The last post, Long Term Trading Signal, described a trading signal that can indicate trend changes in the market to help with long term investing.
The cross has to be material, and the current cross has not yet had enough of a gap to show clearly a trend change. Click here for updated chart with a start date of a month ago (zoomed in chart).
So for right now, wait and see.
After quite a while of long time of losses, this past week in Gold miners and Oil was refreshing.
Some of the stocks I am playing with.
So I looked at the price of gold to see what is going on. For perspective see Gold over last 10 years then the recent price range. Notice the 6 month view that gold seemingly broke out of a range.
The last chart shows US Dollar price range, no trend change yet.
After watching the markets since 2006, and being a professional day-trader in 2000-2001, I have learned quite a few things. As an analytical person, I search for logic in a the markets, which do not operate by any rules at all. If you have a rule-based trading system that makes you money, one thing is for sure, eventually the system will break. Upshot: Great to have guidelines for trading, but nothing is absolute.
Couple of mantras I heard as a day trader is 'don't fight the trend' or 'the trend is your friend'. Basically if the market is going up, many stocks will be going up, and vice-versa. The market has been on a tear up since 2009, will be 7 years this March!!. That is quite a trend!
Unfortunately I did not listen to this rule to my detriment, and second-guessed when the market is topping. Upshot: Spot the trend and play in the direction of the trend.
Today I bring back a post I did in 2008, I am re-writing it simply because my original post is a mess, and this week we may have a trend change upon us.
The concept is simple, have a MACRO tool to spot a trend change to help remove the emotion of guessing the market direction. I present to you today a tool that has worked as far back as the market has been trading. Take the weekly simple moving averages for 20 week and 50 week average and use its trend direction to indicate overall market direction. In the image be,ow when the 50 week (blue line) is above the 20 week (orange line) the trend is up. If reversed, the trend is down.
Does this mean we are in for a multi-year market fall? Perhaps. As we can see on the chart the two may flip back and forth and the trend does not change (one example around 2012 below). But even if this happens, simply sell when the indicator shows, and buy when it flips. Historically speaking the 'profits' lost is minimal compared to the typical risk of ignoring this indicator.
I do think the markets may someday reach a flat-line when this indicator will be broken. But until today, it has shown to be a very useful tool.
So look at the image below, take the emotion out of your trading, what do you see?
All doom and gloom, not at all! I see a very bright future AFTER we go through some more hard adjustments to the new economic model. What matters now is preserving wealth. For that, consider the long term trading signal below. For current chart click here:
Video from Karl Denninger, explaining this signal history
Jim Chanos is by far my favorite investor. He speaks his mind honestly and open since the start of his career in the 1980's!
He addresses a basic problem I have identified in the post "Employment of the Future", basically identifying that #marchoftherobots is a HUGE problem!
He calls out that as companies become more profitable, they invest in eliminating people.
WELL worth the watch
My friend John Chinnock says there is no bell that rings when stocks hit all time low or all time high. What he means is there is no clear indicator when the market hits an extreme or a turning point.
Today the FED announced interest rates would not rise. No surprise to me at all. The economy does not need higher interest rates to improve. The only way they could have targeted raising rates if on an international level, the US required to raise as a financial weapon.
So the markets have shot up. Markets may make a run like we saw in 2009 to 2015, and repeat a 6 year run!
But maybe not. There are troubling signs like China's stock market and manufacturing nose diving in the USA.
We are at historical times, economically.
Leading up to 2008 crisis, the standard economics taught in the USA since world war 2 was generally in effect. There was breaking from economic standards starting with Bill Clinton in 2000 with dismantling of Glass-Steagall act put into place in the depths of the Great Depression.
The purpose of these laws was to establish realistic accounting to value banks and keep monetary reserves and risk at acceptable levels. The reason this is important is so private business does not become public liability if there is an issue. In 2009 mark to market accounting was suspended. Mark to market accounting is what non-banks live by. For example, if you declare your house is worth 300,000 dollars, but the houses near you for equivalent assets sell for 200,000 dollars, you bank will use this information to value your house.
Since 2009 the stock market has risen to historic levels in the USA. Ignoring the banking sector, corporate America has been doing pretty good, even for a critical eye like myself. But while the companies are doing good, the average American has not. Companies are benefiting from huge gains in technical advancements that enable better profits with less people.
China has been advocated as a world leader of the NEXT generation of economics. I have question this wisdom many times. There are two primary drivers for me questioning this conventional wisdom. First is the historic 1 child per couple and second is insane levels of mal-investment never seen in human history. The combination of both makes China's future economic leadership questionable.
So here we are at end of August 2015, with China's stock market down 41% two days ago from June high. USA is down 7% from all time high set on July 17th this past Monday. As of today the USA SPX is down 6.5% since July 17th. America is in an epic panic! down 6.5% in little over 30 days after being up 300% since March 2006. Oh the horror!
The Stock market was meant to be a risk taking event. US citizens cannot take risk. The only question left is what next?
And here my friends, I can no longer advise. We are entering a world where corporate profits will hit record profits for the next decade, with majority of US citizens losing economic ground. For the market is this good for the market? China will need to shift to robotics leaving out 100's of millions of citizens without better income, is this good for the market?
China is actively trying to devalue it's currency along with many other nations to gain an economic edge through manipulation over innovation, is this good for the market?
With the realization that all laws are meaningless illustrated by the willingness of society to accept mark to fantasy accounting as perfectly fine to use logic and rule of law to judge outcome of this current events as at best pathetically optimistic.
We may be entering a time where the market soars beyond anyone's wild dreams leaving out 90% of Americans behind, with the world suffering from innovation investment due to risk tolerance. We could see the USA market cut in half as it joins the world downturn and the realization of fantasy accounting is just that.
I no longer have faith in gold, oil, or any resource in the face of world economics being turned on it's head. I have only faith in companies advancing technology to get reliable income for the next decade. Tesla, Google, Facebook, Amazon (AWS), and others are world leaders in their sectors.
For now, I am stuck in the gold miners, with epic lows I have to think they will double or triple from here. But who knows. Good luck.
Now the public media is screaming panic over the markets. Is this the next leg down? Possibly.
As long time readers know, for years now the next issue i said would come as we come closer to 2017.
I honestly don't know where this is going, but we do have several screaming warning signs.
First China's stock market has been in a freefall (chart below), along with natural resources already collapsed months ago. The world's government bond markets have historically low rates, with some countries requiring YOU PAY THEM to buy their bonds! (negative interest rates).
The VIX (Volatility index) has been off the charts, with the markets not able to price the VIX for 30 minutes on Tuesday.
Gold and gold miners pre-collapsed before all of this.
What makes all of this disturbing is the world has already done everything within reason to keep the market valuation rocketing higher for the past few years. The Banks since 2009 do not have assets valued by market prices, but rather mark to 'declared value'. So the banks already have a positive an outlook as possible for valuations. Combine that with interest rates at historic lows, and the Federal Reserve bank recently purchasing federal bonds directly with Quantitative Easing, owning trillions of US mortgages and bonds.
So the question is, assuming we do start on a year long decline, what will governments do next to spur the next leg back up? I have no idea what that could be, please put in comment what you think the world can do to spur demand like was done in 2001 and 2009.
Let me remind readers of a fairly neutral signal that has historically been a good indicator of long term downturns, see post here.
If there is a significant plunge still ahead, I am hoping for a snap back rally in days ahead, that will be the last place to get to safety.
I am tired of reading the torture the Greeks get to endure under the hand of the European Union, lead by the Germans.
Lets start at the beginning, Greece played some creative paper games with help of Goldman Sachs, allowing Greece to enter the European Union when they should not have been allowed.
So here we have a country that under the European union's own rules was not fiscally sound enough to join.
Fast forward that when 2008 hit, the mask is ripped off and we discover Greece is insolvent. I can excuse 2009-2010 that Europe did not allow Greece to exit. There was greater problems that may have required Greece to remain, even if it was not best for their citizens.
So Germany....I mean European Union....demands to be fiscally responsible. A country that is already under water fiscally, with any math at all cannot pay backs its debts for 50+ years if they play their cards perfect. Anyone can tell they are bankrupt. Why should people not alive when the debt was created pay?
Ok, lets run with the fantasy, demand Greece take measures and somehow spark economic growth AND export cash out of the country to pay off creditors.
And...surprise...we have a debacle.
Greece unemployment is at 25%, with young at over 50%. There are supply shortages and unrest.
At this point democracy is being ignored. the people want out. The Politicians don't stand up for the people and the people suffer. I do not believe in violence, but I am at a loss what it will take to free the people of Greece from slavery and let them...and us move on.
Its no secret that I have been a perma-bear since 2006. While I was early for 2008 crash, I have been plain outright wrong since 2008 most of the time for the general stock market.
What I failed to grasp until SPX touched 1,000 briefly that the market has become a game of political global competition rather than an instrument of market capitalism.
Since 2009 mark to market accounting has been suspended, first time since the 1940's.
And yet, we are told that current valuations are trustworthy without the underpinning of valuations using practices in place for 70 years.
These and other tactics have made the market soar while avoiding some of the challenges the world economy faces.
Here we are poised for a huge leg up or possibly a bit of a kick down. I lean towards a kick down, with what may be possibly a very rapid kick up.
It should be obvious to any market watcher that so far in 2015 its been a bit choppy at best.
Right now however, we have quite a few things happening that are of interest.
First up is S&P 500, using my post for long term investing, we are still green, but a week or two down may change that picture:
Then we have Greece, about to leave euro, and threatening to be the first nation on bitcoin!
Holly hell that's a mighty f-u to the world banks. If Greece does it they will get PUMMELED by every bank in the world. Every news report will blame BitCoin as the source of every woe. Notice the last few years with Greece topping 50% unemployment by some age groups that no one reports that mainstream! But if they do go bitcoin, I am sure it will be daily headlines!
Then we have USD, its been up for a while, no indicator of up or down.
And of course gold, I won't even post a chart, its pretty much who the heck knows.
Then there is political turmoil with wars and ISIS.
I personally think between now and March 2017 we will hit a severe rough patch, but who knows when. The economic system is being muscled into line for the big boys to play ultimate chicken, as China is demonstrating.
But mark my words, the one to watch that will tell everyone that we have an issue is watch the US Treasury curve, 10 year under control at the moment:.
I have had quite a few discussions and emails about my thoughts of employment in the future. I believe vast majority of people today are mis-understanding the economic and social strains we are experiencing today.
Looking forward, I want to try to not only be better prepared myself, but to share this view to others. There is a good chance you reading this is a result of me sending you this link. I ask you read in entirety, and even if you don't agree start to think critically about the future. I have spent years (since this blog started) thinking and reading to come to this current point of view. I encourage you to click through all the links I provide to prove my thought process. Also note the year of the link! Chances are links are old so the capability is much better today!
The root problem is NOT Republican or Democrat, top 1% rich or the 'lazy' poor. The economic problems we see in the world is simply because technology is advancing at such a brisk pace, humans cannot adapt. It is true, those who own the technology do get richer as technology is used to reduce costs and increase profits. But this isn't an evil play by the richest to take all the wealth, it is part of the current monetary system in place for 1,000's of years (generally speaking).
How can I say technology? The mantra you always hear is technology creates jobs. And yes, we can point back to plenty of examples of this. But that was when technology had a fraction of the power it has today. Moore's law basically states technology doubles in power every 18 months. Think about that, since the dawn of computing to day, in 18 months the same chip will be twice as powerful as what we worked on creating for last 50 years. In 2023 a computer can compute equal to a human brain, for about $1k. In 2050, a computer for $1k will compute equal to all humans on the planet.
This is the undercurrent driver for the maturing of technology in automation. The net is when automation is adopted, the reason its profitable is NET you reduce labor in that sector.
We are seeing this mature, and its very easy to see the future if you simply pay attention.
Once self driving cars and trucks are in place, most taxi drivers, limo drivers, truck drivers, bus drivers, school bus, and eventually house delivery drivers will no longer be required. Dispatchers and coordinators (back office) won't be needed either. Companies like Uber will enable people to book driver-less cars at much cheaper prices than I pay today. I already use uber and its 50% cheaper than a taxi or limo to the airport now!.
Once I can book Uber to pick me up, drop me off, and that car will run continuously (only needs to stop for recharge), the costs will plummet to rent that time. Many people will opt to not even own a car! This will of course cut down in car sales as people used the pool of what used to be idle cars sitting on streets and driveways as ways to share the cars.
So not only will people who drive be at risk, but the car industry itself will be cut back as the car manufactures, gas stations, mechanic shops, after-market car ships all will be reduced. The differences between different manufactures will be not as important, as people don't even bother to buy a car for personal use.
So, I hope you can see this impact is not as far off as people want to think, once these devices are proven safe, it will be a rapid transition to this new model.
OK, so America lost bulk of their manufacturing, and now jobs are returning to USA, so that's good right? NET however, we are talking globally manufacturing to shed millions of jobs through automation.
So we have delivery people, manufacturing, and packers dramatically reduced, is that it?
To make this article shorter, I will list other areas that we know TODAY that are ripe for downsizing. There are many more that will become clearer in the years ahead.
Computer Data Center staff (moving to cloud, eliminate Network Engineers, Virtualization specialists, specialized skills like Database Admins, Middleware admins, etc)
Finance - Anything in finance is at risk. Finance is information, and information can be automated. Once we move to cashless society majority of location-based finance establishments won't be needed. Over 80% of all trading is by robots already.
I will be continually updating on Google+ Robot advancements, click here #MarchOfTheRobots
Follow publication The-Vital-Edge.com for in-depth articles on the changing employment landscape being driven by automation.
Not only are jobs being shed, those who do work are being optimized to reduce costs (pay) and optimized time (work 60+ hours). A great site to see some of this in action, and how CHEAP is Freelancer.com
OK, so what now?
Basically if you are in a job that is going to be affected, and retirement is not an option, action now is required. I myself left a secure position to embrace the cloud and work in a vibrant, growing company.
If your just starting out, choose a job that basically involves innovation. Things like nano tech, robotics, design, biotech, anything that is new. For once whatever the new thing is invented and standardize, the work involved will be optimized. To remain in demand, you must be in a job of continual innovation.
Those who remain working will face FIERCE competition for your job. So you must be truly the best candidate for the job, and remain so to remain employed. Once a gap in employment occurs, full recovery will be near impossible.
The good news is learning has never been easier! Google for learning sites, watch programs like TED to expand your view.
We sit here today with S&P 500 at 2099, with Gold miners (GDX 20.29) making slow progress up, energy up, and USD down.
I caution those long the market for years to be nimble, while I am no longer looking out for 2008 crash, we may have a direction change in the wind for the next year. With resources costs rising, USD falling, and market bubbly we may be ripe for a change in direction.
Tech however I am convinced is always possibly good, providing you hit the right sector of tech. Robotics, Solar, biotech, and potentially autonomous car manufactures may buck the trend.
Good Luck!
Every news source I hear tells me that oil and natural resources are going to be depressed for years to come. While I can't say what will happen, when I hear such a chorus telling me all the same thing about the future it does raise questions.
Looking at the charts, lets see what we can gleem as likely next few years.
First, lets talk about the US Dollar. Even mainstream news tells us how much the US Dollar has been gaining value compared to the world. It is quite possible USD will go 50% higher from here. But lets take a look at the last year.
Since about August of 2014, the USD has been on a tear! If you follow currencies, this change is very dramatic, but not unprecedented.
Recently the USD has been pulling back, but I dont expect a straight down line, this may take 3 months to a year to return to 80 range.
So what did the overall US stock market perform during the same period?
\
The overall market went from about 1860 to 2115, about 13% rise. During same period USD went from 80 to recent high of 100. about 25%. This alone does not tell us much, except as the world entered a recession, the US attracked investors as haven of stability driving currency and stock up higher.
How did natural resources do?
The world entered a recession, and China is a HUGE driver of natural resources. Overall natural resources collapesed, from about 310 down to about 210. Pretty huge drop. To give context, here is CRB over last ~8 years.
We are at a near 8 year low, comparable to the 2008 crash.
Gold is a subset of this, how did that do?
Considering how STRONG the USD was, and commoditied TANKED in the last year, gold has been relatively flat. 1300 down to 1200 range.
How has Gold miners fared?
Gold miners are also at near lows, not seen since 2008 crash.
So what can we say absolutely about all this data?
RELATIVE to last 8 years, natural resources are near a LOW, as also GOLD MINERS (GDX).
That during the last year as USD rocketed, gold valuation kept about parity value.
USD, if going to return closer to valuations a year ago, indicate Gold will appreciate. (as gold is priced internationally like all resources independant of USD valuation).
If buy low, sell high is a strategy, all things point that Gold Miners are near decade lows. Doesn't mean that miners will head higher, could stay here for 20 years. But risk of devaluation from here is much smaller than most of the last decade.
The Federal Reserve Bank was dovish, basically indicating interest rates won't rise until winter at earliest. We are witnessing a huge game of chicken across all countries. Good luck!
I am starting to pull away from Gold Miners, yea, if your reading this, it's long overdue.
I went into Oil companies big couple weeks ago, its nice to see green on the screen.
Right now I am looking at Natural Gas, 3x ETF GASL if 4 bucks, and 1X ETF UNG is 13. I may not get any as Natural Gas has not been good to me in the past.
then there is tech, many stocks have been taking a hit, but rebounding in last couple of weeks, like Amazon or Microsoft. I can't see buying Microsoft at this time, but most top line tech is always good.
Looking back, simply buy the obvious is best, anything else is an outsiders bet.
I am still in gold miners, but not looking (ever?) to add, good luck!
On Friday close, Jan 16th, 2015, Friday, Long dated options for GDX and GDXJ, and many other stocks will expire.
I expect this week to be the week of games, as large bets over years come due this Friday.
Miners could do anything. If they explode higher, I'd be tempted to dump some positions on Friday.
Gold has been holding its own for months, and miners are above their low. GDX was down to 17 now trading around 20.
So the week ahead will be interesting across the market.
Will there be a Gold Metal winner? I am hoping so! good luck!
Yesterday I posted "Gold Miners, Break Out?" indicating we may be on the verge of a break out. Today there was a nice follow through. GDX could turn back down lower, but with this channel break I think it is safe to put stops now in at 18.
GDX has been on such a slide for years, this maybe on the beginning on a multi-year run.
We haven't had a weekly moving average cross yet to confirm a multi-year run, but in the short term a nice trend change. (see this post for long term indicator)
I also wouldn't be surprised in a whip-saw action into the yearly options expiration in mid-January, it simply becomes where the big money wants it to go.
To the chart!
Also Oil has taken a huge hit, which will help gold miners profits. Whenever Oil bottoms, huge buying opportunity, anyones guess how low it will go. There is severe international games going on with Oil, and Russia is taking the worst hit!
Russia 2 year federal bond is paying about 16%!!!! compare that to USA 2 year bond at 0.66%!!!
Oil price collapsed with Ruble devalued and Russia rates soaring is not a good time for Russia.
Gold Miners have had a nice run the last couple of weeks.
Of course, I am happy to see finally some gains, however I want to temper this optimism with a larger context.
I do believe gold miners can do well WITHOUT gold appreciating, simply due to cheaper energy. A flat gold price with cheaper costs will improve stock price.
However, after watching gold miner beat down for last few years, best to wait for indicator of a trend change.
Taking a step back, Gold Miners (GDX) is on the cusp of breaking out of a range. If it does, it maybe an explosive move. Buying here at 19.44 you can use as a stop out price of 17.44, risking about 10% for upside gains of potentially much more. I rise back to price of $60 3 years ago would be 200% gains.
It is also important to know that USD has risen insanely rapidly since October, and Gold has held its price. If USD reverses will be interesting to see if Gold rises.
.gif&container=blogger&gadget=a&rewriteMime=image%2F*)
