In a reverse of Alice in Wonderland’s fall down the rabbit hole (read the book again or see the Dsiney film – they’re great!), Disney shares rocketed yesterday with the news of its new streaming service with rival Netflix going the other way. Incidentally, I have had an established bearish call on Netflix for my PRO SHARES members. Get your FREE TRIAL here.
And that helped push US indexes into new high ground for the post-Christmas rally (save the Dow which has been lagging all week).
But it still seems to me to be a Wizard of Oz smoke and mirrors stock market with investors believing the Fed behind the curtain is pulling all the strings.
So with markets climbing the Wall of Worry of all the poor data, this is my best guess for the way ahead – and the chart I sent to VIP Traders Club members yesterday:
Yes, the markets surged last week in a show of bullish enthusiasm that was matched by the US public approval rating surge for their President to a recent 45% (was 39% in March). As I have long maintained, approval for Mr Trump – a most controversial figure at the very least who would not normally be getting over 50% – marches to the state of the economy , to the stock market and to the degree of MSM President-bashing, which has been toned down markedly since the Mueller Report exonerated him for collusion in the Russiagate pre-election trumped-up scandal (ouch!).
In fact, this current rating matches his all time high also at 45% – will it break out towards 50% now? It probably will if/when the indexes move further into new ATHs! That would be a superb ‘coincidence’.
I must confess I did enjoy the schadenfreude told-you-so joyous outburts by his supports at the MSM usual ‘liberal’ conspiracy theorists that squirmed on camera after the Mueller report release (youtube has lots of these).
So is it all sweetness and light on Wall Street? No – a dark cloud hangs over the stock market in the form of recent unicorn IPOs. The massively loss-making ride-hailing service rival to Uber –Lyft – is certainly getting precious little lift for its shares. It raced to $85 on the first day’s burst and since then has been in freefall to yesterday’s $58 for a staggering loss of $27 (32%) in just two weeks. In a proper bull market, IPOs would keep sailing away to the moon, so this is most definitely bearish. So is Lyft vanishing into the newly-photographed black hole (see my heading image)?
But the number of IPOs that have never made a profit have been reaching records in recent months, so is the Lyft crash the end-game for them – and signalling the demise of the greatest start to a year ever? The Uber IPO will certainly be interesting (set for next month). And I see its launch price estimated offer has been lowered in response. This is not bullish, although some may question the tag ‘tech’ as applied to basically taxi companies.
I expect US Q1 earnings season that licked off yesterday to be better than the current gloomy forecasts – otherwise, why bid stocks up in the face of terrible Q4 and Q1 economic data? Already, JP Morgan smashes records as the first out of the blocks yesterday. I have a feeling we shall perhaps see new highs above the October ATH in the S&P and probably the Dow as well with one caveat: if the indexes make their turn early next week, it may be over.
But after that? I am preparing VIP Traders Club members for life after that! Why not join us for the ride? Get your Free Trial here.
Why do I expect a sudden reversal in shares soon? One top reason is that volatility in shares, bonds, currencies – the major financial markets – has slumped to record lows. We know from experience that after a long period of complacency in major markets comes a period of high volatility – and that means big opportunities for those expecting it.
Central banks are buying gold – should you?
Many pundits are suddenly turning very bullish on gold. They cite many stats including the improvement in Chinese and Russian central bank demand recently. While up-to-date hard numbers are difficult/impossible to obtain for central bank purchase/sales data, many agree central banks are in the accumulating business.
But is this a good sign for gold’s price prospects? In fact, if we look at the historical record, central banks have a reliable habit of adding to reserves at major market highs. Yes, they behave just like most small traders (and hedge funds!) – they buy at the tops ans sell at the bottoms.
And talking about selling at the bottom, remember the infamous Brown Bottom back in 1999? Our genius gold trader Gordon Brown announced he was selling a major portion of UK’s gold from reserves when the price was just under the $300 area. Naturally, this was a contrarian’s dream setup to load up on the metal. It then embarked on one of its epic rallies that culminated in the famous $1920 peak in 2011. See what I mean?
Of course, central banks are far less price sensitive than we mere mortal souls who have to make profits from price movements. But who sells when they believe the price will rise? Only those with a gun to their heads. Luckily, there are few of these in the markets.
As a mater of record, I have been accurately forecasting the twists and turns in the gold price in recent months. For instance, I caught the rally from the August $1160 low and rode it to near the February $1340 high where I advised VIP Traders Club members to take final profits.
OK, so what have I done for members lately in the gold market?
This is my roadmap I have sent to all VIP Traders Club members. We entered new short trades as marked and now looking for further weakness.
If you want to get my downside targets for gold, take a two week FREE TRIAL TO MY VIP TRADERS CLUB.
My bearish view is totally at odds with current sentiment – which is what I like to see. Today I see these articles on seekingalpha.com
Gold turning bullish?
The return of Gold’s safe haven demand
Signs of life in Gold
Gold has now major institutional support
Preparing for Gold as currencies crumble
Silver demand hits high in 2018 as supply fell
….and a bullish Platinum piece (see my recent blog (where I have been taking profits).
All of these articles give many reasons why they are bullish or bearish, but do you know the essential missing factor? Will they give ideas on trade timing – the most important element in trading after guessing the correct direction? Of course not.
It does a trader no good if a pundit is bullish at £1,300, then sees it drop to $1,250 and then zoom up to $1350. Yes, he/she was correct being bullish overall, but most traders would be stopped out with a loss on the dip before reaping the reward of the subsequent rally. That would be more than annoying. And it happens far too often.
And that correcttiming element is what I specialise in – and in most cases can offer a close stop with my trade entry for a low risk/high prob trade.
OK, but what about silver? I am achieving similar success with this metal (in fact I am on a roll with all three PMs). Here is the chart
The shape is broadly similar as you would expect but I have a different downside target.
If you want to get my downside targets for silver – and upside forecasts, take a two week FREE TRIAL TO MY VIP TRADERS CLUB.
When these corrections in gold and silver are over, I have surprising upside targets for both.
Is anyone out there expecting Bond yields to rise this year? I am.
Not only is my track record in PMs on the money, but so is my ventures into the fixed income space. US bond yields reached a minimum in the summer of 2016 after a decade-long bear market, and I was fortunate to put VIP Traders Club members on the right side of that reversal pretty much at the bottom (high in price) around the 180 area (currently at the 150 area).
OK, so what have I done for members recently? In fact, as Treasuries rallied post-Christmas, my analysis pointed to this being a counter-trend B wave that would lead to a big C wave down.
And this is a highly contrarian view! Most pundits took the Fed at their word in December that they would ‘pause’ the interest rate hikes this year from their previous 3 or 4 planned increases (the US economy was believed to be running hot). Equity investors took that as the new Powell Put – and filled their boots.
Massive funds flowed into both bonds and equities in the first quarter as the prospect for lower rates was back on the agenda. What could possibly go wrong?
For one thing, the rapid run-up in the 3-month T-Bill rate was putting a slight dent in that story – and lead to the famous Yield Curve Inversion (since corrected). And for another, everyone was all-in and we know that bull markets top out when there are few bears left. And for the third, the Fed does not control interest rates – they follow the dictates of the market.
And that is what happened at the end of last month – T-Bonds topped as DSI bulls exceeded 90% – and that was when I pounced to enter highly contrarian short trades at the 150 level.
That was when the market broke clear of the lovely wedge I was tracking and entered a swift 4 big point correction and I labeled that my wave 1 of a forthcoming five down. The weak wave 2 rally only to the Fibonacci 38% retrace on Thursday is my signal to expect a sharp move lower.
Incidentally, the recent Yield Curve Inversion gained massive MSM coverage with armies of pundits with dire warnings about the economy and stocks. I believed that with the 10-yr T-Note yield close to the short term rate, the market was giving an incorrect signal and the inversion was to be the springboard for a sharp surge in bond yields, which is precisely what is occurring.
This jump in yields as flashing good times for the economy ahead (against MSM gloom-and-doom consensus) – but not for stocks as the appetite for buy-backs will be dimmed by the higher interest rates. I expect good news to become bad again soon. And a better-than-expected Q1 earnings season could provide the very catalyst.
And one of my favourite measures of risk-on complacency is the Junk Bond Index HYG. Recall, these high risk bonds issued by the most speculative companies more or less track stocks and behave more like them than like bonds
Note the post-Christmas period where the trajectory has been virtually straight up with only minor setbacks, Compare this period with that before Christmas where volatility reigned. But not now. Note the huge gap between the 50-day and 200-day MAs indicating a massive over-bought condition that will be corrected very soon.
I full expect this market to catch up with Treasuries soon and head due south. And when that occurs, the share market will surely follow.
If you wish to know my downside targets for the T-Bonds that will offer huge profits for early birds, take a two week FREE TRIAL to my VIP TRADERS CLUB.
I have this as one of my TOP TRADES OF 2019