Well, at least the moon. At major stock market tops when optimism for the future knows no bounds – as exists today, we see major projects that are shooting skywards – literally.
Not only are we seeing huge skyscrapers around the world that are vying to be the tallest (London is a battle ground with the Shard the tallest in the UK and in the EU). The Jeddah Tower in Saudi Arabia will the the very tallest when (or should that be ‘if’) completed in 2021.
It doesn’t stop there — several US multi-billionaires are converted rocket men. Elon Musk has his Space-X and now Jeff Bezos is planning a trip to the moon. They are in direct competition in a battle of the heavyweights.
And here is coverage of Bezos’ plans which aims to have NASA help launch his moon lander.
For traders, this development is highly significant. Why? Simply because the developing Apollo moon programme in the 1960s was accompanied by one of the biggest stock market rallies (the DJIA doubled in this period). Bullish sentiment was in command with the Nifty Fifty the then equivalent of today’s FAANGS.
But when the first historic moon landing finally occurred in 1969, that marked the precise top of the multi-year rally at the 1,000 area. The DJIA then embarked on a major bear market into the early 1970s. And that was when public support for more human space exploration waned as social mood darkened. I know – I was there working at NASA at the time.
We knew the proposed Mars manned programme I was with would never get off the ground. Bullish sentiment for the future of manned exploration had hit a brick wall – as did the stock market. Much cheaper un-manned missions were then planned – and now from a variety of countries.
And in the crazy world of ‘climate change’, some are now today seriously resurrecting an old scheme for cooling the earth’s poles by squirting sea water from ships up into the air in an effort to reduce the effect of the sun’s radiation.
I well recall a common maxim going around in the 1960s: “Never mess with Mother Nature!”.
But such grandiose schemes gaining current publicity (at least in the BBC) is yet another symptom of extreme social mood that is now topping and gradually turning over. The end result will be a depression.
Dow is off 1,000 points – will it now begin a recovery?
We in the VIP Traders Club have been short all stock indexes and have captured excellent profits. In fact, I emailed VIP Traders Club members on 1 May with the notion that the ‘Sell in May’ theme, currently much-debunked in the MSM – would likely be great advice this year simply on a contrarian view!
I spotted a major turn early this month based on my Tramline methods. That was when complacency was rife with the VIX Fear Index plumbing new lows at the 14.50 lows. Since then, it was exploded up to a recent high at 19.50 for a stunning advance of 35%.
That was a short squeeze I had anticipated since short interest by the large speculators was historic. They had based their large short positions on the notion that the Fed would always ‘have their backs’ by not increasing Fed Funds rate so little danger to the bull run in stocks.
And that was the ideal setup for my contrary trades. Remember, markets exist to punish the majority! These small scale Elliott waves trace out this textbook pattern and note how the complacency was shaken to its core last week in the stunning short squeeze I anticipated.
Of course, all eyes were on the likely outcome of the US/China trade talks with the majority bullish – until early May, that is. But with the US tariffs now in place (with China about to act, possibly), is this a Sell the Rumour, Buy the News moment? Sentiment has turned on a dime/sixpence with dark forebodings spreading in the MSM.
Here is the France CAC 40 – one of the most promising opportunities this year
From the Christmas low I have a complete five up. That means I expect a three or a five down depending on whether the 1 May high completes the entire rally from the 2009 low.
The one trendline that has guided me all along is the one shown. It held all dips until 22 March when it smashed down through it in wave 4. The line then became a line of resistance and has held the two kisses. I was fooled on the first kiss as I believed that was the final high but fate took a hand!
Now I have a very convincing pattern that calls for a further decline into pink support and then a decent bounce. Of course, we are close to this support so the rally could start at any time.
Incidentally, in my Trade Alert to my VIP Traders Club members yesterday morning, I suggested taking profits on Dow shorts since I believed we had reached a ‘Sell the Rumour. Buy the News’ (SRBN) opportunity with the news of Trump’s tariff hikes now in the MSM.
And what happened yesterday? The Dow dipped to my 25,500 target in the morning and then staged a tremendous recovery finishing 500 pips off the low in what I reckon was one of the greatest SRBN trades this year.
Again, precise timing of your trades is one of the most important ingredients of success. Missing a great entry by hours can sometimes be critical. This applies less so in my Pro Shares service trading individual shares.
My textbook trade entry in ROKU
I am relating this trade as it is a prime example of how I go about researching solid low-risk trades.
Roku is a US streaming and smart TV supplier and a member of the high-powered tech sector. I had not been following the chart until March when it had climbed up off its Christmas low at $26 and made a high at $73 in mid-March and proceeded to correct. I believed it was due for a significant pull-back as that level represented strong resistance.
That is when I started tracking it and quickly concluded that the most likely correction would be a three-wave affair. I was willing to wait for the C wave to touch an important Fib support level where I could advise members to go long at low risk. This is the chart
Not only did I have the lovely three down but the correction traveled along a good tramline pair – and I had a momentum divergence as a bonus! This was the perfect set up to buy at $56 with a close stop.
And with the great results, it seems Roku is taking on the streaming giants in the form of Apple and Amazon.
So now we have a low risk trade with a gain to date of $27 (50%) in only 12 days. But my point is this: Without my Tramline system you would not have had a way of pinpointing precise low risk trade entries ahead of time – and forecast the direction correctly. Not everyone can do this.
Sentiment was not bullish before the results as many doubted the ability of Roku to challenge the biggies in a contest for eyeballs. And one other tiny point – Roku still loses money (only 10% of operating profit), although not on the scale of Uber!
Note that this share was probably the only one that headed north last week when almost all other tech giants such as Amazon, Apple fell sharply.
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Uber flops and Lyft drops 40%
Last year, over 80% of the IPOs were money-losing at launch. That is a record that even exceeds that at the top of the Dotcom mania in 2000. And the love of investors for loss-making companies knew no bounds this year with yesterday’s Uber launch.
Uber was priced at $45 but failed to find a trade for some time on the open and closed yesterday with a loss on the day. Here is the chart
In fact, it mirrors the Lyft chart
With such weak performances in the ride-hailing world, both companies will be under tremendous pressure to raise prices and cut costs at the very least.
I was in Cape Town recently and used a small local rival to Uber where the service was great – and prices much cheaper. That will be the headwind the leaders will face.
The bottom line: The Uber IPO was the most anticipated this year so far (with Airbnb possibly launching later). It flopped and I believe is a watershed in investor sentiment. Maybe they won’t be so keen to snap up big money-losing IPOs. The Airbnb launch (if it happens) will be watched with more than the usual interest.
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