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Will “Sell In May” Fire Off This Year

Daily Chart May 18th InvestWithAlex

5/18/2015 – An up day with the Dow Jones up 25 points (+0.14%) and the Nasdaq up 30 points (+0.60%).

“Sell in May and go away” is one of those well know Wall Street “truths”. Unfortunately, it didn’t work last year. Instead, the market had a fairly good rally between May 21st and July 17th of 2014. Will it work this year? Let’s take a look.

35 months. That’s about how long it’s been since the market pulled back at least 10%, which is an eyebrow-raising stretch of time. Take a look at the market each year going back to 1980 and you’ll find that the S&P 500 has averaged an intra-year drop of a little over 14%. Yet, here we are approaching three full years of a largely uninterrupted climb.

With the stock market trading at or near all-time highs, the chief U.S. equity strategist Deutsche Bank said Friday he would not chase this rally.

Today, most investors are fast asleep. They shouldn’t be. The market is at its utmost dangerous when most people don’t anticipate a correction. Which is the case today.

As I have illustrated here so many times before, most investors are overwhelmingly bullish. Even though the stock market hasn’t gone anywhere since July of 2014 (NYSE). Further, we have faced a similar market setup/situation last summer. Range bound market, compressing wedge, everyone was fast asleep, etc… That was followed by July and September/October corrections.

Think of today’s trading range as if Mr. Market is accumulating energy for its next move higher or lower. Just as if a spring was compressed and then let go. So, will the market breakout to new all time highs or are we on verge of a big sell-off? I believe we will soon find out. One thing is certain, this period of low volatility is coming to an end.

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. May 18th, 2015  InvestWithAlex.com

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

Will “Sell In May” Fire Off This Year Google

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No Stock Market Bubble, At Least Not Yet

PE Ratio

BlackRock’s global chief investment strategist, Russ Koesterich, believes there is no bubble.

“The price-to-earnings ratio for the S&P 500 is about 17.5 times, which Koesterich pointed out is a “bit above the average.” But he said, “When you take into account … a low inflation environment and you’ve got a low [interest] rate environment, that’s probably in the right vicinity. It’s a bit stretched, but I don’t think it’s a bubble.”

Fair enough, but there a few things to consider here.  First, I am not sure where he is getting his 17.5 number.  TTM (trailing) P/E ratio = 20.4 while Shiller’s P/E ratio = 27.5. Shiller’s adjusted P/E is a much better measure. Further, as we have indicated here so many times before, earnings are expected to decline over the next twelve months. Making today’s P/E even more outrageous. Just look at the chart above. 

Second, many money managers believe that we must have either a blow off top or be in a massive bubble for a bear market to start. Nothing could be further from the truth. It is not a requirement. In other words, those who anticipate much higher markets based on the premise above, might pay dearly for it.

z32

No Stock Market Bubble, At Least Not Yet Google

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COT Reports & Weekly Market Calendar

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 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 May 12th, 2015

Currencies: 

  • USD:  4K Long Vs. 72K Short – Significant short position.
  • Canadian Dollar: 38K Long Vs. 52K Short – Neutral.
  • British Pound: 102K Long Vs. 35K Short- Significant long position.
  • Japanese Yen: 66K Long Vs. 34K Short – Neutral.
  • Euro: 162K Long Vs. 27K Short – Significant long position.
  • Australian Dollar: 93K Long Vs. 28K Short- Significant long position.

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

Markets/Commodities/Volatility: 

  • E-Mini S&P 500: 184K Long Vs. 635K Short – Heavy short position.
  • VIX: 114K Long Vs. 14K Short – Heavy long position suggests market turbulence ahead.
  • Gold: 37K Long Vs. 80K Short – Neutral

Conclusion: Based on the information above, commercial interests expect markets to decline while volatility surges higher.

Next Week’s Market Calendar: 

  • May 20 – FOMC Minutes
  • May 22 – Consumer Price Index

z33

COT Report & Weekly Market Calendar Google

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Why Most Bulls Might Be High On Drugs….Again

Daily Chart May 15th InvestWithAlex

5/15/2015 – A mixed day with the Dow Jones up 20 points (+0.11%) and the Nasdaq down 2.5 points (-0.05%)

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. 

Despite the fact that the NYSE (largest index by capitalization) hasn’t gone anywhere since July 17th, 2014 (10 months if you can’t count), bullish spirits are running red hot. Don’t believe me? Let me show you just today’s news feed.

“We think the S&P takes out 2120 and trades up to 2200.”

“If this market was going to crater, it would have done so already. At least that’s what Jani Ziedins of the Cracked Market blog believes. Instead, he says, the smart money is holding strong, waiting for the skeptics to surrender and fuel the next leg up.”

The psychology seems to be: “I better lock in this deal while I can.” We might be seeing a similar pattern play out among corporate CEOs, who could soon choose to jump into the busy M&A game as they see borrowing rates turning higher.”

WOW!!! This much bullishness at once is making my head spin. Yet, should I dare to bring up the charts below, I get the following range of responses……

  1. Who cares…..we are in a long-term secular bull market – Hint: We are not.
  2. The US Economy is about to turn around and surge higher – Fair enough, but based on what? As I have argued before, there are no drivers to propel us forward.
  3. There are too many bears!!! – This is nonsense. Even the hardcore bears I know are scared to death to touch this market on the short side. Even most mainstream bears are suggesting that this bull market will continue.
  4. The valuations are NOT too high. – Take a look at the P/E chart below. I rest my case.
  5. The FED will backstop any and all market corrections, QE forever and other nonsense – Only a fool would make an investment decision based on the statements above. And let me tell you, there are quite a lot of fools out there.
  6. The market is consolidating as it gets ready for a breakout – I can just as easily argue that it is distributing.
  7. Etc…..

You get the idea. Call me a fool, but I have heard the exact same thing at 2000 and 2007 tops.

Historic Macro Vs Stock Market Data Divergence. 

Macro Data InvestWithAlex

Inflation Adjusted S&P. 

S&P inflation adjusted

Adjusted P/E Ratio Is Near Historic Highs (only 2000 tech top stands higher). 

PE Ratio

In other words, you don’t have to be a genius to figure out what happens next. 

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. May 15th, 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 Most Bulls Might Be High On Drugs….Again Google

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How To Make Money With Drones

Here is the coolest drone application I have seen up to date. Well, if you don’t count shooting them down with a shotgun. The next GoPro? Time will tell.

There is very little doubt that “drones” will be a huge industry moving forward. That brings up an important question.

How do we make money off of it?

That is precisely what this article/video attempts to answer.  Where the real money is in drones.

Here is the bottom line. This space is wide open and full of young start ups. And as with any other industry, there will be one or two big winners (think Microsoft or Amazon), while the rest will fail. Not much is available in terms of public markets.

You might want to look at some of these companies from an angel investor angle, but your chances of finding that diamond in the rough are small. Finding a venture firm that has a portfolio of these things might be your best bet. One thing is certain, it is probably worth following this new industry closely.

z32

How To Make Money With Drones Google

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Why Was Janet Yellen Talking Down The Market?

janet yellen investwithalex

A little over a week ago Janet Yellen uttered the following words, “I would highlight that equity market valuations at this point generally are quite high.” What was she trying to convey? Here is one outlandish theory from Tom Hutchinson.

“Why is she talking about the market? Now Fed chairs are notorious for avoiding being clear about the direction of the market or their opinion evaluation. They go way out of their way to do that. When they deliberately talk about the market, there’s a reason for it. What I personally think is the reason here is that the Fed is not going to raise rates in June or maybe even September and she’s trying to talk down the market a little bit in anticipation of not raising rates.

My opinion is that if she was going to raise rates, why talk down the market? The rate hike would do that. The risks of not raising rates are that, you create a bubble. Too many people love the idea that rates aren’t going up and flood into the market and she wants to temper that a little bit and avoid overvaluation.”

So, let me get this straight. Janet Yellen does not want to raise rates and she is asking Mr.Market not to push higher? Perhaps. However, here is a scenario that makes a little bit more sense. At least to me. The FED will raise rates and Ms. Yellen is simply telling the market that it should get a little bit more serious about the upcoming rate hikes. Particularly, when you consider today’s bubble level valuations.

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Why Was Janet Yellen Talking Down The Market?  Google

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Bull Or Bear? You Decide

Daily Chart May 14th InvestWithAlex

5/14/2015 – A positive day with the Dow Jones up 189 points (+1.05%) and the Nasdaq up 69 points (1.39%). 

As yours truly, David Stockman and Mohamed El-Erian continue to warn their followers that a big stock market decline and a severe recession are coming down the pipeline.

David Stockman: 

  • “The worldwide central bank money printing spree of the last two decades has generated massive excess capacity and mal-investment all around the planet.”
  • “What is coming, therefore, is not their father’s inflationary spiral, but an unprecedented and epochal global deflation.”
  • “So the central banks just keep printing, thereby inflating the asset bubbles worldwide. What ultimately stops today’s new style central bank credit cycle, therefore, is bursting financial bubbles. That has already happened twice this century. A third proof of the case looks to be just around the corner.”

Mohamed El-Erian: 

  • Financial markets have grown addicted to central bank easing, and that addiction could cause a heap of trouble when central banks tighten the credit spigot.
  • “It reminds me a little bit of 2007 and 2008,” when investors tried to discern when the turn would come away from easy credit conditions, El-Erian said. “I’m not so confident that I will see the turn coming, and turns tend to happen quite quickly.”

I couldn’t agree more. The only remaining question is…….are the US Equity markets currently going through a 10 month distribution or consolidation period? If distribution, the time to pay the piper may be soon at hand.

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. May 14th, 2015  InvestWithAlex.com

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

Bull Or Bear? You Decide Google