying what had happened to NYSE in April and May. Here is the chart for your reference.

NYSE Chart investwithalexNow, this week’s rally has been driven by 3 primary components.

  1. China Has Been Fixed: As I have explained numerous times over the last few weeks, after it’s massive sell-off, China was bound to bounce. That is exactly what we are seeing. Yet, that that doesn’t mean the rally won’t be retraced back and we won’t have a further crash. In fact, it is highly probable now. The question is…. when? Hedge fund manager Bill Ackman tends to agree China Crash Is ‘Way Bigger Than Subprime’
  2. Greece Has Been Fixed: There is no way in hell that Greece can ever repay. Its eventual bankruptcy or default is a mathematical certainty. How long before Greece becomes an issue again? I don’t think very long. El-Erian Agrees: Greek deal only prolongs the inevitable
  3. Short-Covering/Bullish Sentiment/Good Earnings: The market is overbought and bullish sentiment is once again at topping levels. Then you have bulls poking fun of bears You’d be a ‘fool’ to short the market: Gartman Correct me if I am wrong, but I believe Mr. Gartman was predicting a bear market when the Dow was hitting 17,500…5-10 trading days ago. How can anyone manage money like that?

Point being, we are in a very complex short-term and long-term market environment. It would be smart not to come to a quick conclusion here either way. But, 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. July 17th, 2015  InvestWithAlex.com

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

Is Nasdaq Breaking Out Or Playing A Cruel Joke?  Google

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The Best Freaking Trade Out There

VIX Investwithalex2

Now that everyone has boarded the Nasdaq’s train to prosperity and new bull market, take a look at the chart above. See those massive gaps? They are making my mouth water with anticipation.

Plus, everyone is slamming VIX/VXX at exactly the wrong time. For instance, Fear not–VIX signaling all clear for stocks: Strategist 

Did anyone stop for second to think that this might be super bearish for stocks?

Of course not and I guess I”ll have to repeat what I have said here right before VIX/VXX surged higher last time.

Previous Post: 

We have talked about VIX/VXX before. First, 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):70K Long Vs. 27K Short
  • Leveraged Fund & Speculators (dumb money): 49K Long Vs. 33K 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.

z32

The Best Freaking Trade Out There  Google