Investment Grin Of The Day Google
What You Ought To Know About Shorting Nasdaq In March Of 2000
Continuation from Friday….. (How You Could Have Made A Fortune Shorting The Nasdaq)
That is exactly what happened in early March of 2000. The Nasdaq topped out at around 5,050, declined slightly into the middle of March before bouncing up into a perfect bearish setup by March 24th. An analyst familiar with the cyclical work above would have been aware that if the March bottom of 4,800 was to be penetrated on the downside a bear leg and a possible crash would be in the cards.
As soon as such confirmation was realized, all investors following the “Buy Low, Sell High, Go Short & Cover” investment strategy should have exited their net long Nasdaq positions and reversed their portfolios to net short. Immediately. And indeed, the confirmation was received by the end of March when the Nasdaq broke below its March 17th bottom of 4,800.
Trade #2: Exit long position at 4,750. Reverse course and go short at the same price. Net realized gain up to date 4,030 points or 560%.
As soon as March low was broken on the downside the Nasdaq quickly collapsed by more than 30%, reaching its intermediary bottom by the end of May. Yet, investors familiar with the overall cyclical composition of the market would have been aware that bear market legs do not last 60 days. They would have been aware that this collapse was just the start of a prolonged bear market cycle.
Furthermore, they would have been aware that initial bear market legs tend to last 2-3 years as all previous bear markets had initiated with such prolonged declines. For example, 1900 top to 1903 bottom, 1929 top to 1932 bottom and 1966 top to 1970 bottom. The Nasdaq continued to decline until it reached its bottom of 1,108 on October 10th, 2002. An 80% decline.
By the time October 2002 bottom was reached, analysts familiar with the cyclical work above should have been, once again, on a heightened state of alert. This time around they would have been anticipating and looking for a market bottom. Ready to cover their short positions and to go long at a moment’s notice. Such a confirmation was obtained when the market broke above its down trending trend line in October of 2002.
To Be Continued Tomorrow……
What You Ought To Know About Shorting Nasdaq In March Of 2000 Google
Why A 1,000 Point Down Day Will Spell Armageddon
Weekly Update & Summary: September 27th, 2014
A negative week with the Dow Jones down 168 points (-0.97%) and the Nasdaq down 68 points (-1.48%). During the week, the Dow left a number of up gaps behind. With the highest one being at 17,283, suggesting a short-term bounce. With that said, the Dow continues to maintain a number of down gaps leading all the way down to August 7th low and a large gap from August 18th at around 16,650. Suggesting an eventual correction.
And that’s just the beginning. The market continues to have two large gaps down from April 14th/16th and a number of smaller gaps leading all the way back to February 5th low. I continue to believe that the Dow will close such gaps when the next bear leg develops at below mentioned time frames (please see mathematical analysis & timing section below).
Friday’s Update:
The market had a fairly strong rebound following yesterday’s bloodbath. What’s interesting is that everyone is still trying to figure what might have caused the decline. Cashin: What could be behind the selloff. Theories are abound and range from bending iPhones to some hedge fund liquidating a large position, from illiquidity in credit markets to Russia getting ready to freeze out the EU bureaucrats this winter. I would pay to see the last one.
Yet, all of that is irrelevant BS when it comes to financial markets and what had caused yesterday’s slide. Here is what you should consider instead.
First, the Dow declined a miserly 250 points and most in financial media lost their shit. Literally. I can only imagine what will happen if the Dow has a bear market day and loses 1,000 points or so. Armageddon? And while this might seem trivial, it is not. This gives you a psychological setup of most investors. In other words, once the market really begins to move down, given today’s psychological makeup, most investors will freak out. Leading to a possible panic and/or a crash.
Second, no one will ring the bell at the top. Most of the conversations focused on why today’s environment is not indicative of a market top and why the market still has some time run. Again, everyone is missing the point. By the time everyone realizes a bear market is in play we will already be down 10-20% or it will be too late to avoid losses.
Just look at 2000 and 2007 tops. Maybe I am suffering from amnesia, but I don’t recall neither Greenspan nor Bernanke holding a press conference and announcing that a bear market was about to start. On the contrary, they were hyping up how great the economy was. It wasn’t until the market was down 20-25% that everyone realized what was happening. As always, it was too late to do anything.
The upcoming bear market will present itself in a very same fashion. In short, anyone who is trying to identify the market top based on various fundamental reasons is playing a fools game.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014-2017. 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 2014-2017 will start (to the day) and its internal composition, please CLICK HERE
(***Please Note: 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 26th, 2014 InvestWithAlex.com
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Investment Grin Of The Day
How You Could Have Made A Fortune Shorting The Nasdaq
Continuation from yesterday……(The Composition Of 2000 -2017 Bear Market)
Investment Strategy #2: What Most People Did (The Reality….Worst Possible Outcome).
Think about the following for a second. While “Buying & Holding Forever” is a nice catch phrase, very few investors out there can do so consistently. For instance, how many people do you know that were able not only to hold on to most of their stock positions during the bear legs of 2002 and 2008, but to add to their positions during the time. Chances are, not many.
For the purposes of this discussion, let’s assume that ….
- You were fortunate enough to originate your position in November of 1994. Right before the final 600% run up took place.
- Subsequently, you sold out half way through all of the bear legs and bought back in half way thought all of the bull market legs.
… which should be lot better than what most people were able to accomplish during this difficult time.
Given the circumstances above, your total ROI should have been around 425% by September of 2014 and approximately 320% by the time the bear market of 2014-2017 completes itself. Yielding a net annualized rate of return of 8.5% and 6.5% respectively. Not bad, but once again, buying and holding a 30-Year US Treasury in 1994 would have outperformed this gut wrenching speculation in Nasdaq by a fairly good margin.
Investment Strategy #3: Buy Low, Sell High, Go Short and Cover
As was suggested earlier, based on the cyclical composition within the stock market you should have been aware that the last phase of the 1982-1999/2000 bull market was about to start. In addition, you should have been aware that the upcoming cycle is likely to develop as a powerful “blow-off top” 5-Year cycle. Leading you to initiate a long position in November of 1994.
Trade #1: Go long in November of 1994 at 720 on Nasdaq.
As October and November of 1999 rolled around, any investor familiar with the cyclical composition of the stock market should have been aware that a bull market was ending and that a 17-18 year bear market was about to begin. As a result, such investors would have been looking for any sign of a top and an opportunity to reverse position.
The first sign of a top occurred in early January of 2000 when the Dow topped out at 11,850. Exactly 5 years and 35 trading days after the cycle began in November of 1994. Yet, despite the Dow’s sell-off between January and March of 2000, the Nasdaq kept surging higher. Setting a blow off top in the process.
Believe it or not, that was an optimal outcome and a trade setup. This divergence should have been a clear sign that a blow off top was forming and that a market crash was likely once the top on the Nasdaq was set and confirmed. In fact, investors familiar with the cyclical composition above should have been watching the market like hawks for any sign of a top and bearish reversal. Ready to liquidate their long positions and go short at a moment’s notice.
To Be Continued On Monday…….
How You Could Have Made A Fortune Shorting The Nasdaq Google
Did Apple’s Bending Phone Caused Today’s Meltdown?
9/25/2014 – A big down day with the Dow Jones down 264 points (-1.54%) and the Nasdaq down 88 points (-1.94%).
It took the market just 30 minutes to retrace the big gains from yesterday. In the process, all markets opened up a big up gap in the morning. A gap that the market will have to close at some point in the future.
On top that, today’s market action did a lot of damage to the overall market and its structure. And while only Russell 2000 is now in a clear technical downtrend, today’s action brings out a number of important questions that both bulls and bears should consider.
Primary, is this the start of something more or this your typical 2-5% correction that should be over fairly soon?
Unfortunately, it is an impossible question to answer if you are relying solely on fundamental analysis and a next to impossible question to answer (at this stage) if you are to add technical analysis into the mix. With more divergences in most markets than hookers in Amsterdam, the market is essentially free to either stage a massive bounce here or to go through an outright collapse.
A better analytical tool is a must. As such, I suggest you check out my timing and mathematical work as soon as possible if you would like to know what happens next. To start, please CLICK HERE
(***Please Note: 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 25th, 2014 InvestWithAlex.com
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Investment Grin Of The Day
The Composition Of 2000 -2017 Bear Market
Continuation from yesterday…….(Short-Term Cyclical Composition Of The Stock Market)
Once the 2000 top was reached the market was doomed to repeat the next secular bear market cycle ending in 2017. This bear market was kicked into high gear with a sell of 2000-2002, during which the Dow lost 40% of its value and the Nasdaq crashed 80%. The initial sell off was followed by an exact 5 Year and 1 trading day bull market cycle. Terminating on October 11th, 2007.
What followed was a mid-cycle sell off of 2007-2009. Such sell offs typically represent the fastest and the deepest moves down during any secular bear market cycle. We saw the same mid cycle sell offs develop in all previous bear markets. For instance, the crash of 1907 was the mid cycle panic of 1899-1914 bear market, the crash of 1937 was the mid cycle sell off of 1929/32-1949 bear market and the massive sell off of 1972-1974 was the mid cycle point of 1966-1982 bear market.
When the mid cycle panic bottom was reached in March of 2009 the market turned around to stage the next 5 Year rally of 2009-2014. Thus far, this 5 year bull market cycle has lasted 5.5 years, the longest since the 5.5 year cycle of 1924-1929. Leading many to conclude that a secular bear market ended in 2009 and we are now in a long-term bull market.
Unfortunately, there is no evidence that secular bear markets last only 9 years. On the contrary, since the stock market first started trading in May of 1790 all bull/bear market cycles repeated in a clearly defined 15-20 year patterns. Today’s environment is not very different. In fact, most bear markets end with 2-3 year bear legs. For example, 1912 to 1914, 1946 to1949 and 1980 to 1982. When we combine this information with the overall composition of the stock market described earlier, it becomes clear that a bear leg of 2014-2017 is essentially imminent.
Once again, the cyclical composition background above in necessary for understanding today’s environment and its application to various investments strategies one could have implemented during the time.
In November of 1994 (our starting bottom) the Nasdaq was trading at approximately 720. Let’s now take a look at 3 different outcomes or investment strategies to determine which one was the best.
Investment Strategy #1: Buy and Hold. (Middle Path).
If you would have invested in November of 1994 and held though today (September of 2014 with the Nasdaq is at 4,500), you would have generate a ROI of 525%. Representing an annualized compounded rate of return of approximately 9.5%. Not bad.
However, if we are to account for an upcoming bear market of 2014-2017, in the best case scenario the Nasdaq ends at 3,000 by 2017. Yielding a ROI of 316% or just 6.5% a year. Still not bad, but it seriously underperforms buying and holding a 30-Year US Treasury Bill that was yielding 8% in November of 1994.
To Be Continued Tomorrow…….
Why Both Bulls & Bears Will Miss The Upcoming Bear Market
9/24/2014 – A strong up day with the Dow Jones up 154 points (+0.90%) and the Nasdaq up 46 points (+1.03%).
The stock market continues to perform as anticipated. I had a heated discussion with a Perma Bull last night. That led to an idea for today’s update and the reason why 99% of all bulls and bears will miss the upcoming bear market.
During our discussion the Perma Bull suggested that he will be able to get out of the market as soon as the bear market starts, hedge with put options, blah, blah, blah…..
The reality is very different. The psychological framework behind today’s market will prevent ALL from either avoiding or participating in the upcoming bear market. Today, this mindset is very straight forward.
- For Bulls this market will never go down. Every sell off is recovered within a relatively short period of time and everyone is proclaiming that this secular bull market has another 5-10 years to go. Despite the fundamental backdrop, the only way is up. Climbing the wall of worry….right?
- For Bears this market has been an absolute disaster. In simple terms, the bears are scared shitless of this market. No wonder investor survey reveals that the % of bearish investors are at an all time low (since they started tracking the metric in 1985)
Interestingly enough, both mindsets lead to the same kind of thinking and to the same eventual outcome when the bear market begins to develop. Leading to massive bullish losses and forgone opportunities for the bears to profit. Here is how it will play out. It always does.
- First 5% decline mindset: This is just a simple correction. Bulls don’t sell, bears don’t initiate short positions.
- 5-10% decline mindset: This is the 10% correction everyone was talking about. Bulls don’t sell, bears don’t initiate short positions.
- 10-20% decline mindset: Darn it. This is that 20% correction that was overdue. Too late to sell now, its time to buy more. Too late to go short now, the move is almost over.
- 20-30/40/50%: F$%*. Bulls begin to panic while selling at a loss. Bears begin to short, without realizing that it is too late to short (future losses are probable).
As you can see, today’s mindsets for both bulls and bears will lead to significant losses when the upcoming bear market of 2014-2017 begins to develop. If you would be interested in avoiding this faith and learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE
(***Please Note: 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 24th, 2014 InvestWithAlex.com
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Why Both Bulls & Bears Will Miss The Upcoming Bear Market Google
