Summary: Continue to maintain a LONG/HOLD position.
1/30/2014 – The roller coaster ride continues with the Dow Jones ending the day up +110 points or (+0.70%). With gap ups and downs galore.
It is definitely starting to feel like the volatility is coming back into the market. While VIX index is still sitting at relatively lows levels, the market is starting to exhibit signs…. Continue reading “Stock Market Update, January 30th, 2014. InvestWithAlex.com”
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Book summary….
Have you ever wondered if it was possible to generate outsized investment returns by timing the stock market and/or individual stocks with great precision?
If you have, this book is for you. Financial media and most financial professionals would lead you to believe that such a task is impossible. Yet, Timed Value challenges this traditional assumption head on by presenting a clear cut case that the stock market is not random, on the contrary, it is precise.
The book starts by discussing the traditional aspects of “Value Investing”, its hidden secrets and problems. The second part of the book shifts into the timing aspect by showing the reader the exact calculations needed in order to time the market or individual stocks with stunning accuracy.
Further, the author shows “HOW” once the stock market structure is understood in its entirety, the market or individual stocks can be timed with great precision. Not by some arbitrary technique that cannot be replicated, but through the use of modern science and mathematics. Math doesn’t lie and when the market turns/reverses at exact mathematical points of force, only one explanation remains. The market is not a randomly volatile instrument, but a mathematically precise tool that baffles the mind.
As such, this “How & Why” stock market timing masterpiece is a must have book for any true market practitioner or those wanting to improve their overall returns.
Summary: Continue to maintain a LONG/HOLD position.
1/29/2014 – The market continued its initial bear market move with the Dow Jones being down -190 points or (-1.19%).
Further, the market opened up another 100 point gap in the morning, erasing all of yesterdays gains and indicating that the market will eventually come back to close the gaps. No doubt, short term picture remains bearish while the long term picture remains bullish. Raising up questions if this is just a correction or a beginning of anticipated bear market. As my timing work showed, it is highly probable that the bull market topped out on December 31st and what we are witnessing now is the initial stage of the bear market.
Again, even though the timing work confirms, we must wait for a technical confirmation that the bull market has indeed topped out before taking a short position. As such, I continue to maintain our long/hold position.
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CNBC Writes: ‘Huge amount of downside’ in S&P: Fleckenstein
Bill Fleckenstein is not ready to call the top for the market just yet. But pointing to the S&P 500‘s valuation, he says that once stocks do start to fall, the decline could prove extremely painful.
“The [price-to-earnings ratio] is 16, 17 times earnings,” Fleckenstein said on Tuesday’s episode of “Futures Now.” “Why would you pay 16 times for an S&P company? I don’t care about where rates are, because rates are artificially suppressed. Why isn’t that worth 11 or 12 times? Just by that analysis, you’d be down by a quarter or 30 percent. So there’s a huge amount of downside.”
For Fleckenstein, a noted short seller who is famous for making money in the 2008 crash, the Federal Reserve‘s quantitative easing program has led investors to badly misprice stocks.
The Fed “printing money does not make the economy work, but it sometimes makes stocks go wild,” Fleckenstein said. “The reason the stock market did well last year is because the Fed printed $1 trillion.”
Bill is right on the money and while he is not ready to call the top, I am. In one of my previous posts MARKET TOP, I have identified December 31st, 2013 as the top of the bull run from the 2009 bottom.
It has also been my premise all along that fundamentals no longer matter. Not in terms of identifying some sort of a new stock market environment, but as of right now. The fundaments do matter a great deal under “normal” circumstances, yet normal circumstances have been greatly distorted by massive infusion of credit into our financial system.
Credit that drove our stock market prices beyond any reasonable valuation and well above 2000 and 2007 tops. Sure, earnings, P/E ratios and other metrics matter. Yet, most metrics we revert to today have been distorted by the same credit infusion. Leading to higher earnings and corporate profits. The bottom line is, when credit collapses so will all other metrics. Do not be fooled, all of this is nothing but an illusion.
As I have said so many times before, my mathematical work shows that we are in for a 3 year bear market that will take us into the 2017 cyclical bear market bottom that started in 2000. Do you need more information and exact price/time targets? My premium subscription service will be available next Monday.
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Summary: Continue to maintain a LONG/HOLD position.
1/28/2014 – The market rebounded nicely today with the Dow Jones being up +91 points or (+0.57%). Is this the bottom of the first or “initial sell off”? It is hard to say. While it looks promising the short term picture remains bearish.
If you look at the five day chart above you will note two gaping holes on Jan 23rd and 24th. As I have mentioned many times before, the stock market tends to close such gaps before any sustained bear or bull moves can take place. Since our work indicates that the Bull market from 2009 bottom has topped out on December 31st, 2013, the market must jump back into that territory and close the gap before a sustained bear market move can take place. As such and based on my calculations, a rally from this point on into the 16,400 on the DOW would make perfect sense.
With that said, there is nothing left for us to do except sit on our hands and wait for some sort of a confirmation. I believe we are still weeks away from such an event. It is too early to go short and it is prudent to remain long in case the analysis above is incorrect.
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Summary: Continue to maintain a LONG/HOLD position.
1/27/2014 – Another down day for the market with the DOW being down 41 points or (-0.26%). The NASDAQ was down 44.5 points or (-1.08%) as it played catch up closing the divergence gap mentioned here last week.
Overall, the short term trend is down, while the long term picture remains bullish. We did identify December 31st, 2013 as the major turning point and the beginning of the bear market that should take us into the 2017 lows. Yet, we must first wait for a technical confirmation before reversing our long/hold position and going short.
Short term, the market could experience further weakness, before reversing and closing before mentioned gaps in the 16,400 range.
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Today’s 5 Minute Podcast Covers The Following Topics:
Reader’s Question: Why are you so confident that we have hit the top? As far as I know no one can predict the markets. Please explain your approach…” – Roger Strand
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Business Week Writes Investment Advisers Go All In on Stocks
Advisers surveyed weekly by the National Association of Active Investment Managers have 98.3 percent of their clients’ portfolios allocated to stocks. Exposure to equities averaged 72 percent during 2013.
What a shocker!!! Just as always and exactly at the wrong time.
This is nothing new when one sees the market from the vintage point of human psychology. Most investors make the same mistake. When speculation and advancing market psychology grips investors psyche, there only one thing left to do. BUY. BUY. BUY. Why? Well, because everyone else is doing it and just like the retail market participants, financial advisors and money managers don’t want to be left behind.
Yet, as per my article yesterday, “MARKET TOP” the markets just topped out. As always, instead of getting out or going short most investment advisors are rushing into stocks. Just like they were rushing OUT of stock in March of 2009, when they should have been buying everything under the sun.
Sometimes human nature never changes.
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Summary: Continue to maintain a LONG/HOLD position.
1/24/2014 – A horrific day in the market today with the DOW being down -318 points or (-1.96%). While not the end of the world, it got people to pay attention.
This type of a move is consistent with the beginning of a bear market. In my earlier blog post today, MARKET TOP, I have indicated that it is highly probable that the market topped out on December 31st, 2013. Both my mathematical and my cycle work confirm the conclusion. Now, the market gapped down again leaving another 100 point hole in the structure of the market. This indicates (at least to me) that while the long-term bull market has topped out, the market is likely to bounce into the 16,400 category to close the gaps before any sustained bear market move can take place. While I do anticipate further downside over the short-term, the market should bounce in order to give us a technical indication that the bear market is indeed here.
I will have more details on this in my weekly update tomorrow.
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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? Please get my book titled Timed Value coming out this Monday for further explanation. It would take too long to explain 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