Weekly Update & Summary: May 3rd, 2014

For the week the Dow gained 151 points (+0.93%) and the Nasdaq gained 48 points (+1.19%). As suggested in last week’s update, the market came back to close the gap that was opened up on April 25th. While the Dow did very well structurally this week, it continues to have two near term gaps to the downside, the one on April 14th and a large gap on April 16th. Indicating an upcoming correction. Further, there are a number of smaller gaps left leading all the way down to February 5th low. We continue to believe that the Dow will close such gaps when the next bear leg develops at below mentioned time frames (please see mathematical analysis & timing section below).

WEEKLY REVIEW:

GDP Growth Collapses. Is The US Economy In A Recession Already?

We have argued, for quite some time, that the US Economy and/or economic growth is a giant Ponzi scheme perpetuated by careless FED policies and massive credit/liquidity infusion into our financial system.

Take that ocean of liquidity away and you will something very ugly swimming underneath. With most of that liquidity going directly to speculation and driving most asset classes into bubble level valuations, today’s GDP growth number of +0.1% is quite shocking. Even for me.

GDP Slows to Crawl in First Quarter, Up 0.1% (Vs 1.2% growth consensus)

Understandably, most economists will blame the weather and baby Jesus for the miss, but the story goes deeper than that. According to some GDP observers the GDP growth would have been Negative 1.0% if it wasn’t for a temporary, government mandated and massive spending triggered by Obamacare.

Wait what?!?!….Are we in a recession already?

That in itself is irrelevant. What is relevant is that the stock market is sitting at an all time highs, the FED is talking about further tightening and you are most likely fully invested in the stock market. That is what’s really important.

Further, our mathematical and timing work confirms the notions above.Liquidity party or not, it shows a severe recession within the US Economy between 2014-2017. In the past, I have argued that we will be in “an official recession” by the end of 2014 or in Q1 of 2015. By the looks of it might happen faster than I thought.

Again, the FED will be forced to keep this liquidity party going while looking at new ways to re-inflate and stabilize the markets when the bear market of 2014-2017 kicks in. Expect a flat yield curve and much lower equity prices over the next few months/years. If you would be interested in learning exactly when the bear market will start (to the day) and its subsequent internal composition, please CLICK HERE

Will Corporate Earnings Drive Stocks Higher? Don’t Bet On It.

Breakout makes a compelling case that corporate earnings will continue to drive stock prices higher for the foreseeable future.

“Companies are getting incremental gains from revenue, holding the line on expenses, so at the end of the day we’re likely to see modest gain in earnings for the quarter, somewhere maybe around 5%,the economy here is going to reaccelerate ”

One big problem. Today’s earnings are an illusion at best driven by artificial credit infusion into our Economy by the FED. In fact, based on our rough calculations……if you take out the QE and other stimulus out of the corporate earnings equation, the S&P P/E ratio zooms up from about 18 today to 50 – 70 it really is. Making today’s market not only incredibly expensive (by any historical measure), but “are you f&#*ing kidding me” expensive.

That is exactly what the vast majority of today’s investors (professional or not) miss. We have faced the exact same situation in 2007-2009 collapse when the P/E ratio zoomed up from about 20 at 2007 top to 128 in 2008 as supposed corporate earnings vanished into thin air. Expect the same thing to happen today as the bear market/recession of 2014-2017 show their ugly face and corporate earnings vanish once again.

What Today’s Job Report Shows About The Future Of The US Economy Is Shockingly Scary.

Here is what we got.

288K new jobs added in April, far higher than 218K expected.
The unemployment rate tumbled down to 6.3% from 6.7%.
Labor participation rate collapsed from 63.2% to 62.8%

That’s great…..right? Not so fast there sparky. If there was ever a fundamental setup for a massive bear market to start, we got it today. Think about it the following way.

As Janet Yellen has suggested on a number of occasions, jobs or job creation is her primary concern. Today’s job report validates her view that the US Economy is recovering at a good clip and that full employment is just around the corner. As such, further monetary tightening is now a certainty. Yet, the reality is quite different……

Incredibly overpriced financial markets and most other asset classes.
Extreme levels of speculation driven by cheap money and FED printing.
An economy and a financial market environment that is entirely dependent on cheap credit and/or stimulus.
Technically negative GDP growth and slowing economy.

Job creation is a lagging indicator. As I suggested a number of times before, the worst thing the FED can do right now is tighten further. I hate going back to 2007, but the “fundamental” setup we face today is identical to the one we have faced at 2007 top. Jobs were plentiful, markets were in extreme overvaluation and the FED was tightening. It was not until the mid 2008 (or well after the stock market peaked in October of 2007) that the unemployment rate started surging higher. Expect the same thing to happen now.

Our mathematical and timing work confirms this notion. It shows a severe bear market between 2014-2017. When it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning exactly when the bear market will start (to the day) and its subsequent internal composition, please CLICK HERE

MACROECONOMIC ANALYSIS:

Ukraine/Russia/USA/EU/NATO continue to be the most important issue. In fact, I continue to believe that things will escalate significantly over the next few weeks.

As I write this (on Friday night), the situation in Ukraine is critical. 31 people die after radicals set Trade Unions House on fire in Ukraine’s Odessa In short, we are witnessing the start of a civil war. At this stage only one question remains. Will this be enough for Putin to go in and put a stop to all of this nonsense instigated by the US/NATO/EU ….-OR-…. will Putin play some sort of a long term strategic game against the West that very few of us are aware of? To be honest with you, I have no idea as this has become a very complex matter. If I had to guess, if the civil war in Ukraine escalates over the next few days you will see the Russian Army invade, very quickly decimate any opposition and re-install Pro-Russian government.

This would be the best possible outcome for the Ukrainian people. Unfortunately, such a move by Russia will spark a number of economic sanctions (from both sides), political storm, war rhetoric and a million other unforeseen consequences. As you can imagine, this would be incredibly unsettling for financial markets. I can tell you one thing, the market does not have this event priced in. The upcoming week is critical.

TECHNICAL ANALYSIS THE FOR DOW JONES:

Long-Term: The trend is still up. Market action in January-February could be viewed as a simple correction in an ongoing bull market. Same applies to the market action over the last few months. Yet, that in itself can be misleading as per our timing analysis discussion below.

Intermediary-Term: Since February 5th, intermediary term picture shifted from negative to positive. Giving us a technical indication that both the intermediary term and the long term trends are up. Yet, that in itself can be misleading as per our timing analysis discussion below.

Short-Term: Short-term trend remains positive for the time being. The Dow would have to break below 16,000 for the short-term trend to shift from positive to negative.

Again, even though all 3 trends are bullish for the time being, that might be misleading. Please read our Mathematical and Timing Analysis to see what will transpire over the next few weeks.

MATHEMATICAL & TIMING ANALYSIS:

(*** Please Note: This time around about 90% of the information contained within this section has been deliberately removed as it contain too much technical information. Particularly, exact dates and prices of the upcoming turning points. As well as trading forecasts associated with them. I deem such information to be too valuable to be released onto the general public. As such, this information is only available to my premium subscribers. If you are a premium subscriber please Click Here to log in. If you would be interested in becoming a subscriber and gaining access to the most accurate forecasting service available anywhere, a forecasting service that gives you exact turning points in both price and time, please Click Here to learn more.Don’t forget, we have a risk free 14-day trial).

In conclusion, xxxx

Longer-Term Overview:

The next turning point is located at……

Date: XXXX
Price: XXXX

TRADING:

I am now fully committed to the XXXX side of the market with 11 individual positions taken at the prices outlined below. A lot of them have done incredibly well thus far and I hope you were able to benefit as well. I will be updating you of any changes or anticipated changes before they take place.

Remember, you should have an exact strategy and entry/exit points based on the forecast above.

The list below is for your reference point. It entails my investment strategy for my own investment purposes. While you are free to follow me, please do so at your own risk. Do not take this as a trading advice. Please note, all of the positions below have been triggered.

Stock	Entry Point ($)	Action Taken	Stop Loss @
xxxx	xxxx	xxxx	91
xxxx	xxxx	xxxx	1250
xxxx	110	xxxx	121-123
xxxx	74	xxxx	80
xxxx	xxxx	xxxx	260
xxxx	xxxx	xxxx	460
xxxx	35	xxxx	39
xxxx	65	xxxx	70
xxxx	120	xxxx	120-130
xxxx	100	xxxx	108-112
xxxx	112	xxxx	120

Otherwise, I suggest the following positioning over the next few days/weeks to minimize the risk while positioning yourself for a forecasted market action. (This is continuation of our previous positioning).

If You Are A Trader: XXXX

If No Position: XXXX

If Long: XXXX

If Short: XXXX

CONCLUSION:

An incredibly important week is coming up. We are now looking for our forecasts above to be confirmed over the next few trading days/weeks. I have also described what to anticipate over the next few months and exactly what you should do now. With increased volatility, multiple interference patterns and an incredibly important long-term turning points coming up over the next few months we must be very careful and risk averse here. Those anticipating the moves and those who can time them properly will be rewarded appropriately.

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

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