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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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Stock Market Update. InvestWithAlex.com February 7th, 2014

Daily Chart February 7, 2014

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

2/7/2014 – Another large rally in the market with the Dow up 165 points (+1.60%) and the Nasdaq up 69 points (+1.69%). 

Many market participants are calling for the end of the correction and continuation of the bull market. I believe they might be premature and the overall notion is beside the point. 

As I have stated so many times before, the Dow Jones topped out on December 31st, 2013, ushering in the next leg of the cyclical bear market scheduled to bottom in 2017. While the long-term technical trend remains up and this could be viewed as a correction, my mathematical work is rarely off. First, it is yet to be seen if the rally over the last couple of days has any legs or if this is a simple bounce. Based on my calculation it is possible that Monday was the bottom, but the point of force was not strong enough to confirm an intermediary bottom. 

Is it possible that the point of force discussed below is the top and not the bottom? Yes, that is a possibility. However, before I change my position to such an outcome, we must first have a strong follow through early next week. If we do not and if the market proceeds to roll over and go lower, the points of force below once again become our primary targets and turning points. 

Either way you twist this, the situation above does not impact our overall trading portfolio. We continue to stay in CASH or LONG/HOLD while waiting for a confirmation that the bear market is indeed here. Please see tomorrows weekly update for a more detailed analysis. 

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 7th, 2014 Google

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LinkedIn (LNKD) Generational Buying Opportunity?

Let’s make this very simple. Great quarter for LinkedIn. Pretty much as good as it gets. They lowered their forward guidance, hence the stock sell off. Should you buy?

Not if you like your money. No doubt, LinkedIn is a very well run company. Yet, it is way too expensive for my taste. With about $25 Billion market cap, forward revenue of about $2 Billion and slowing growth, LinkedIn is too richly priced. Certainty, the company will continue to grow at a fast clip, but even a stampede of unemployed workers coming to LinkedIn’s platform (due to upcoming recession) in order to spam each other about job opportunities won’t justify the valuation.

Now, valuation metrics aside, stocks tend to deviate (sometimes significantly) over a short period of time. Is it possible for LinkedIn to surge higher? Sure, but even technical picture is somewhat deteriorating. Today’s down gap is likely to be closed over the next few days. Yet, will LinkedIn and its expensive stock price be able to avoid the pull of the upcoming bear market? Given its rich valuation and slowing growth trajectory, I don’t believe so. If anything, I wouldn’t be surprised to see Linkedin stock price to be cut in half over the next 3 years.

linkedin chart

——————————————————————————————–
Here is a good analysis

LinkedIn: Why Are Investors Paying So Much For This Stock?

Feb. 7, 2014 10:14 AM ET |  5 comments |  About: LNKD

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)

LinkedIn’s (LNKD) Q4 and FYR lived up to expectations, but guidance was not what the market had hoped for. So once again the usual pounding happened in after hours trading, but to my surprise, not enough if you ask me.

Actually, the company’s results were great and I don’t think investors could have asked much more from the company. Anything more would have been unrealistic. But once again, the problem is not the results or even the guidance, it’s what you pay for it. And in LinkedIn’s case, investors are paying way too much.

I am not going to bother running down the numbers. The company’s results are here and the presentation is here. If you have not read them yet, go ahead and do so …

Let me tell you what shocked me from yesterday’s report. Earnings aside and taking only revenue into account, the chart below shows the quarterly revenue of LinkedIn over the past several years.

(click to enlarge)

The blue line is the quarterly revenue of the company up until its recent report. The extension to that, beyond Q4 of 2013 (the green line), are numbers filled in by me based on guidance. In other words, irrespective of the actual results, I started with Q1 of 2014 by plucking in $460 in revenue — which is management’s upper limit guidance — and from there I simply increase randomly revenue every quarter thereafter, so as to come within guidance of $2 billion in revenue for all of 2014 (the green line).

The red line calculates year-over-year quarterly revenue growth. Now up to the most recent quarter, quarterly growth on a year-over-year basis has been coming down since about Q3 of 2011. With the most recent results, it is now down to about 40%. But based on management’s guidance, that will come down to about 20% by the end of 2014.

My question is, is LinkedIn worth $26 billion? Is any company with $2 billion in revenue and with forward guidance of 20% revenue growth worth that much? In my book, LinkedIn is not worth $26 billion even with 50% year-over-year quarterly revenue growth, let alone 20%.

But let me ask investors another question. What will happen if the growth trajectory of the company continues to disappoint further in 2015 and 2016? How much of a multiple will the market put on LinkedIn then, if for example management’s guidance calls for 30% revenue growth in 2015 instead of the almost 50% that the market is expecting? Will the market still pay $26 billion for the company’s stock? My answer is no.

And if you want my opinion, if management disappoints again and the market realizes that the super high growth days are over, then it will mark the stock down beyond what anyone imagines. By how much we will have to wait and see, but even $100 a share is pretty farfetched for LinkedIn’s stock if you ask me.

The market was modeling $2.16 in revenue for 2014 and management gave the market around $2 billion. The market is modeling around $2.9 billion in revenue for 2015 and my guess is that analysts will be bringing that figure down. By how much makes no difference, because even with $3 billion in revenue, there is no reason for LinkedIn’s market cap to be around $26 billion anyway.

LinkedIn (LNKD) Generational Buying Opportunity?  Google

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Warning: Why Does CNBC Wants To Destroy Your Wealth

CNBC Idiots

CNBC Writes: Why long-term investors should buy this selloff 

After a year of steady and quite remarkable gains, fear has crept back into the stock market. Concerns about the U.S. economy have joined emerging market weakness and jitters about the Federal Reserve’s stimulus reduction to send the S&P 500down 6 percent from the high reached Jan. 15. But savvy traders are advising long-term investors that this selloff is presenting a terrific opportunity to buy stocks at a discount.

“If you’re a long-term investor, now’s the time to be allocating,” said Rich Ilczysyzn, senior commodities broker at iiTrader. “I know there’s a lot of pension fund capital waiting to be allocated. They may wait for a specific trigger, maybe 5 percent, or maybe 10 percent. But it’s not going to give the retail guy a lot of time to jump on. And what’s going to happen is, people are going to miss the absolute bottom.”

Read The Rest Of The Article Here

Only the pump and dumpers or the idiots in the financial media can say that a mere 6% selloff is a “buying opportunity of a lifetime”.  I think that teach that phrase in the stock broker school to be repeated like a retarded parrot. Well, I guess I shouldn’t expect anything else from CNBC, a perpetual BS machine.

I would admit to one thing. It was quite entertaining to watch CNBC on huge down days in 2008 and 2009. To watch their “deer in the headlights” faces as they whined while trying to figure out why the collapse was happening. According to them, no one saw it coming.

WRONG, dear talking heads. Plenty of people saw it coming, including myself, and have tried to warn others. Yet, no one wanted to listen. We have the exact same situation today. That is fine by me. That is human nature and I have no desire to shove my work or opinion down anyone’s throat.   

At the same time, one reality remains. The stock market is incredibly overpriced.  Particularly, if you take credit and speculation into consideration.  The most important point to understand here is that corporate earnings over the last 5 years have been driven by the same credit infusion (by the FED to the tune of $85 Billion a month + negative interest rates) that spilled into the stock market. When this QE goes away and/or when the velocity of credit slows down, both happening now,  the stock market as well as the earnings will collapse.

Leading to a significant recession and a massive amount of wealth disappearing into thin air. As I have already mentioned on this blog a number of times,  my mathematical work has confirmed that the bull market has already topped out on December 31st, 2013 and the bear will take us into the 2017 bottom. I am not sure if I can be any more clearer than that.

As such, if you want to listen to retards on CNBC (no offence to the genuinely challenged community) telling you that this is a buying opportunity of a life time, go for it.  Just ask yourself, where were they when the real buying opportunity presented itself in the March of 2009. 

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Warning: Why Does CNBC Wants To Destroy Your Wealth Google

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Why The US Economy Is Just Like Philip Seymour Hoffman On Heroin

sick-global-economy-investwithalex

CNBC Writes: Marc Faber: Market volatility will continue, here’s why

“It would seem to me that it’s not just tapering that is putting pressure on markets,” Faber, the author of the closely watched “Gloom, Boom & Doom Report” told CNBC on Tuesday. “In emerging economies we have practically no growth, we have a slowdown in China that is more meaningful than the strategists seem to think and than the official, Chinese statistics seem to suggest.”

“That then puts pressure on the earnings of the multinationals because most of the growth in the world over the last five years has come from emerging economies,” he told CNBC Europe’s “Squawk Box.” No growth, he said, was causing “a vicious circle on the downside” with slowing emerging economies and inflated asset markets that are now deflating, in turn putting more pressure on asset prices and on the economies.

Faber’s comments come as volatility in equity markets continued this week, prompting concerns among traders and investors that markets were at the start of a sharp correction. The moves lower follow a rally last year on the back of the U.S. Federal Reserve’s monetary stimulus.

“Total credit as a percent of the global economy is now 30 percent higher than it was at the start of the economic crisis in 2007, we have had rapidly escalating household debt especially in emerging economies and resource economies like Canada and Australia and we have come to a point where household debt has become burdensome on the system—that is, where an economic slowdown follows.”

Read The Rest Of The Article Here

Marc Faber needs to stop reading my reports. In all seriousness, it is nice to see someone like Faber confirm your own analysis and investment thesis in its entirety.

He is, of course, right on the money.  When the entire global economy depends on massive amounts of credit and each country is trying to devalue their currency faster than the other, you know you have a big problem.  Here is a good way to look at the issue.

The US Economy and its global counterpart is no different from the Philip Seymour Hoffman. One of my favorites. The guy was on top of his game in one of the most competitive industries in the world, successful, rich and with the ability to land any type of a girl. What else does a guy need in this world?

Well, for him that wasn’t good enough. So he had to find an escape in booze and heroin. The US Economy functions in exactly the same way. Neither Greenspan nor Bernanke has the testicular fortitude to let the economy go through a typical recovery, clear the slate and keep moving on.

Instead, they have infused the economy with massive amount credit (aka heroin) at the first sight of a sneeze. Distorting all financial markets to a massive degree and making the patient addicted in the process.

Now, there is no going back. Just like Philip Seymour Hoffman OD on heroin, the US and Global Economy will OD on cheap credit. Leading to massive financial trouble around the world. There is no way to avoid it now.

While I agree with Faber, I have an extra level of analysis that he does not. Timing.  Again, my timing work is indicating that the bull market topped out on December 31st, 2013 and the market will now roll over to take us into the cyclical 2017 bear market bottom. 

With that said, right now would be a prudent time to protect yourself. 

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Stock Market Update. InvestWithAlex.com. February 3rd, 2014

Daily Chart February 3, 2014Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/3/2014 – Another ugly day for the market with the Dow Jones being down -326 points (-2.08%) and the Nasdaq being down  -107 points or (-2.61%).

Again, based on my mathematical work, this is not a correction. As my earlier post “Market Top” from two weeks ago outlined and explained, December 31st, 2013 was indeed the top of the bull market that started in March of 2009 and the beginning of the final bear market leg that will take us into the 2017 cyclical bear market bottom.

Even though the market continues to go down, we still need a confirmation before taking a short position. As such, I continue to anticipate the market to bounce into the March time frame before resuming its bear market. If you remember, the market left a number of open gaps in the 16,400 area that will “technically” need to be closed.

Short-Term Projections:

(***This is the only time I will provide short-term projections here. They will only be available in our premium section thereafter). 

My mathematical work shows two points of force coming in February. One coming up this Friday and the other one on February 17th.  Based on my mathematical work, I believe February 17th will be the bottom of this bear move, reversal and subsequent bounce into the March of 2014. If market confirms, we are looking at the 15,025 on the DOW  as our projected negative price target.

However, if the market gets there sooner, there is a good chance that this Friday will be a turning point. I will keep you posted. Either way, we have to wait for a confirmation before taking our long position.

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Stock Market Update. InvestWithAlex.com. February 3rd, 2014 Google

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Weekly Investment Update and Summary. February 1st, 2014. InvestWithAlex.com

daily chart Jan31, 2014

Continue to maintain a LONG/HOLD position.

Weekly Summary: 

Even thou the market had a number of significant down days during the week, the Dow Jones ended up down only -180 points or (-1.14%). Both the Nasdaq and the S&P fared much better. Loosing only -24 points (-0.59%) and -7.7 points (-0.43%) respectively. 

If this week can teach us anything, its that volatility is back. Every trading session was opened up with a fairly large gap. With Fridays gap being close to 200 points on the DOW. What does that mean?

It means the cyclical composition of the market has shifted from a general uptrend exhibited in 2013 and for the large part since the start of this bull market leg in March of 2009 to a bear market leg identified here last week. 

Again, my mathematical timing work had confirmed that the DOW Jones topped out on December 31st, 2013 at precisely 16,576, ushering in the new bear market leg that will take us into the 2017 cyclical bear market bottom. 

Now, most market participants believe that the decline since the start of the year is nothing more than a simple correction that is long overdue.  While I disagree we still have to wait for a technical confirmation before taking our short position to profit from the bear market leg.  Such confirmation must come from a short term bottom here, subsequent bounce and resumption of the bear move thereafter. 

Our model portfolio established at the beginning of the year has been in cash this entire time @10 Year Note, helping us avoid the decline. For our previous investments, we continue to maintain our LONG/HOLD position without adding anything new. Once the bear market confirmation arrives we will get out immediately and go short. 

If you recall, I have mentioned that the market opened up large gaps on the way down from 16,400. At this stage it is highly probable that the market will bounce back to those levels before resuming the bear market let once the bottom of this correction is set. When will that happen. Please see our Mathematical & Timing analysis below.  

Fundamental Analysis: 

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. I am acutely aware and as most market commentators point out, based on the P/E ratio of 18.5 and some other metrics that the market is not overpriced and is within its historic range. At lest suggesting that there is no need to worry about any sort of a decline. 

s&p ratio

However, everyone is missing the elephant in the room. The earnings for most corporations have been “juiced up” to the tenth degree by the same credit infusion. If you take the credit and those earnings out, the P/E ratio is likely to be in the 50-100 range. Making this market not only overpriced, but putting it in the “are you fucking kidding me overpriced” category. 

Please note, that is exactly what happened when the P/E ratio shot up to over 124 in May of 2009 even though the market had lost over 50% since October of 2007. When earning disappear (as they will), today’s valuations will look astronomical.   

Macroeconomic Analysis: 

It doesn’t matter where you look, we have the same cancer spreading across the globe. Massive credit expansion juiced up the FED. This week the Fed announced a further cut in QE from $75 Billion to $65 Billion due to perceived “Economic Strength”. I have argued for a long time that the FED will be unable to withdraw this support without a massive blow up one way or another. We already starting to see strain show up in emerging markets. 

With our mathematical work confirming the bear market over the next 3 years, this plays very well into our scenario. The bottom line is, our economy is driven by credit and will deflate on a large scale as soon as the credit intervention goes away (as it is now) and/or the velocity of credit slows down (as it is now). 

Technical Analysis: 

Technical picture remains murky. 

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

Short-Term: The trend is down as the market structure turned bearish. Please see my timing analysis for further instructions. 

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

Mathematical & Timing Analysis: 

There is a number of important mathematical turning points arriving over the weekend and next week. Will these points signal the end of the bear move and a reversal into an anticipated rebound? I believe so. As soon as the rebound completes we should see the market roll over the resume a bear market leg in March of this year.  

Time Targets: Coming Next Week.

Price Targets: Coming Next Week 

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. 

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The Secret Behind What Drives The Stock Market

InvestWithAlex Wisdom 17

Today’s 5 Minute Podcast Covers The Following Topics:

Reader’s Question: “The economy is doing very well right now and the fundamentals are good. What would be the catalyst for the bear market you talk about? ” – Peter. 

    • The secret behind what drives the stock market. 
    • Why most people get it wrong when it comes to forecasting.  
    • The natural cycles behind all economic and market developments. 
    • How this one little thing can double your portfolio performance virtually overnight. 

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