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Why The Market Top Is In and What You Should Do Next – Update

Long Term Dow Structure35

Update: 

The blog post below was published in January, warning readers that the bull market has topped out on December 31st, ushering in the next leg of the bear market. The bear market that will take us into the 2017 cyclical bear market bottom. Thus far, the market has performed just as anticipated. A substantial decline and a bounce.

However, with the Nasdaq hitting an all time high today, the question is…..is my forecast wrong?

No. Here is why. What you have to understand is that every single market and stock will have its own internal mathematical structure and it’s own rate of vibration. My mathematical work follows the Dow Jones in particular. As such, the market structure remains intact and just as we have been forecasting within our member section. In fact, an important turning point is coming up shortly, pushing and pulling the Dow towards the completion of secondary top in March of 2014. Something I have talked about on this blog a number of times.

Exactly when, where and what steps will the Dow take to get there? I highly encourage you to visit this site tomorrow in order to read our weekly update. I will answer most, if not all, of the questions.  

End Of Update…..

In my earlier blog posts I have mentioned that we had a cluster of very important turning points showing up around December 31st, 2013 and January 1st of 2014 (based on my cycle work). Indicating a significant turning point. 

Yet, my mathematical work at the time didn’t confirm. That is until Tuesday of this week. You can blame a simple brain fart or a lack of sleep on my part.  

I have shown the chart above before. To prove to you that the stock market is not random, but quite the opposite, it is exact. Showing you that there was only a 22 point variance over a 16 year period of time. Further, when we take the values on the chart above and do a few simple calculations we get a value of 12,935.

So what? 

Based on my calculations, the move between March 2009 bottom to December 31st, 2013 top on the DOW was exactly 12,836. That is an exact hit with 0.7% variance. With cycle work and mathematical confirmations coming together, I have no choice but to call for a market TOP.  

(***What calculation? You can learn more about it in my book “Timed Value” by getting two free chapters on timing HERE,  purchasing it on Amazon HERE or getting it as a free bonus HERE). 

Now, even though the market top is in, we have to wait for a technical confirmation before taking our short position. Based on my previous experience that is a prudent thing to do. 

What should you do next?

Option #1: If you are in stocks, start getting out and going into cash. Earning 2-5% annually is heck of a lot better than losing 30-40% over the next 3 years (the length of upcoming bear market). Plus, you will have money when the bottom comes to buy some wonderful companies at give away prices. 

Option #2: Profit on the short side. At the same, this will be a very difficult thing to do. The upcoming bear market is unlikely to be directional. My work shows that it will closely resemble the 2000-2003 bear market with a lot of ups and downs. As such, it will be difficult to make money on the short side.

The best advice I can give you is this. Protect and accumulate cash. Once we hit bottom in 2017, the market will start its 18 year bull market.  

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Why The Market Top Is In and What You Should Do Next – Update  Google

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Is The Party Back On? The Stock Market Update

daily chart Feb 13, 2014

***The Market Is About To Turn. What Position Should You Take or Maintain To Maximize Your Gains While Minimizing Risk? Please Click Here To Find Out. 

An interesting day with the Dow Jones up +64 points (0.40%) and the Nasdaq up +39 points (0.94%).

The day started with about a 100 point gap down due to bad retail data. The market rallied right away to close the gap and push further to the tune of +60 points. Turning today’s seemingly regular day into a 150 point rally for the Dow.

As of right now, both the short-term and the long-term chart look exceedingly bullish.  Even though we are properly positioned, extreme caution here is a must.

It seems like the scenario discussed in yesterdays update is in play. While the Dow pushed higher it was unable to break above 16,050 for the time being.  Indicating that the highest range of this bounce leg has been reached and that the market rally is likely near exhaustion.  Whether or not we will see follow through tomorrow, is for the most part irrelevant.  Remember, time is the most important element.  

This works well with our February XXXX day provided in yesterday’s forecast. Making our next update incredibly important. Based on the market actions tomorrow I should have both price and time targets for the top on February XXXX. 

Again, February XXXX should prove to be a turning point of this ………(Would you like to see the exact points of force in both price and time? Plus, what you should do. Please Click Here to +Subscribe to our premium service above. It’s FREE). 

CONCLUSION & POSITIONING:

While the scenario above is highly probable, we must implement proper trading positioning, in case it is not.  Positioning below is as per DOW Jones (not to be applied to individual stocks).

If No Position: XXXX

If Long: XXXX

If Short:  XXXX 

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start. 

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Is The Party Back On? The Stock Market Update  Google

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Stock Market Update. InvestWithAlex.com February 12th, 2014

daily chart Feb 12, 2014

A fairly uneventful and flat day, with the Dow Jones down -30 points (-0.19%) and the Nasdaq up +10 points  (0.24%).

The talk of the bottom and continuation of the bull market continue to intensify. Technically speaking “they” might be right. After all, the long-term trend for the Dow Jones continues to be overwhelmingly bullish.  The correction we have experienced since the start of the move can (for now)be classified as a typical correction. After all, the move from 16,588 on December 31st, 2013 to 15,370 on February 5th, didn’t really break any important levels. According to the bulls we are in the first few innings of a “multigenerational” bull market.

Yet, the bears are ready and hungry. Of course, the fundamental thesis is right on the money.  The rally we have experienced over the last few years has been fueled by credit and speculation. Driving most asset classes (stocks, bonds, real estate, etc..) into an extremely overvalued range.  While most bears point to 2007 top in comparison, anticipating a 50-60% slide over a short period of time, other bears go even further. Predicting a complete 1929-32 depression style type of a collapse where guns, ammo and tuna cans become your best investments.

Who is right?

No one. At least based on my mathematical work. Remember, it is the stock markets job to confuse as many people as humanly possible.  Point being,  my work shows that the stock market will drive both bulls and bears up the wall over the next couple of years. Every time the market dives, vindicating shorts over a certain amount of time and suggesting that the bear market/collapse is now in place, it will then turn around and stage a massive rally. Leading bulls to believe that the bull is back. Rinse and repeat.

The structure of the upcoming bear move 2014-2017 will be very similar to that of January 2000 – March 2003 on the Dow Jones. (not Nasdaq).  That is why proper timing of up and down moves over the next few years will become so incredibly important. Identifying the point of force (turning point) and then riding it up or down in whatever direction it points will yield the best results…..  

(Missing portion. Would you like to see the exact points of force in both price and time? Plus, what you should do. Please Click Here to +Subscribe to our premium service above).

There is a couple of things we have to consider.

1. The Dow Jones left two gaping holes on the way down. All the way up to XXXX. Not always, but typically, the market moves to close such gaps before any directional move (up or down) can take place. Our mathematical work showed that the market topped out on December 31st, 2013 at 16,588. Meaning, the market must close the gaps before rolling over and attempting a sustained bear market move. So, is it going to XXXX over the next few weeks? As of today, it is too early to say due to too many interference patterns, but it is highly probable.   

2. The next important TIME turning point we have is February XXXX. Followed by a number of significant turning points in March. This yields a number of possible scenarios. Most probable of which is as follows…..

(Missing portion. Would you like to see the exact points of force in both price and time? Plus, what you should do. Please Click Here to +Subscribe to our premium service above).

CONCLUSION & POSITIONING:

While the scenario above is highly probable, we must implement proper trading positioning, in case it is not.  Positioning below is as per DOW Jones (not to be applied to individual stocks).   As such….

If No Position: XXXX

If Long:  XXXX

If Short:   XXXX

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section

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Stock Market Update. InvestWithAlex.com February 12th, 2014 Google

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Stock Market Update. InvestWithAlex.com February 11th, 2014

daily chart Feb 11, 2014

What Position Should You Take or What Position Should You Maintain? Please Click Here

Another  very strong day in the market, with the DOW up 193 points (1.22%) and the Nasdaq up 43 points (+1.03%).

As discussed in our weekly forecast, this stock market rally follow through (over the last two days) makes one of our two scenarios obsolete.  Particularly, our  most likely scenario of the Dow Jones reaching 15,071 by February XXXX, before turning around and bouncing is no longer in play. Which shifts us to the secondary scenario. The bounce that is happening right now.

This bounce is an incredibly important move for the DOW in both price and time. Even though the move started earlier than anticipated, it is incredibly important for the structure of the market and our Bear Market Thesis.  Remember, secondary and lower high in March of 2014 is a must before any structurally sound bear market can resume.

How long will this bounce take and how far will it go?

We have a number of things to consider.  First, the last down leg on the Dow Jones left a bunch large open holes going all the way up to 16,400. It would be ideal for the market to close the gaps before rolling over and starting the next bear leg. Further, a move into the 16,400 by March of 2014 would allow us to liquidate the remainder of our long positions at fairly good prices and get us ready for taking a short position for the remainder of the bear market.  

With that said, February XXXX remains an important turning point in the market. Given today’s market action I believe that this turning point will be a halfway point of the bounce and/or the B leg of the correction (if you are familiar with Elliot Wave). In other words, it is likely to be a turning point for a short correction that will retrace a % of the current rally without compromising the bounce.  Thereafter, the Dow should bounce into the XXXX category by March to structurally complete the up move.

That is why a proper trading strategy we have executed so far is so important. While our work can determine exact turning points over the long term, it get a lot more complicated over the short term.  As such, we must always wait for a technical confirmation before taking or reversing a position.

(***Please note, we have made a number of trades within our sample portfolios today. Please log in to your account to review the trades).

Short-Term Projections & Advice:

The next point of force shifted to February XXXX. A likely intermediary top before a correction of the rally from February 5th takes place. Thereafter, the market should…..  (Would you like to see the exact points of force in both price and time? Plus, what you should do. Please Click Here to +Subscribe to our premium service above). 

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section

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Stock Market Update. InvestWithAlex.com February 11th, 2014 Google

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Weekly Stock Market Update. InvestWithAlex.com February 8th, 2014

2/8/2014

daily chart Feb 7, 2014

Continue to maintain a LONG/HOLD position -OR- In CASH .

Weekly Summary: 

Quite a volatile week. We started off with a massive drop on Monday, subsequent stabilization and a rally towards the end of the week. When it was all said and done the Dow Jones gained 95 points (+0.61%) while the Nasdaq gained 22 points (0.54%).  The volatility is back and that’s a good thing. Structurally, the market did very well, leaving only one gap unfilled. That was on Thursday (around 15,500) and it is highly probable (based on my work) the market will go back to close this gap next week.  

The question on everyone’s mind is…..

Is this correction over? Can we get on with the bull market?

Not so fast. As I have indicated many times on this blog already, the Dow Jones topped out on December 31st, 2013 at 16,588. My mathematical analysis and work confirm that. What we are witnessing right now is the first stage of the bear market that will take us into the 2017 bottom. Again, the structure of the upcoming bear market move will be very similar to the bear market move between January of 2000 and March of 2003.

In short, a lot of volatility, a lot of violent ups and downs and a general downtrend that will take us into the 2017 bottom. Such internal market structure will make it very difficult for all (longs, shorts and traders) to make money in this market. You only have two options.

First, you can simply go short for the duration of the move. But only after the bear market is confirmed. If that is not exciting enough, you might want to concentrate on timing bull/bear moves over the next few years to maximize your returns. BTW, that is exactly what we specialize in here. Please check out our +Subscribe section.

Thus far, our model portfolio (within our premium section) has been in cash @ 10 Year Note, helping us avoid the decline while we wait for a bear market confirmation. Otherwise, I recommend people to maintain their LONG/HOLD positions.  

Remember, there is vast difference between proper or exact timing and smart money management.   

Fundamental Analysis: 

There has been no change in the fundamental picture. As you know, my fundamental case remains fairly straight forward and clear cut. All stocks and most other markets (credit and real estate) are substantially overvalued due to massive infusion of credit by the FED over the last few years and pure speculation. How overvalued are we?  

market to gdp

The chart above is just another data point we can use in our analysis and comes to us via courtesy of Dshort.com. The chart essentially indicates that today’s overall market valuation is above 2007 valuation levels. Looking back, we know that valuation levels at 2007 were extreme and subsequent collapse to the tune of 60% proved that without a shadow of the doubt.

While we have already surpassed 2007 levels, the market is still below 2000 levels. Does that mean you can breathe a sigh of relief? Not in the slightest.

Here is why…..

Speculative levels of 2000 tech bubble were caused by simple speculation in the tech sector and subsequent excesses throughout the economy/markets. Today’s valuation excesses are caused by massive infusion of credit. When we take that into consideration, I would argue that today’s valuation levels (once again, driven by credit) are higher than 2000 valuation levels. When the credit is finally withdrawn or becomes ineffective, both occurring simultaneously in today’s environment, the valuations are bound to collapse.    

Macroeconomic Analysis: 

An interesting week. Both Ukraine and Argentina are putting capital controls into their markets, indicating an upcoming economic collapse in both countries. A number of economist came out blaming “Emerging Markets” for market instability within the US. Of course, they are once again wrong. It is the not the Emerging Markets that are causing problems throughout the world, but the US Economy and the end of the credit binge that is causing all sorts of problems. It simply being felt more prominently in a weaker emerging market economies. That will soon change.  

Japan continues to try spark its economic growth through monetary intervention, currency devaluation and angering menstruating women.  All idiotic moves leading to an eventual disaster.  The UE bureaucrats continues to pretend that everything is fine by offering Greece further extensions in hopes that Greece will pay them back. I think it’s time for the EU to admit that it is never going to happen. In fact, they might as well usher in the unavoidable and the unthinkable. Greek default.  

Technical Analysis: 

While the overall technical picture continues to remain murky, the resolution should be just around the corner.

Long-Term: The trend is still up. Market action in January-February could be viewed as a simple correction in an ongoing bull market. 

Short-Term: Even though the market bounced from Tuesdays lows, the short term picture remains down. Please see my timing analysis for further instructions. 

Overall, we must wait for a confirmation before taking a short position. 

Mathematical & Timing Analysis: 

We have two possible scenarios playing out.  

As mentioned in our daily updates, my mathematical timing work indicates a significant turning point on February xxxx with the initial price target of xxxx. As of right now, I believe the bounce we have experienced over the last few days is just that, a bounce. As such, I anticipate the market to roll over early in the week and continue its bear move to hit the price/time targets below.

However, in case we do get a follow through of the current rally early next week, I would have to adjust my view and call for a top (instead of a bottom) on February xxxx. If this scenario comes to fruition we might be at an important juncture of bear market confirmation. As such, the first few trading days of the upcoming week is incredibly important.  

Time Targets: xxxx

Price Targets: xxxx

CONCLUSION: 

If you are out of the market as we have been, stay out. If you are still fully invested consider liquidating your positions as we go through a rebound over the next few weeks. Once the rebound plays itself out and the market confirms the next bear leg down, I would recommend going short at that time. 

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section

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Weekly Stock Market Update. InvestWithAlex.com  February 8th, 2014 Google

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Are Stock Valuation Higher Than 2000 and 2007 Tops? You Bet Your Sweet Ass They Are!!!

Well, kind of. The chart below is a very simple, yet a power look at today’s valuation levels. It shows that while we have already surpassed 2007 valuation levels, we are still a few clicks away from the 2000 levels. At the same time this is not the main issue here.

It is important to understand where we came from, what we are comparing and why it is incredibly important for your overall portfolio. The late 90’s and subsequent top in January of 2000 were caused by the tech bubble. We all know that. As a result of its collapse, the FED’s had opened the flood gates of credit to stabilize the economy and to avert a deep recession. That money flowed directly to real estate, mortgage finance and the stock market….creating a powder keg that exploded in 2007-09. 

The FED’s, once again, raced to the rescue, scared to death, trying to avoid the next “Great Depression”. This time around, not only did they flood the market with cheap credit, but they went as far as creating money out of thin air and monetizing the debt to the tune of $3 Trillion over the last 3 years alone. The money, once again, flowed into the stock market, and to a lesser degree real estate, creating overvaluations and speculation in every sector of the economy. 

So, let me ask you. Is it different this time? Can a collapse/recession be avoided? Are these valuation at an appropriate level or is the stock market incredibly overpriced? 

I think you know what my answer will be. It’s clear (as per chart below) that the market is above 2007 levels. What that chart does not show is that today’s values, as opposed to values in 2000, are driven by credit. Meaning, in real terms, today’s market is likely to be a lot more expensive than it was at  the high of the tech bubble. 

Dr. Marc Faber clearly agrees in the article below. As always, his analysis is right on the money. I highly encourage you to read it. 

Finally, I have clearly stated a number of times on this blog and as per my mathematical/timing work, the bull market from the March of 2009 bottom has topped out on December 31st, 2013. Further, this same mathematical work indicates that the market is set for a bear market leg that will last into 2017. As such, it would be prudent to educate yourself on the matters above while protecting your overall portfolio and wealth. 

I wish you luck. 

Chart Courtesy Of dshort.com

market to gdp

—————————————————————————————————————-
Dr. Doom: Tech stocks even more overvalued now than in 2000

With stocks worldwide off to a bad start in 2014, one man isn’t surprised by any of this.

Dr. Marc Faber, editor and publisher of the Gloom, Boom, and Doom Report, thinks the drop in the markets, particularly with US stocks, were nothing compared to what they could – or should – have done.

While turmoil in emerging markets is often cited as the culprit for stocks’ decline, others are pointing the finger at the Federal Reserve Bank for tapering its monetary stimulus. Faber believes the fall in equities is the fault of the Fed, but not because of tapering.

“It’s easy to blame someone else for ones problems,” says Faber. “Emerging markets central bankers are blaming now the Fed for the tapering… The Fed has brought about problem in emerging economies. But, it’s not the tapering. It’s the previous bubble they created because investors were chasing yield. They bought emerging market stocks, emerging market currencies, and bonds. They pushed up these asset prices to relatively high levels.”

Though the correction in stocks caught some off guard, Faber says he wasn’t surprised by anything other than people’s reaction.

“The market in the US, the S&P went from 666 in March 2009 – almost five years ago – to 1,850,” says Faber. “Now the market dropped 7% and it seems that it’s the end of the world. This is ridiculous.”

“Compared to the previous increase in prices,” says Faber, “the market retreat of 7% is nothing, nothing at all!

Where Faber sees a bubble is in the tech sector, particularly with social media stocks. He was short Twitter, which until Wednesday was up 45% from its IPO closing price of $44.90. He says he covered his short as shares dropped to $50 per share Thursday. However, he is generally not hopeful for the sector.

“Social media stocks are more overpriced than the internet shares were in year 2000,” says Faber.

Besides Twitter’s staggering 24% drop on Thursday, Pandora was down 10% and LinkedIn took a 7% hit in afterhours trading before Friday morning’s opening bell.

Faber warns investors hoping to make easy money by shorting social media stocks that they may get hurt. Yet he doesn’t buying them to make a quick buck is a good idea, either. In other words, investors should just stay away from social media stocks.

“In year 2000, between January and March, [internet stocks] still went up 30%…. And then, it collapsed,” says Faber. “I’m not saying that individual investors should short these stocks because they may get burned. But, by and large, the fact that they still go up doesn’t make them good value from a long-term perspective.”

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Stock Valuation Higher Than 2000 and 2007 Tops? You Bet Your Ass They Are!!! Google

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Bitcoin Wild Swings Continue. Down 25% In Two Days.

Check out the chart below. Is that something you want to invest in? 

If your answer is YES, you have got more balls than brains. Taking merits of this digital currency aside, at the end of the day no one really knows how much bitcoins are worth. They could be worth $1 Million or they could be worth $1. It is purely arbitrary. You can’t value it and as such it is not an investment. It is a pure speculation. Anyone who claims otherwise is full of shit.

Is there utility in Bitcoin. Certainly. However, the utility part can be equated to early American colonial times, where every little town had its own currency. Same thing will happen with onslaught of digital currencies over the next decade. Who will win?  One thing is for sure. I am not smart enough to figure it out, but good luck speculating in Bitcoins.    

bitcoing chart

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Bitcoin Wild Swings Continue. Down 25% In Two Days.  Google

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Stock Market Update. InvestWithAlex.com February 6th, 2014

Daily Chart February 6, 2014

Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/6/2014 – Big day in the market with the Dow Jones up 188 points (+1.22%) and the Nasdaq up 46 points (1.14%). 

The question on everyone’s mind is…..has the market bottomed? Is the correction over? 

As of right now and based on my work I see very little evidence of that. Our primary points of force and their price targets remain intact (please see them below). At least for today. We might have to adjust those targets if we are to see strong follow through over the next few trading days, but that is still to be seen. The market opened up with a 60 point gap in the morning, giving us an early indication that it will turn around and go lower (in short order) to close the gap. Further, subsequent move lower to hit our points of force before any sustained bounce from the January-February sell off can take place is highly probable. 

As such, our current position remains intact. If you are in CASH, maintain your cash position while waiting for a technical confirmation that the Bear market has started. Otherwise, maintain a long/hold position.  The long-term trend is still intact and bullish. 

Short-Term Projections:

As of today, I am not adjusting the points of force below. My mathematical work shows two points of force coming in February. Typically we should anticipate a turning point on such dates. (Would you like to see the exact points of force in both price and time? Please +Subscribe to our premium service above). 

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Stock Market Update. InvestWithAlex.com February 6th, 2014 Google

Daily Chart February 6, 2014

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How To Make A Killing In A Deflationary Inflation

InvestWithAlex Wisdom 20Today’s 5-10 Minute Podcast Covers The Following Topics:

Topic: Inflation or Deflation Over The Next 5 Years? How To Allocate Capital To Make A Killing -OR- How To Make A Killing In A Deflationary Inflation.  

    • Inflation or Deflation….what will win over the next 5 years? 
    • Why it is incredibly important for your overall portfolio. 
    • How you should position yourself now. 
    • What steps to take to make a killing over the next 5 years. 

Please tweet me your questions @investwithalex

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Revealed: Who Will Win The Inflation-Deflation Battle And Make A Killing

Inflation or Deflation InvestWithAlex

Business Insider Writes: BILL GROSS ‘Be Careful 

In his February investment letter, Bill Gross, the manager of the biggest bond fund around at PIMCO, warns investors to “be careful.”

Why? Gross believes the rally has been fueled by ever-expanding debt.

Now, due to a combination of smaller government deficits and tapering of the Federal Reserve’s quantitative easing program, the rise in debt is slowing, which Gross argues is bad news for risky assets like stocks and good news for bonds.

“Bull markets are either caused by or accompanied by credit expansion. With credit growth slowing due in part to lower government deficits, and QE now tapering which will slow velocity, the U.S. and other similarly credit-based economies may find that future growth is not as robust as the IMF and other model-driven forecasters might assume. Perhaps the whisper word of “deflation” at Davos these past few weeks was a reflection of that. If so, high quality bonds will continue to be well bid and risk assets may lose some luster.”

Read The Rest Of The Article Here

Bill Gross is, of course, right on the money.  

The one question that gets left behind is whether or not we will have inflation or deflation over the next 5-10 years. That is an incredibly important question. A correct answer should greatly impact your overall portfolio allocation over the next couple years. Getting it right would mean outperformance, getting it wrong would only yield severe losses.

Gold bugs, inflationist and hyper inflationist would lead you to believe that hyperinflation is just around the corner, your dollars won’t be worth the paper they are printed on and that gold is about to surge to $100,000 an ounce.

Deflationist would lead you to believe that we are on a verge of an economic collapse, credit collapse, market collapse, great depression and that all asset prices are likely to decline to the tune of 90-95% over the next few years. If this scenario does indeed come true, it would be prudent to invest into a stockpile of canned food, a small arsenal of guns and a container load of ammo.

Who is right?

No one. The reality is somewhere in the middle. Technically we are in a deflationary environment due to a massive credit expansion and the subsequent collapse of that credit throughout our economic system. Basically, we are still feeling the impact of 2007-09 credit defaults, with more defaults coming up over the next few years (due to upcoming recession).   

On the other hand, the FEDs have been printing money like crazy over the last couple of years and distributing it though various channels of the economy. Mostly through financial institutions, speculation and asset price appreciation.   

That is why we are seeing the evidence of both inflation and deflation throughout  the economy. Which one will win out over the next couple of years and how to invest in such an environment?

Please listen to today’s podcast in order to get your answer. 

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Revealed: Who Will Win The Inflation Deflation Battle And Make A Killing  Google