8/14/2018 – A positive day with the Dow Jones up 112 points (+0.45%) and the Nasdaq up 51 points (+0.65%) 

Not much new to add to our forecast. If you would like to find out what the stock market will do next, in both price and time, based on timing and mathematical work, please Click Here. 

This might come as a shock to most bullish investors out there, but…..

Fed is no longer worried about every market hiccup, economist Lavorgna says

Perhaps lulled into a sense of complacency by a Federal Reserve that previously had seemed to attend to the market’s every hiccup, investors seem unprepared for a central bank that now thinks more hawkish medicine is in order, a veteran Fed watcher said Tuesday.

“People don’t seem to realize the Fed does not have investors’ backs,” said Joe Lavorgna, chief economist for the Americas for French investment firm Natixis.

Lavorgna has spent 20 years following the Fed for Deutsche Bank Securities and other Wall Street firms after starting his career at the New York Fed.

The biggest issue today is that most investors haven’t figured this out yet, let alone priced it into the market. Some bullish sentiment indicator are hitting historic highs and very few investors, if any, think the FED will spoil the party.

Yet, the time to worry is now. Let’s assume the above is true and the FED won’t care if the market drops 10-20% sometime in the future. In other words, they won’t jawbone the market higher as Janet Yellen has done in the past. That, in addition to tightening and taking liquidity out of the market can spark a real crisis of confidence.

Throw in the following chart and we possibly have an explosive situation on our hands.

In other words, if the FED refuses to support the market, even verbally, a 10-20% loss in the market can very quickly turn into a 60-40% loss. What’s worse, such a bloodbath will only take us back to the mean in terms of historic valuations levels. Bears rejoice? 

Our work is clear in terms of identifying what the stock market will do next. If you would like to find out what the future holds, in both price and time, please Click Here

8/13/2018 – A negative day with the Dow Jones down 125 points (-0.50%) and the Nasdaq down 19 points (-0.25%) 

Short-term, the stock market continues to follow our exact trajectory.  The next larger scale move should be….. If you would like to find out what the stock market will do next, in both price and time, based on our timing and mathematical work, please Click Here 

Here is a sure bet ladies and gentlemen, if I have ever seen one……

Two possibilities for the S&P 500’s melt-up phase

Due to the higher move early last week, I have to now consider the more bullish pattern to 3,225 more seriously. I have labeled that pattern in blue, and it is an alternative pattern at this time. This pattern has a leading diagonal for wave (i) completed off the early April lows, and has us now setting up for the heart of a 3rd wave, ultimately pointing us over 3,100 on the SPX for wave (iii). However, in order to prove this is the operative count for wave (5), we will need to see a strong break out through 2,890 in the coming week or two. Should this occur, then we will likely see a pullback to the 2,870 level, and as long as we hold the 2,840 region on that pullback, it will be pointing us up toward 3,100 in quick fashion to complete wave (iii) of wave (5).

There you go, just load up on call options and ride this train to the promise land of milk and honey of massive capital gains.

RIGHT? 

Wrong. Over the last few weeks we have been discussing an important divergence between the Nasdaq/Russell/Wilshire and the Dow/S&P/NYA. It is important to note that while the former is sitting at or near its respective all time highs, the latter is nowhere close.

How do we reconcile that?

Once again, that was the exact topic of discussion in our weekly update. In order to answer that question properly Timing, Cyclical and Mathematical analysis has to be thrown into the mix. Only then can one answer an all important question of what the stock market will do next.

If you would like to find out how this divergence will resolve itself, in both price and time, please Click Here. One thing is certain, it won’t be as simple as a one directional “melt-up”

A mixed week with the Dow Jones down 149 points (-0.58%) and the Nasdaq up 27 points (+0.34%) 

Thus far, the Dow continues to follow our exact long-term and short-term trajectory. And while the market remains predominantly bullish, the situations in far from being that simple. If you would like to find out what the stock market will do next, based on our mathematical and timing work, in both price and time, please Click Here

Market sentiment remains at historically high bullish levels. For instance, Bull vs. Bears 24-to-1: What a “Meltup” Looks Like. All you have to do is open any financial media outlet and it would be story galore of how the market is about to break out to all time highs with at least another 10% rally being a sure thing. 

As accurate as that forecast might be, no one, and I mean no one is taking about the possibility of an all out crash. And considering that fact alone, is it possible that a crash will develop?  That is exactly the line of thinking explored in the following article.

8 Measures Say A Crash Is Coming, Here’s How To Time It

Since 1951, this “equity reduction” signal has only occurred 17-times. Yes, since these are long-term quarterly moving averages, investors would not have necessarily “top ticked” and sold at the peak, nor would they have bought the absolute bottoms. However, they would have succeeded in avoiding much of the capital destruction of the declines and garnered most of the gains.

The last time the Equity-Q ratio was above 40% was during the late 2015/2016 correction and the technical signal warned that a reduction of risk was warranted.

The mistake most investors make is not getting “back in” when the signal reverses. The value of technical analysis is providing a glimpse into the “stampede of the herd.” When the psychology is overwhelmingly bullish, investors should be primarily allocated towards equity risk. When its not, equity risk should be greatly reduced.

Unfortunately, investors tend to not heed signals at market peaks because the belief is that stocks can only go up from here. At bottoms, investors fail to “buy” as the overriding belief is the market is heading towards zero.

In a recent post, It’s Not Too Early To Be Late, Michael Lebowitz showed the historical pain investors suffered by exiting a raging bull market too early. However, he also showed that those who exited markets three years prior to peaks, when valuations were similar to today’s, profited in the long-run.

While technical analysis can provide timely and useful information for investors, it is our “behavioral issues” which lead to underperformance over time.

Currently, with the Equity Q-ratio pushing the 3rd highest level in history, investors should be very concerned about forward returns. However, with the technical trends currently “bullish,” equity exposure should remain near target levels for now.

That is until the trend changes.

When the next long-term technical “sell signal” is registered, investors should consider heeding the warnings.

Yes, even with this, you may still “leave the party” a little early.

But such is always better than getting trapped in rush for the exits when the cops arrive.

The above is great, yet most bulls would dismiss all of the above as premature. After all, what is there to worry about. The Nasdaq/Russell/Willshire are sitting at their respective all time highs. If anything, it is to early to worry about any sort of a crash. Simply put, the market is not setup for it.

I would agree, however, I would also point out that the Dow/S&P/NYA and many other indices are INDEED technically setup for a crash. Combine that with a fact that no one is expecting a crash and we might have a real problem on our hands.

How do we reconcile all of the above……as a bear trap or as a bull slaughterhouse? 

That is exactly what we discuss in our weekly update. Not only that, our charts predict exactly what the stock market will do next. In both price and time. If you would like to find out, please Click Here