Weekly Update & Summary: March 28th, 2014
This was a rough week for the market. Particularly, for the Nasdaq and iShare NASDAQ Biotechnology Index (IBB). While the Nasdaq lost 121 points (-2.83%), the IBB declined 16.6 points or (-6.76%). The Dow fared much better by squeezing out a tiny gain of 20 points (0.12%). Structurally, the market did very well this week by closing most of the gaps. Keep in mind, the Dow left a large gap behind at around 16,050. I believe the market will go back to close that gap when the bear market initiates.
FUNDAMENTAL & MARKET ANALYSIS:
Why Interest Rates Will Remain Low
According to David Kotok, co-founder, chairman and chief investment officer of Cumberland Advisors, ”long-term rates are likely to stay near current levels for quite a while”.
I tend to agree, but I will go even further. Not only will interest rates stay low, but I would expect the 10-Year Note to retrace back to at least 2% over the next 2-3 years.Why?
Again, the forecast above is based on our incredibly accurate mathematical and timing work. This work predicts a severe bear market in US equities between 2014-2017 and a subsequent deep recession. As it is now, inflation is nonexistent as we continue to deal with debt liquidating deflationary forces.
When the bear market hits (we are almost there), the FED will have no choice but to abandon their “tightening” plan. Instead, a year from now they will be flooding the market with further liquidity/stimulus to try and avoid any further collapse. As you can understand, in such a interest rate environment, short-term rates will remain at zero while long-term tail of the yield curve will flatten once again.
Is Gold About To Surge?
There is very little love for the yellow stuff at the moment. Since topping out less than two weeks ago, gold is down 6%. Today,many people and money managers are falling all over each other, suggesting that the gold has topped out and the time to short is NOW. Not so fast. Not according to our mathematical and timing work.
Here is what most people miss. Most people anticipate strong economy, tightening, stronger dollar and somewhat higher interest rates going forward. That is not what our mathematical and timing work shows. Not at all. Quite the opposite. Our work shows that a severe bear market of 2014-2017 is about to start, ushering in a deep recession where the FED will be forced to flood the market with liquidity once again. Not tighten by any measure. In such an environment (liquidity pump while equity markets decline) gold tends to perform very well.
That is on top of a favorable technical setup. While I wouldn’t buy just yet, Gold should be on your BUY watch list.
What Does The Yield Curve Yield?
The opposite of what most other market participants believe. Most market participants anticipate the FED to tighten, as they have indicated, indicating economic growth and higher interest rates. In such a scenario you should see spreads widening. Instead, we are beginning to see a trend reversal and yield curve compression since the start of this year.
Does the bond market see something that most other market participants do not?
I believe so. In fact, we anticipate the yield curve to flatten further over the next 24 months and possibly invert as the bear market of 2014-2017 enters the picture. As we have indicated on this blog so many times before the bear market will usher in a severe recession, forcing the FED to flood the market with further liquidity. In such an environment, we would anticipate the long end of the curve to head lower. Much lower.
MACROECONOMIC ANALYSIS:
Ukraine continues to be the most important issue. In fact, things might escalate significantly over the next 10 days.
As I published on my blog, I am getting an unconfirmed report from a Russian military acquaintance that Russia will go into East Ukraine late next week. This is further confirmed by my analysis of Russian media and physical Russian troop buildup along Ukraine’s border. In addition, this is further confirmed by Pentagon’s warning and direct warning against such action by President Obama. I will have much more on this on Monday as I need to verify this information from another source (I am trying to track someone down). Thursday, April 4th was mentioned as the date.
If true, anticipate the stock market to crater next week. This action will provoke a completely different ball game in the international community. One thing is for sure, this will be an interesting week to watch.
TECHNICAL ANALYSIS:
Long-Term: The trend is still up. Market action in January-February could be viewed as a simple correction in an ongoing bull market.
Intermediary-Term: Since February 5th, intermediary term picture shifted from negative to positive. Giving us a technical indication that both the intermediary term and the long term trends are up. Yet, that in itself can be misleading as per our timing analysis discussion below.
Short-Term: While the short-term trend remains bullish, it might be misleading as per our timing analysis discussion below.
Again, even though all 3 trends are bullish for the time being, that might be misleading. Please read our Mathematical and Timing Analysis to see what will transpire over the next few weeks.
MATHEMATICAL & TIMING ANALYSIS:
(*** Please Note: This time around about 90% of the information contained within this section has been deliberately removed as it contain too much technical information. Particularly, exact dates and prices of the upcoming turning points. As well as trading forecasts associated with them. I deem such information to be too valuable to be released onto the general public. As such, this information is only available to my premium subscribers. If you are a premium subscriber please Click Here to log in. If you would be interested in becoming a subscriber and gaining access to the most accurate forecasting service available anywhere, a forecasting service that gives you exact turning points in both price and time, please Click Here to learn more.Don’t forget, we have a risk free 14-day trial).
Based on our mathematical and timing work the next turning point is located at
Date: XXXX
Price: XXXX
XXXX
Point being, you should have an exact strategy and entry/exit points based on the forecast above.
The list below is for your reference point. It entails my investment strategy for my own investment purposes. While you are free to follow me, please do so at your own risk. Do not take this as a trading advice.
|
Stock |
Entry Point ($) |
Action To Take |
|
XXXX |
88 |
XXXX |
|
XXXX |
1160-1180 |
XXXX |
|
XXXX |
515 |
XXXX |
|
XXXX |
74 |
XXXX |
|
XXXX |
21 |
XXXX |
|
XXXX |
420 |
XXXX |
|
XXXX |
35 |
XXXX |
|
XXXX |
65 |
XXXX |
|
XXXX |
120 |
XXXX |
|
XXXX |
100 |
XXXX |
|
XXXX |
112 |
XXXX |
Otherwise, I suggest the following positioning over the next few days/weeks to minimize risk while positioning yourself for a forecasted market action. (This is continuation of our previous positioning).
If You Are A Trader: XXXX
If No Position: XXXX
If Long: XXXX
If Short: XXXX
CONCLUSION:
An incredibly important week is coming up. Only one scenario remains on the table. I have also described the point force we are looking at and exactly what you should do in each case. With increased volatility, multiple interference patterns and an incredibly important long-term turning point we must be very careful and risk averse here. Those anticipating the moves and those who can time them properly will be rewarded appropriately.
Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start.
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