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Timing The Stock Market (Part 4)

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Continuation of part 3

The problem with traditional cycle analysis is threefold. First, the use of 2-Dimensional price/time stock market charts to track the cycles. This book makes it clear that the stock market is a much more complex phenomena that moves in at least a 3-Dimensional environment. As such, when the stock market cycle analyst begin to use traditional cycle analysis on a two dimensional chart, they are nearly measuring the shadow of the overall cycle and not the cycle itself.

Second, the cycles are not static, they are dynamic.  They are constantly rotating, adjusting and realigning themselves within the structure of the market.  While it might sound complicated, it is not. It simply means that while the overall cycles remain intact, they constantly change their starting position to realign with the 3-Dimensional structure of the market. As various points of force occur in the market place, these cycles tend to realign themselves to confines of the lattice structure developing in the stock market at the time.

Finally, there are multiple cycles working in the stock market at any given time, ranging from hourly cycles to cycles lasting decades. An analyst performing cycle analysis must be aware of this fact and know which cycle is the predominant one during the period of study.  Doing so would allow the analyst to setup a proper index composite that should mimic and predict the market in great detail. An illustration is a must to cement all 3 points.

Let’s take a look at the  2000 top, 2003 bottom and 2007 top.  Let’s assume that during this time there were 10 different and major stock market cycles moving at the same time, and when combined, represent all major ups and downs of the market. The dates above are the major inflection points in the market. They represent the lattice completion points in the 3-Dimensional environment.  That is precisely the points where the cycles realigned themselves in order to form the new cycle composite.

When the market hit the 2000 top, most cycles that worked prior to that period had stopped working. Instead the cycles realigned themselves at the 2000 top to build a completely new cycle composite going forward. These cycles represented the market between 2000 top and 2003 bottom. Further, these cycles realigned themselves again at the 2003 bottom and 2007 top. That is the primary reason behind why these cycles work for a period of time and then break down to never work again.  Once the inflection points and the cycles are understood, an analyst simply realigns such cycles in a predictable fashion in order to time and predict the market with great precision.

Let’s study a sample market composite to gauge full understanding.  

To be continued……

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Timing The Stock Market (Part 4)

Warning: The US Dollar Is About To Surge

Daily Ticker Writes: Why the Dollar Will Always Be the Reserve Currency for the World

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On Friday morning the U.S. dollar came close to its lowest point of the year against the euro, according to The Wall Street Journal, on expectations that the Fed will have to continue its easy money policies for longer than first forecast thanks to the government shutdown.

“I’ve never been very worried about this,” he asserts. “The reason for that is there really is no alternative. The Chinese are not going to offer – and they cannot, given where they are in development, I think, for a decade or more – a genuine competitor for the dollar.”

Read The Rest Of The Article Here

I tend to agree with the premise of this article. As of right now there is no clear alternative to the US Dollar. The Chinese Yuan cannot be that alternative as it is technically not even a freely traded currency.  It will be decades before Chinese Yuan approaches the point of even being considered as an alternative to the US Dollar. The Euro? Well, there are too many structural issues in Europe.

There is a real possibility that Euro won’t even survive over the next decade. The majority of European economies (well, almost everyone except Germany) are in a big fiscal mess that is not getting any better. If anything, it is getting a lot worse. With the upcoming worldwide recession over the next few years (I discuss in my previous blogs posts) there is a real possibility that it might force some countries out of the EU and out of the Euro.  

That is one of the reasons of why I am so bullish on the US Dollar for the time being. No doubt that the US has some serious economic and structural problems. Yet, that in itself doesn’t determine the value of its currency.

It is quite possible for the currency to appreciate significantly even under dark economic circumstances and that is what I foresee for the US Dollar. Be aware of that.    

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Warning: The US Dollar Is About To Surge 

Why Is Warren Buffett So Upset?

Reuters Writes: Buffett calls threat to not raise U.S. debt limit a ‘political weapon of mass destruction

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NEW YORK (Reuters) – Warren Buffett, chairman and chief executive of Berkshire Hathaway (NYS:BRK-A – News), said Wednesday that the threat of not raising the U.S. debt ceiling is a political weapon.

The idea that Congress could fail to raise the $16.7 trillion U.S. borrowing limit is a “political weapon of mass destruction,” Buffett told cable television network CNBC.

Buffett said Berkshire Hathaway owns short-term Treasury bills and is “not worried” about the bills being paid, despite concerns about the U.S. debt ceiling.

Of course Mr. Buffett is correct. What happened in Washington over the last couple of weeks is nothing short of a disaster. An absolute disaster. What Mr. Buffett forgot to mention is that this “political weapon of mass destruction” has already gone off.

Surely, the US will not default on its debt. In my previous posts I have clearly stated that neither the market nor should you care about that. The damage has already been done and will be eventually felt on a different front.  This front has to do with our creditors.  I bet you my left leg that this situation was very closely watched and analyzed by both Japan and China (two of our biggest creditors). 

Their conclusion will be very simple. Washington is being run by idiots who have no problem putting the wealth and the future of our countries at risk. Therefore, we should diversify.  I bet you my right leg that these countries will start to lessen their US Debt exposure (if they haven’t started already) as soon as possible. Interest rates will go up and that will cause a significant slow down in the US Economy and a substantial DROP in the financial markets.

BOOM. Thank you Washington.  


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Timing The Stock Market (Part 3)

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Continuation of part 2

Now, before we jump headlong into cycle analysis, we must first look at and address three primary cycle issues.

Issue #1: Why do cycles exist in the stock market?

To begin with, everything in nature is cyclical. If we wish to get very technical and look at the fundamental particles we will learn that everything in nature is energy. That energy itself is in the constant state of cyclical movement where the primary difference between various elements and matter is the rate of vibration or oscillation (which in itself is a cycle).

Since everything in nature is cyclical and the stock market itself represents a natural growth spiral, we can safely assume that the stock market is cyclical as well. Yet, it is a little bit more intricate than that. It is not necessarily the stock market that moves in cyclical fashion, but the human psychology that underlines the stock market.  If you study mass human psychology you will soon learn that men go on repeating the same mistakes over and over again. Not only are they incapable of learning from history, but they tend to repeat exactly the same mistakes that their parents and their grandparents had made. .  

When it comes to the stock market and mass human psychology it is very easy to see how people pool their emotions (or mass delusions) together to justify what the stock market is doing. For instance, 2000 and 2007 stock market tops present us with a perfect opportunity to illustrate just that. In both cases it was clearly visible that market participants are suffering from a mass delusion. With the tech stocks selling beyond any reasonable valuation in early 2000 and with the credit/housing market feeding a massive speculative bubble throughout the entire economy in 2007.    

From bottom to growth, from growth to excess, from excess to a decline/collapse. Rinse and repeat. Each one of these cycles servers their purpose, from start to finish. They always had and they always will, for one simple reason. You cannot change the human nature of greed, hope, fear and panic. It will always be within us. The tricky part is identifying these cycles, how long they will last and more importantly, where do they start and end. This section clearly illustrates how to do just that.

Issue #2: Why do some cycles work perfectly fine over a certain period of time only to break down and never work again?  

As mentioned earlier, this issue has caused major headaches for most cycle analyst since the day their craft was born.  At times analysts are able to de-trend various cycles out of the market that, at first glance, work perfectly fine.  In fact, they might work so well that an analyst might get too comfortable with it. The trouble starts when these cycles brake down and stop working. Eventually they all do. Most analyst have been trying to figure out why that happens, thus far without any luck.

To be continued……

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Timing The Stock Market (Part 3) 

Are You As Stupid As The FED Wants You To Be?

Bloomberg Writes: BlackRock’s Fink Says There Are ‘Bubble-Like Markets Again’

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BlackRock Inc. (BLK) Chief Executive Officer Laurence D. Fink, whose company is the world’s largest money manager with $4.1 trillion in assets, said Federal Reserve policy is contributing to “bubble-like markets.”

“It’s imperative that the Fed begins to taper,” Fink said today at a panel discussion in Chicago, referring to the central bank’s $85 billion in monthly bond purchases. “We’ve seen real bubble-like markets again. We’ve had a huge increase in the equity market. We’ve seen corporate-debt spreads narrow dramatically.”

“We have issues of an overzealous market again,” Fink said at the event, which was sponsored by the Paulson Institute and the University of Chicago Institute of Politics. 

He is of course absolutely right. The markets have been distorted by the FED to an amazing degree. The situation is truly unprecedented as we have never seen anything even close to that.

I would go even further and argue that we have backed ourselves into a corner from which no easy exit is possible. As I have mentioned before the velocity of $85 monthly QE is slowing down drastically as all of that money no longer has as much of a impact as it did in the past. Simply put, as the velocity slows down, the overall economy/markets follow and interest rates go higher. On the flip side, should the FED cut back by any amount (even a small one) the impact to the downside will be as described above, only much more severe. There is no easy answer, we will all have to suffer.

Not that I would know, but it is like going through a cocaine withdrawal. Your normal dose no longer has the kick, yet if you decrease the dose….withdrawal symptoms begin to show up.

Either way, only two outcomes are possible. Going through a withdrawal or ODing. Not a pretty picture for the US Economic future either way you look at it.   

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Stock Market Update, December 13, 2013

daily chart Dec 13, 2013  

Summary: Continue to maintain a LONG/HOLD position. 

Even though in the short-term the market has reversed itself and has turned bearish, the long term bull remains very much intact. As such, there is no change in our overall position for the time being. As my mathematical work clearly shows, the bear market will start in 2014. If you would like to know the exact date of the turn, I will make that information available in early 2014. 

For now, the market continues to linger around its all time highs. My previous updates remain right on the money. Please click on the links below to see them. 

November 22nd Report

November 15th Report. 

November 8th Report.

November 1st Report.

As we continue to hold our long position while waiting for the market reversal, right now might be a good time to start thinking about how you would liquidate your holding and/or re-allocate your capital once the bear market of 2014-2017 starts.

If you would like to take it one step further, this is a good time to start researching SHORT opportunities.  

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  Stock Market Update, December 13, 2013

Does NSA Know Everything About Your Sex Life?

Bloomberg Writes: Banning Spying Would Be as Effective as a Ban on Sex

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The uproar in Europe over spying by the U.S. National Security Agency has led to calls for a treaty or code of conduct to limit espionage. To understand why this is naive, imagine a treaty to ban sex. It would be honored in the breach. States, too, have an overwhelming natural impulse: to spy.

Spying is (or was until Edward Snowden) largely covert; no one freely admits to doing it. It is also one of the last preserves of the absolute sovereign, unconstrained by law — think Louis XIV in a trench coat. This is one reason why there are international laws for trade, travel and warfare, but almost none governing espionage, except the one that allows spies to be shot if captured in civilian clothes.

Read The Rest Of The Article

It is mind boggling to me that we live in a country that has a massive surveillance program that essentially spies on everyone in the world, yet this same country can’t put together a working healthcare website after spending $500 Million on it. Something doesn’t add up. Either way, let’s take a look at this issue from a different perspective. 

The question is, why does the US need to spy at all?

Of course a certain level is of spying in necessary, but to do it to the extent that NSA does it is absolutely crazy. For example, I am sure the NSA will scan this blog post, identify various keywords (like NSA), assign it to my profile and probably run it through some sort of a filter to determine if someone needs to look into it further. Okay, but why?

Powerful nations or people do not do this. They are confident enough in their abilities to control their environment. Only those who are scared (politically and economically), reserve to these types of behaviors. Unfortunately, somehow the US became the nation of fear propagated by its own government.

The upcoming Bear Market will only make things worse. Oh, and of course they know everything about your sex life as well. 

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What You Ought To Know About Massive University Education Bubble

Bloomberg Writes: Google’s Boss and a Princeton Professor Agree: College Is a Dinosaur

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Colleges and universities are indecisive, slow-moving, and vulnerable to losing their best teachers to the Internet.

That’s the shared view of Google (GOOG) Executive Chairman Eric Schmidt and Anne-Marie Slaughter, a former Department of State official and until this month a tenured professor at Princeton University. They explored the problems of higher education on Friday in a one-on-one conversation sponsored by the New America Foundation, where Schmidt serves as chairman and Slaughter is the new president.

Colleges have the luxury of thorough, democratic deliberation of issues because “they never actually do anything,” Schmidt said during the event. He cited Princeton, where he graduated in 1976 and once served as trustee, which spent six years deliberating over whether to change its academic calendar—and in the end did nothing. “Don’t get me started on that,” Slaughter laughed.

Slaughter agreed that traditional colleges and universities, with their high fixed costs, are at risk. “They’re going to lose their top talent,” she said. “We can become global teachers. The best people can become free agents.”

Read The Rest Of The Article Here

It is unbelievable how much College Education costs today. The cost of education has gone up by  7-8% per year over the last decade. Some colleges increased their tuition 50-100%  during the same time. Basically the costs of educations has skyrocketed.   

Is there a reason for that? Not particularly. Schools are just getting way too greedy. On top of it all there is $1.2 Trillion of student debt out there. That is a truly staggering amount .  The worst part about this whole “college scam” is the fact that we are ending up with a generation of college graduates who are so deep in debt that it will literally take them decades to get back on their feet.  That in return puts a significant drag on the US Economy as major purchases such as cars and homes would have to be postponed.   

I will have a complete breakdown of this enormous problem in my future posts, but for now I do hope new technologies discussed in the article above blow this “College Monopoly” sky high.  It is a must for our future economic growth. We must find a way to provide affordable education to the masses. That would be a win-win for everyone.   

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What Jim Rogers Thinks You Should Know About Gold

Daily Ticker Writes: Jim Rogers Forecasts a Drop to $900

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Commodities investor Jim Rogers tells The Daily Ticker that gold, having lost its luster as a safe haven, could drop to $900 or $1,000 in the next 1-2 years. Longer term, he has a very different forecast. Gold will soar to “well beyond $1,900 an ounce,” topping its record $1,920 high reached in September 2011, says Rogers, author of Street Smarts: Adventures on the Road and in the Markets. The reason: “massive currency debasement” around the world. “Every major central bank in the world is printing a lot of money plus war, chaos, riots in the street, governments failing,” says Rogers.

Despite that forecast, Rogers warns investments not to consider gold – or any other investment — safe. “I would never use the word ‘safe’ when I’m speaking about investing.”

There are only a few investors that I listen to when they speak. Jim Rogers is one of them. A brilliant and very interesting guy.  So, when he says something you better listen. I highly recommend that you click on the link and listen what he has to say. The video is just 2 minutes long. 

My stock market timing work kind of confirms his thesis on gold. I already talked about gold in one of my previous posts CLICK HERE and the fact that I don’t really understand it or know how to value it properly.

Jim mentions that he anticipates gold to decline further over the next few years to shake out the bulls before resuming its bull market due to currency debasement and inflation. My work confirms this as a highly probably scenario. 

As the markets and the economy decline over the next few years in a deflationary environment, so should the gold.  As we bottom in 2016 and begin the inflation cycle I talked about before, gold should start appreciating. Perhaps significantly. Just my two cents. 

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Timing The Market With Cycles (Part 2)

Orchestra

Continuation of part 1 

Imagine for a second that you are watching the New York Philharmonic Orchestra. As the show starts you see over 50 musicians sitting on stage and playing their musical instruments. The instruments themselves vary across the board.  There is a piano, dozens of violins, trombones, cellos, bass, etc…  As musicians begin to play, beautiful and harmonious music begins to flood the concert venue. If we stop at this juncture, we would miss an important clue that can help us time the markets with great precision.

As the music plays, a number of very important developments occur behind the scenes. To begin with, music itself is nothing more than a vibration or a wave or a cycle or an oscillation.  Each musical instrument and each player produce a range of vibrations while playing their instruments. That creates music. So a single musician will produce  a rate of vibration/oscillation that at least in technical terms is identical to the structure of the cycle. Now, having 50 musicians in our orchestra simply means that at any given second there are 50 different cycles (vibrations/waves) being created by 50 different musicians and instruments. They vary across the board and are as diverse as possible.

Yet, they all come together to create beautiful and harmonious music.  I cannot stress this enough. All 50 of the cycles (vibrations/waves)  unify  into 1 primary cycle by the time music reaches your eardrum.  No longer are you listening to 50 different vibrations, you are now listening to only one.  You are listening to the summation of these vibration, to the final result.  Finally, this end product or the summation of all of these cycles could be represented on the chart as a singular wave moving up and down over time.

What does this have to do with the stock market?

If you are to chart the final result or the final musical wave generated by the 50 musicians above it would look identical to the 2-Dimensional chart of any given stock or of the overall chart of the stock market.  It wouldn’t be identical, but it would look identical as if the music you have just heard is being tracked by the stock market charting service. This yields an important clue when it comes to the stock market cycle analysis.

Basically, there are many different cycles working in the stock market at the same time. Their range, structure, power and amplitude are as diverse as you can imagine. While some cycles last for decades and even centuries, others oscillate every few minutes. However, once we identify all of these cycles and put them all together, we end up with an exact representation of the overall stock market. When I say exact, I mean exact.

Let me repeat this. If the cycle structure is fully understood and constructed properly you can build an exact replica of the stock market. Not only for the past, but also for the future. Once the cycles are known you can predict the exact structure of all upcoming stock market moves to the point and to the day. Confirming both the fundamental and 3-DV analysis work described earlier.  

To be continued…… 

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Timing The Market With Cycles (Part 2)