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”
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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In his State of the Union address, President Obama announced that he is raising the minimum wage for new federal contract workers to $10.10 an hour. Challenging lawmakers and states to do the same. In essence, hoping that the his action will lead to an eventual rise in nationwide minimum wage.
Here is the behind the scenes explanation of why he is doing it, why it will not work and why these idiotic economic policies by the FED and by the US Government are killing the US Economy.
Now, prior to understanding what is behind this move, you must be made aware of our overall economic environment. While it seems complex, it is quite easy.
As of right now the US Economy is being pushed and pulled by two opposite forces. Inflation and deflation. How is it possible?
Technically speaking we are in a deflationary environment. It is a naturally occurring cycle where the prices of goods and services go down due to over capacity, credit decline/collapse and stronger currency. If you think about it, deflation is great for both consumers and businesses.
Yet, our Federal Government and the FED’s are terrified of deflation. Why? Because they have a massive pile of debt that they have to pay back. A little over $17 Trillion.
The problem is, there is no way in hell they will be able to pay this debt pack under normal circumstances and no way in hell X 10, in a deflationary environment.
The only way out of this mess is through inflation or war. That is why the FEDs have been working overtime printing money and trying to inflate our debt (and our money) away. With mixed results.
Hence the reason behind our current deflationary and inflationary forces. Forcing some prices (ex: food) to go up while other prices to decline or collapse (ex: asset prices or services).
The bottom line is, the Government needs inflation at any cost. This brings us to President Obama’s pledge or push to increase nationwide minimum wage. Again, it has nothing to do with getting people out of poverty and everything to do with inflating away national debt and destroying the dollar.
Yet, unemployment (or true unemployment) remains high and in such an environment wages will have to stay low. No matter what President Obama does, he has very little pull in free markets and when there is a readily available oversupply of work force, wages will stay where they are.
The bigger issue here is blatant destruction of the US Economy and the US way of life through pure economic stupidity. What you are witnessing now is the end of the road and an eventual collapse of the house of cards that is the US Economy.
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More Economic Insanity From The White House
WASHINGTON (AP) — The U.S. economy is showing more strength than at any time since the Great Recession began six years ago.
Employers are hiring. Home prices, sales and construction have surged. Corporate profits and stocks have hit records. And consumers have picked up their spending.
The economy has yet to fully recover from the most devastating crisis since the Great Depression. But it’s getting closer — a point President Barack Obama was expected to highlight in his State of the Union address Tuesday night.
The propaganda machine continues to hum along. Let me remind you that the so called “Great Recession” was caused by the insane economic policies of the US Government. Mind you, they continue the same policies today, yet on a much larger scale.
— JOBS
Job growth has been remarkably steady in an uneven recovery. Employers have added at least 2.1 million jobs in each of the past three years, creating momentum that could help the economy gain speed in 2014. Each new job puts more money in the hands of people to spend. That’s why consistent job growth can give more traction to the recovery. The unemployment rate has plunged from 7.9 percent to 6.7 percent over the past year. That’s down from a 10 percent peak in October 2009.
Still, the benefits of more hiring have been muted so far, in part because much of it has been concentrated in the low-wage industries of hotels, restaurants, retailers and temp workers. Also, millions of jobless Americans have stopped looking for work. Once people without jobs stop their searches, they’re no longer counted as unemployed. As a result, the unemployment rate can fall in a way that overstates the health of the economy.
WOW, really. I am not even sure where they are getting their numbers. While the government claims the unemployment is at 6.7%, in reality, that number is much higher. With people giving up on finding work and prolific “underemployment” the real rate is most likely to be around 15%. Hence, no pay growth.
— HOUSING
Real estate is rebounding. Home prices have climbed 13.7 percent over the past 12 months, according to a Standard & Poor’s index released Tuesday. Sales of existing homes totaled 5.09 million last year, the best such performance since 2006, the National Association of Realtors said last week. Home industry experts say the gains should continue this year, though at a slower pace because higher mortgage rates and home prices will make buying less affordable for some.
Sure, real estate has rebounded, but make no mistake. This has very little to do with an underlying economic health and everything to do with massive credit infusion and to a certain extent speculation in the sector. Once the bubble pops again, and it will, housing will decline below 2010-11 lows.
— CONSUMER SPENDING
The spending of consumers, which fuels about 70 percent of the economy, is starting to return to its pre-recession levels. The Conference Board said Tuesday that its consumer confidence index rose to 80.7 this month, well above last year’s average of 73.3. Retail sales bumped up 4.2 percent in 2013, the fourth straight annual increase. Roughly 15.6 million autos were bought last year, an 8 percent improvement and the highest total since 2007. Historically low inflation and interest rates have kept food and clothing affordable. And according to the Gallup Organization, average daily consumer spending rose $16 to $88 last year.
Fair enough, but consumer spending is a simple function of the economy. When the economy goes up, so does the consumer spending. Yet, keep the following in mind. Today’s economic recovery is driven primarily by credit infusion and speculation. As the result, consumer spending is being artificially levitated. When easy credit and speculation goes away, consumer spending will not only decline, but collapse.
— STOCKS
The Dow Jones industrial average enjoyed a monster 2013, climbing 28 percent. Corporate profits are at their highest share of the economy in the 66 years of tracking by the government. Shares were bolstered by a Federal Reserve bond-buying program that is now being wound down. The eventual end of the program, paired with weak growth in China and troubles in Argentina and Turkey, help explain the 4.1 percent decline in the stock market since the start of this year.
Again, everything associated with the stock market has been goosed by the FED and their “unlimited” money supply. That includes corporate profits and emerging markets. It is similar to living a high life while maxing out your credit cards. Eventually the bills will come due and the cards will be maxed out. When that happens, there will be hell to pay in all financial markets. As I have stated so many times before, my mathematical work indicates that the bear market has already started and it will take us into the 2017 bottom.
It is prudent that you get yourself ready.
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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: “What would you recommend if I would like to maximize my investment returns while minimizing risk? Diversification or concentration…” – Justin White
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Yahoo Finance Writes: This could signal the next leg down for stocks
Things are precarious in Japan, and that could mean trouble for US markets.
Once the hottest trade on Earth, the Nikkei is off by 7% this year, compared to the 3% decline in the S&P 500. The culprit is a rising yen, as investors have shunned risk and flocked to safe haven currencies.
Over the past several months, the Japanese government under the leadership of Prime Minister Shinzo Abe has been trying to weaken the yen in an effort to boost its economy. Japan’s version of quantitative easing is roughly the same size as America’s but, given that Japan’s economy is one-third the size of the US, it’s had a bigger impact.
Read The Rest Of The Article Here
I don’t think Japan will have any impact on the US Financial markets. Historically speaking there has been no correlation, nor should there be one. It is simply idiotic to think otherwise.
The reason I am bringing Japan to your attention is due to pure stupidity of their economic policies. Japan has been stuck in the economic funk for over 24 years now. The Nikkei is still down a little over 60% since its top in the 1990. The Japanese (just like their American counterparts) have tried everything under the sun to get their economy going while fighting deflation. Well, everything that is easy and stupid.
What they should have done, default on bad debts while following sound macroeconomic principals, was never done. Instead, they have tried to combat deflation by lowing interest rates and debasing their currency.
I am still waiting for a good explanation from one of those Nobel Prize winning economists of how any economy can prosper through debasement of their currency. It is no different from robbing Peter to pay Paul. Yet, for most countries it is the new solution to all of their economic problems. That is until the currency overshoots and collapses, leading to economic chaos. India and Turkey are the prime examples of this over the last few months.
Yes, Nikkei is up close to 100% over the last year and a half. Yet, a distinction must be made between true market growth and speculative growth driven by insane monetary policy. The latter leads to an eventual economic collapse and pain. I will let you decide in which category Japan falls into.
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Can Japan’s Economic Miracle Help The US Economy?
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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