How to know if this is a trend change?

I trade actively, too actively for my own good.
It is also not good to never trading in and out of the market is to secure returns that are purely subject to when you need to cash out.

The best is to trade in on a trend change up, and to trade out when the trend changes to down.

The problem is, how to know?   There are many different potential indicators, one I really like is 20 and 50 weekly simple moving averages.  When the 20 is above the 50, we are in an upswing.  When it changes, we are in a downswing.  Often the direction is for years, so this can be material.


Watch this video to get a walk through of time how this worked before 2008.  Below that is a recent chart, and pontifications of possible bottoms if we do trend down. 

Good Luck!

For latest chart, click here!

Humans don't know exponentials Covid-19

In my blog post "Covid-19 What is next?" I posted that I don't think the worst of this pandemic will be first half of 2020, but the second half.  It doesn't mean that it won't get worse in the near term.

Using latest statistics, I compiled what this may potentially play out if environment or action doesn't change the trajectory.

The key take away is people can't appreciate exponential numbers.  Look how quickly things can get out of control.  I still hope the curve goes down materially in APRIL, and if it does the worst case count depicted below on May 4th may be by end of June as the infection rate slows.
Keep in mind, there are less than 1 million hospital beds in USA, and a fraction of that is available, and a fraction of them have devices to help keep you breathing.

Not advocating panic, but do recommend reading "Covid-19 What is next?".  Also I can't imagine this is good for the stock market.  Good luck!

Whats next in the market

NOTE: Also READ COVID-19 thoughts.

Today I am just going to post my thoughts, I won't spend the extra time to put in links.
I really like to put links, to enable you the reader to read my source and help you challenge me or yourself on conclusions.

The market fell HARD this past week,  who could have possibly seen it was time to sell the market? (Click)
Back in 2008, who could have seen that coming?    If you pay attention, its possible to see.

So here we are, whats next?

Anything is possible, the run up for the last 3 years was built on 'free money' through tax breaks, very low interest rates, and a Federal Reserve Bank that has purchased 4.5 Trillion dollars in debt to basically make it 'go away'. 

Now that we are seeing a crack in the market, slashing 1% really is not that much, with rates so low.  More tax breaks?    We could make it free for anyone with over 100 million dollars, but I doubt that is enough.  Cut all taxes for the country to zero?  There is the problem of who then finances USA lifestyle.

So only thing left is for the Fed to just buy buy buy.    The Japanese banks now own 80% of their equities.  So why not have the USA take our capitalist society and instead of giving services to the poor, just spend capital buying securities for the top percentages of society?

So the fed can announce anything, at anytime to help get a shock to stop the drop.
This WILL happen.  Only if you are in the top 0.01% will you know when.  Rest of us is waiting to hear.

My bet is the FED will launch when the SPX passes below 2600, but before cutting through 2490.  See graph below.

We may counter rally this week without the FED doing a major offense.  I just don't think it will last if it does counter rally.   Because of the 10 year run up, there is very low number of shorts out there to buy to take profits to help sustain a buy back.

Then once the Fed launches, we counter rally (again?), we'll get to about 3,000, probably crack it above it a little.
Then some zig-zag, then we go down again, terminating at SPX 1600-ish.   I think then the final missile fires from the FED and the US government, and we'll bottom out.
This will take year or two to play out.  Once the bottom hits with FED and US government launching something extreme, then we are onto the next phase.

All of this will be blamed on COVID-19 and "Feel the Burn" sanders.  But these are just scapegoats for fiscal insanity since 2009.  Granted, COVID-19 has real economic impact, but this event is an accelerator for a fragile global economy build on free money.

The gyrations will continue for years with the central bank giving up all sense of fiscal sanity, with a termination of a global currency crisis.  Gold will be the rocket of all rockets and then I have no idea whats next.  Probably making gold illegal to own, or some other restriction, then turning the reigns over to Bitcoin or other crypto currencies.  Maybe Facebook, USA, Google, Amazon, or bitcoin with the decentralized currency play.

Anyway you slice this, not a great place for a 401k.   Good luck!

Update 3/2/20
Global Recession now baked in the cake

Covid-19 What is next?

I  tend to obsess and go over the top reading/learning on topics that interest me.

On the plus side, I feel confident to speak reasonably on topics, like Covid-19 now.
This post if for me, not you, to ensure I did what I can to help the people help themselves.

This will be my LAST post on this topic, until a full blown pandemic breaks out. 

Whats Next?

I am starting to believe Covid-19 will NOT hit pandemic levels until winter of 2020-21 in mainland USA.     It's and educated guess,  but this isn't the end of this story!

The Spanish Flu in 1918 evolved the same way, smaller outbreak in early 1918, and full pandemic in winter of 1918-1919.   I am believe this is the route the world will take.

There are two events that can change this outcome.  If we develop a vaccine that is proven safe and effective for US citizens to take in the 200 million+ volume, before the winter.

Second, if we develop a drug that is mass manufactured, safe, to curb the people who get hit hard.  This would turn the mass sickness into a scary, but treatable disease.

I really doubt the vaccine route, and hope for the miracle drug route.  But keep in mind, historically science hasn't produced volumes of medicines for existing viruses in short periods of time.

I put links that helped me shape my reasoning, feel free to provided your own to me in the comments! Cite your source that you base your opinion please!

The next 6 months

We will continue to have huge fear due to the explosive nature of the virus.  While hospitals in USA are not saturated, the death rate maybe lower than 2.5% expectation.  In China, the whisper number for untreated is 18% mortality rate.

What is important is if this does fizzle out to NOT get complacent!  This winter I expect the worst case scenario to be on the table.  That gives you time to get ready.

Just like in early January how every pundit said the market is going up 20-30% this year, so will pundits say it Covid-19 was overblown by June.  Don't get fooled.

Why Prepare?

COVID-19 if it becomes a pandemic in the next 12 months will take out 3 million people in the USA, and that stat could go much higher.  This isn't fantasy, its based on all the facts known today about the mortality rate and infection rate.  As I stated, I think this is more likely in winter 2020 than now.  But no one really knows.  The only good news is kids under age 17 seem to have a higher resistance and are not catching it .

I have had some friends say that suggesting preparation is equivalent to selling your house, moving to the woods, and getting guns.   Far from it!  All I am suggesting is you take moderate steps to be prepared for whatever the next 12 months brings.   If we do lock-down in the USA, supplies and safety will change.   Think of your family.  What will you say to loved ones? You are hoping for the best?  My question is, why not prepare?  What is there to lose?   My suggestions are minimal additional cost to your normal spend.

Preparation outline.

Preparation is pretty simple really.  Breaks down to these four high level topics.

• Learn preparedness, listen to events, take ownership.
• Cleanliness - Start today and keep up a habit of cleanliness.  Keep hands away from your face, wash hands and use 70%+ Alcohol to sterilize your hands.
• Supplies - Buy food, medicine, and supplies that you will consume over the next 6-12 months anyway.
• Extra precautions - Buy a few items you typically don't need, NIOSH rated protective gear, and plan to treat a sick family member.

That's it.  The first 3 items are minimal additional money out of pocket.  95% of your spend will be used.  And being mindful of your hands will increase success of catching any sickness, not just Covid-19.  I have taken the time to elaborate on each of these  for your benefit.

Learn

Books recommended in a podcast, I ordered but haven't read yet.
Alton's Antibiotics and Infectious Disease: The Layman's Guide to Available Antibacterials in Austere Settings
The Survival Medicine Handbook: A Guide for When Help is Not on the Way
AudioBook - The Prepper's Guide

Podcast links below are specific episodes that I found good. Browse for new material on these channels.
The Coronavirus goes Global (NYT)  (2/27/20)
COVID Super-Spreader Stealth Pandemic? (2/24/20)

Economic Outlook (Covid-19 is just accelerating)
All-Stars #94 Jeff Snider: The slowdown started before the Coronavirus hit the tape! (2/25/20)
What they are doing is not investment (Written before market crash 2/20)
Quote: Expect the S&P 500 to lose about two-thirds of its value over the coming years

Cleanliness

After MUCH reading, the best protection is keeping your hands away from your eyes/nose/mouth, and sterilizing your hands frequently.   If you are not around someone you know has a virus, any mask is good.  The purpose of the mask isn't to clean the air, but to stop YOU from touching your eyes/nose/mouth.  So anything is good, such as a disposable surgical mask.   Buy base on looks, convenience, but no need to ensure it is NIOSH certified N95 or N100.

Good hand cleaners:  Portable and refill/home

Masks on Amazon

Supplies

Simply buy non-perishable food you will use over the year ahead.  Some ideas are wide variety of canned items, pasta, flour, sugar, condensed milk, condiments, spices, rice, beans, cereals, bottled water, and fill your freezer with protein. (chicken/pork/meat).    Don't forget your animals!

Only thing to consider buying you may not eat is plant protein (beans) and fruit in a can, if you don't normally eat them.

Same with medicine, vitamins, Elderberry, and if you need medication try to have 3 month supply.  

Basically pre-buy all supplies to last a few months, and buy what you normally use.

Extra precautions

If any Pandemic hits the USA in the decade ahead, chances are the treatment needed will not scale to treat everyone.  For the unlucky persons who catch Covid-19 and it turns int pneumonia , it requires ventilators that need 2-3 people staffed on the machine around the clock to keep the person alive.  It is quite possible that if someone catches it your family and is not 'critical condition' the hospital won't take them.

So having masks, gloves, plastic, duct tape, etc does help.

For close contact, N95, R95, P95, N100, R100, or P100 masks would help.

The 100 rating are more effective than 95 rating.

Disposable masks are not available anymore, as the total supply has been consumed in the USA and the world.   Disposable masks cannot be effected for weeks or months. (hence disposable).
So if you want to be extra cautious, you can buy more expensive masks that provide longer protection.

One example is this mask:

https://www.grainger.com/product/3M-3M-Low-Maintenance-Half-Mask-6AP71

And you can get N100 cartridges:

https://www.staples.com/3M-OHESD-Particulate-Filters-P100-Nuisance-Level-Organic-Vapor-2-Pack/product_1550001

https://www.staples.com/3M-OHESD-Half-and-Full-Facepiece-Cartridges-Filters-P100-Multi-Gas-Vapor-2-Pack/product_1549795?cid=EM:shipped::sku&&data-cta-category=[PRODUCT]&akamai-feo=off

Other options here

Also consider getting bleach, painters plastic, duct tape, eye coverage, etc.  This will give you options to create a treatment rook and/or safe spaces.

 Closing

By no means do I think above is complete and/or accurate.  Purpose is to simply consider trying to be prepared.  When China locked down 780 million people it was sudden and enforced by military.  Other countries like Italy are following suite.    There will not be a window to act, you have to be prepared ahead of time.

No need to freak out, or stop living life, just take reasonable low-cost and effective preparedness measures.

Good luck!

Articles and more!

To say my reading of articles is up in putting it mildly.   I will post many here, so check back.
Great article about tipping point for market plunge.   Losing gains back to December is nothing.
https://www.zerohedge.com/markets/60-billion-puke-here-comes-systematic-selling-and-watch-russell-2000
New orders collapse
https://www.zerohedge.com/economics/richmond-fed-business-survey-crashes-february-new-orders-collapse
Subprime credit card delinquincies pass 2008 crisis. (And we are at all time high employment.)
https://www.zerohedge.com/personal-finance/subprime-credit-card-delinquencies-spike-record-high-surpass-financial-crisis-peak

CDC warns US outbreak imminent.
https://www.nytimes.com/2020/02/25/health/coronavirus-us.html
If CDC believes outbreak imminent, why have only 400 people been tested?
https://www.zerohedge.com/geopolitical/expert-warns-dysfunctional-us-health-care-system-faces-critical-shortage-coronavirus

Why fed won't save the market (opinion peace, not facts)
https://www.zerohedge.com/markets/no-fed-wont-save-market-heres-why

Harvard professor claims 40-70% of world will be infected
https://www.zerohedge.com/geopolitical/harvard-professor-says-40-70-people-worldwide-will-be-infected-covid-19

Only 13 countries prepared (not USA).  How to prepare.
https://www.zerohedge.com/geopolitical/grim-reality-about-pandemics-they-dont-want-you-know-no-country-prepared

Where is the Pandemic or Market decline?

I posted a couple of panic posts back on January 26th and 31st, titled "Potential Pandemic Precautions" and "Act now and sell the market!".

You may be thinking that I was over-reacting, here it is Feb 23rd and all is well in the USA, with market near all time highs.   What I keep forgetting in life is the market and public opinion is like changing direction of the worlds largest ship, it takes time.

The main issue with the evolving Novel Coronavirus is the infection rate and death rate is not clear.  This is because China hides, imprisons, and lies about what is happening.  China's main concern is maintaining the government stability, not helping the world understand better about the virus.

The stock market has been on an epic high, pretending that the second largest economy in the world, China, ordering 780 million citizens to not leave their house, will not impact USA economy negatively.  Further, as it spreads other cities and countries shutting down won't hurt the USA economy either.

This is a combination of public euphoria, the media feeding frenzy of 'everything will be fine', and big money needing more time to re-position.  Since January 30th Gold/Bitcoin moving higher and US treasury rates hitting all time lows.  My assumption is this is diversification of big money out of the market letting reality to hit the US consumer.  The Federal Reserve bank has been reacting by directly monetizing debt to prop up values.   The US is following in Japan, spending trillions on market welfare to prop up market values, owning 80% of the entire market float.    If you aren't rich enough to own a bunch, you not part of the party.   So much for capitalism. 

The question is will USA Federal Reserve Bank just buy buy buy, and interfere with capital markets.  I think before the year is out, resounding yes.   I think before the free money machine is turned onto full throttle, we will need a market 'scare' to justify this action.   Federal Reserve injected 90 billion dollars this past Tuesday to prop up the markets.  Also injected about  75 and 128 Billion in September.  Federal Reserve now owns approaching 4.5 Trillion in debt, basically bailing out capital markets for bad loans.  ( To give you an idea of what that is, if you earned 250,000 dollars a second since Jesus birth, you still wouldn't have 4.5 Trillion dollars. )

If the printing presses are NOT opened wide by the Fed, the market is looking on shaky ground.
So much so, the Federal Reserve stated Friday "Now is the time to prepare for a recession".   That is laughable, the time was the last 5 years.   Instead we cut taxes and accelerated debt.  There is nothing to prepare with!  Obama dug in by adding 66% more debt in a 'recovery', and Trump is on target to hit 20% in his term, with the 'strongest economy ever'.

Some news titles to understand the basis for my view, and good luck!.

The coronavirus could cause supply chain disruptions that are unlike anything we have seen in the past 70 years.
Some of the world's biggest economies are on the brink of recession
Warren Buffett Torches Corporate America, Spells Doom for Stock Market
China Car Sales Plunge 92%
Covid-19 (Novel coronavirus) Triggers Global Luxury Bust
China Faces Financial Armageddon With 85% Of Businesses Set To Run Out Of Cash In 3 Months
Apple warns revenue will be lower than expected because of coronavirus impact
Research from Wuhan hospital concludes 61% of Coronavirus patients with Severe Pneumonia won't survive.  (need peer review for accuracy)

ACT NOW, Sell the market!

I am posting this, not for you, but for me.

Have you ever believed you knew something so true, that you want to share with others to understand?
Some its God, others its their living values, others is activities benefits like exercise,  and still some others is facts that seem to not be recognized by others.

Today is some FACTS I want you to really absorb.

• The stock market is a value based on emotion.  If it was based on pure fact, company values could be computed by accounting and price fixed.  Stocks enable speculation to be captured into a dollar value.  Speculation is emotion.
• There is a pandemic of lifetime proportions building.  Even if as humans we curb the pending disaster, between now and then there will be emotional negative views thrown into the world.
• The general view of the market has been herd mentality positive since 2010, and since 2008 from low to high the market has risen every year on average almost 13%, the average the market has risen since 2001 is 6%.
•  Reversion to the mean is due, to help reduce the 13% annual average since 2008, a year after a 29% gain increases likelihood of a  reversion to the mean.
• There is a discipline called "Chart analysis" which looks at market charts to identify patterns and use them to help predict next events.  Monday we had a market gap down, Tuesday into Wednesday we had a gap fill.  Wednesday was FOMC meeting and the  market melted into close.  This reads bad after a series of other events in charts to the downside.
• If the market moves down, your emotions will trap you making personal bets with yourself "I'll sell at new market highs".  Think back to the tipping point in 2008 that you refused to sell, sell near the decade high while its easy decision.  How do I know that what happened to you? We are all trapped by emotions to make decisions.
• UPDATE 2/18/2020 - Or with new highs dismiss fears as nothing can stop the market, once again trapping you into buy and hold after 400%+ run up in the market.
• Read my posts for more Year of an explosive market and Choose your expected returns

The potential downside is substantial.  The market reversion WILL be 10% to 50%.    My suggestion is if you are over age of 50, I am not a market professional, make your own decisions.  Sell today, re-evaluate March 1st.  If selling after 400%+ move up since 2008, after 29% gain in 2019, and 3% up in January (which is 50% of typical annual move up) during a pandemic which WILL trigger emotional negative views.

I believe this so firmly I am placing very high risk trades on the market in anticipation of a market decline.  Last time I did this was in August 2008.  So I am acting on this view, not just spewing it.  And if I am wrong, I will lose much more than if I played it safe in fixed funds for February.


Chances are if you are reading this, my will is to clear MY conscience that I did my best as a friend to try to help you.  Good luck!



UPDATE: 2/2/2020
from Hussman Funds, worth a read:
https://www.hussmanfunds.com/comment/mc200130/
Update 2/8/20
State street asserts 70% chance of recession in next 6 months
China is starting to impact world trade, iPhone delays is one example
Update: 2/18/2020
Dow Futures Slide as Morgan Stanley Warns ‘Downturn’ Has Begun
Apple warns it will miss quarterly revenue target due to effects of coronavirus
Largest Shipping Decline Since 2009 and That's Before Coronavirus
HSBC To Cut 35,000 Jobs, Shed $100 Billion In Assets As Profits Plunge
Dramatic Coronavirus Timelapse Reveals an Economical Wrecking Ball in China
China Shutdown To Crush India’s Already-Crumbling Economy

Potential Pandemic Precautions

Updated 3-1/2020

See updated view:
https://websurfinmurf.blogspot.com/2020/03/covid-19-what-is-next.html

Updated 1-27-2020

Please consider spending $100-200 now to stock up on precautions for you and your family as the Novel Coronavirus unfolds.  Items I recommended are below, worse case you buy and hopefully avoid a common flu this season.  What does it cost, $100-200 bucks?!  I spend more on a single dinner with my family, don't be cheap.

If you're convinced, read Items to order and skip the second part of this post.  If you won't take precautions, skip to bottom and read "Why the concern about Novel Coronavirus".   I created hyper-links for you to read the what I did, to see what influenced my decisions.

Items to order

Vitamins

Consider a daily vitamin high in Vitamin C: Airborne 1000mg Vitamin C

Science has shown elderberry prevents catching the flu:
Elderberry daily dose, 100mg to keep your defenses up
ElderBerry daily dose, 150 mg to keep your defenses up
Elderberry liquid, to pack a punch when you need it.

Sanitizers

To prevent transmission, go over-the-top with hand sanitizers with 70% alcohol content.
Economical bottle, keep one at home and at work:
https://www.amazon.com/dp/B0013CNOMU/ref=psdc_2265897011_t2_B00J4EXQPY

Travel packs
https://www.amazon.com/gp/product/B00DDZMLLK/ref=ox_sc_act_title_3?smid=A2A3AJ6U4IV7UO&psc=1

Gloves/Masks

I can't see this as being needed or used.   But if you want to order 'while supplies last", get a mask of N99 or N100 rating.  These things have almost no backlog supply so most are already sold out.
For gloves, ignoring this crazy post, I love these gloves ! (click)  I use it to clean up disgusting messes at home.

What the CDC recommends.

What I recommend above, and wash your hands constantly, 20 seconds+ each time.  For more click below.

https://www.cdc.gov/coronavirus/2019-ncov/about/prevention-treatment.html

Over-the-Top options.

Buy food, don't eat out, or have others prepare your food and stock up.
Avoid planes, trains, etc.  Work at home if possible.  At this time I plan to continue normal life, but will curb eating out.
One of the medicines that in theory will help is https://www.kaletra.com/ . Its impossible to get at a reasonable price.

Why the concern on Novel Coronavirus

The last successful pandemic was the Spanish flu , killing about 75 million people back in 1918.
We have better medicine, more knowledge, but we do travel much more than back then making spreading much faster.  Latest news as of this post predicts doubling of cases every 6 days.  If this is true in the USA alone assuming 100 people are infected now, we can expect 1 in 3 catching this virus in 4 months.    The medical system isn't able to cope with exponential contagions and will become over-whelmed.

So what if we catch it?   What makes this virus different is carriers take up to 14 days to show symptoms.  The infection rate is 2.6, meaning if you get infected you will on average infect 2.6 people.   This is why there is an exponential component.   China has been playing down this disease, but if we are to believe their under-reported numbers, the death rate is 2.65%.   Since they may have lower medical treatment, and they are likely under-reporting, we can go with this death rate for outside China as a guess.

At this contagion rate in 4  months if 1 out of 3 people do catch the virus, we can expect 2.7 million to die in USA.  Yes this is fantastical, and yes I hope its under 10,000 and this post will be a joke in June.  But the point is, the best knowledge today says this is what is possible.  The question really is what will be the death rate in the USA once we hit 1 million infected.  By then the medical facilities will be fully utilized.

To read more about coronavirus click here, or  watch here.

Still not convinced? Again, whats the big deal to buy vitamins, and sanitizers that will be good for next winter also.  If someone you love has frail health, there is no better reason to act.
Best I can do, good luck.

Update 2/8/2020
China has been hiding numbers and not even counting infected.  Neil Ferguson estimates 50K new cases a day as of Feb 5th, doubling every 5 days, with extreme infection in 4 weeks in China
Super Spreaders proven, one patient infects 57 people in a hospital
Update 2/18/2020
Coronavirus is 20x Deadlier than the Flu
Half the Population of China, 760 Million, Now Locked Down

Choose your expected 2020 return

The market is up 3% in the first two weeks of 2020!
The average return in the market since 2001 is 6%, we have achieved 50% of the annual return in 2 weeks, quite impressive!  This is on track for up 50% in 2020 at this pace.

Please read my thoughts on 2020 in post  "The Year of an Explosive Market" from January 1st.

With 3% up in first two weeks, 50% of total gains on average over the last 19 years in the market, I urge considering taking some risk off the table if you are over 50 years old.

At a minimum take a look at the chart below and you evaluate what you think is a "good return" in 2020 with your expectations.

I compiled quite a bit of data to give you information 'at a glance' to decide if the risk vs rewards is worth it.  For 2020, I assumed all percentages from close of Friday 1/17, and not from 1/1/2020.  We are already up 3%, so if the targets I call out are hit, we will in fact have even greater returns.

The year of an explosive market

The Shorter Take

The markets in 2019 did very well, up about 35%!   BUT if you look at August 2018 until today, its up about 12%.  Remember, back in 2018 the market took a hard turn for the last half of that year.

Looking ahead we have two paths ahead, a banner year of gains, perhaps +50% or more, or a market correction.  I am truly torn which one we will see.  The president of the US will press against any fiscal responsibility to keep the market roaring, as he has shown by pressuring the private group, the Federal Reserve Bank.  President Trump stated publicly that we should join in on the reducing of interest rates to negative, to be competitive to the world.  Austria has issued 100 year bonds with NEGATIVE interest rates.   Germany currently pays a negative rate for 1 to 15 year bonds!  Compare that to the USA paying 2.4% for a 30 year bond.

If the USA tries to join in on unconstrained 'free debt', and the world can sustain it, I really do think the market up 50% in 2020 is possible.  S&P 500 from 3250 to 4,875!  

Before I go into greater detail about the economic health, I do what to call out one thing for you to seriously consider.   If you are over the age of 55, and therefore may not have 10-15 years for your savings to return with a market correction-recovery, what is your strategy in investing?   The market has recovered about 480% since 2008, that is very good growth!  That took 10 years to do, but if you where in the market in 2007, you took ~6 years just to stay even assuming you never sold.  

PLEASE take serious consideration of your strategy to withstand a market correction that takes typically 10 years to recover.   RISK only what you can afford to wait even longer to grow your savings.  I drew S&P 500 from 1991 to today to illustrate how amazing the market has been, and yes, can be in 2020.  My opinion is  50% into cash/conservative investments in 2020 is wise after 480% gains if you are 55 or older.  See your professional adviser for whats right for you.

One cautionary factor is to the USA has advanced its debt spending substantially since 2016 with tax cuts.   Our deficit is now at over 1 trillion a year at the HEIGHT of the US economy.  To put that into perspective, if you where paid at 2.7 million an hour 24x7 since the birth of Jesus (year 0) you still wouldn't have enough money to pay 1 year of USA's debt spending!

If we assume the USA and the world will not enter into the one way abyss of racing to the bottom of free debt, lets look at other economic factors that may affect the market.

The question is , if we needed massive tax cuts, QE easing by the banks to get here, what is the government willing to do to keep this party ontrack for the year ahead?

NOTE: I am long the market in the under-valued precious metal sector and Marijuana stocks.

ETF's are GDX, GDXJ, and MJ.

The details

I advise you stop reading here unless you want to understand where I get my view from.

I have gathered items I have found interesting across a variety of sources.   My own thoughts of peak valuation was done in August 2019 post Decade old topping pattern completing.  Although the graphs have advanced, my opinion is the same.

Below is a quote from Hussman Funds, you can read their full post  The Meaning of Valuation .

Yes, interest rates are low, but with them, so are the discount rates and long-term returns that are embedded into current prices. Indeed, the most reliable valuation measures suggest that stock prices are presently about three times the level that would imply future long-term returns close to the historical norm. That may sound like a preposterous assertion, but we’ve seen such extremes before, and they’ve ended quite badly.

Worse, there is a great deal of evidence to support the assertion that interest rates are low because structural economic growth rates are also low. In that kind of environment, a proper discounted cash flow analysis would show that no valuation premium is “justified” by the low interest rates at all. Hiking valuation multiples in response to this situation only adds insult to injury.

Last week, our estimate of prospective 12-year nominal annual total returns on a conventional portfolio mix (invested 60% in the S&P 500, 30% in Treasury bonds, and 10% in Treasury bills) fell to the lowest level in U.S. history, plunging below the level previously set at the peak of the 1929 market bubble. The chart below shows these estimates (blue), along with the actual subsequent 12-year total returns that have followed (red).

Another Hussman post, you can read full here: One Tier and Rubble Down Below

The next chart shows the percentage change in median price/revenue ratios since January 2018. Notice the striking loss of uniformity here. What we see here is essentially a “Nifty Fifty” type of environment, where the most richly valued deciles have accounted for a disproportionate share of the gains while more value-oriented sectors have stagnated or even lost value. This is the hallmark of a market that is losing its engines, yet at the same time maintaining the face of speculation.

We’ve observed precisely the same pattern in the late stages of previous bubbles. Indeed, during much of the tech bubble and the mortgage bubble, value-oriented stocks outperformed other deciles through the bulk of the advance. However, that pattern shifted profoundly as the market approached its peak, with investors increasingly chasing high-valuation “glamour” stocks while the broader market gradually lost its sponsorship.

MISH post: Jim Bianco says this is QE, Like Y2K

We are in QE, free money for the financial system!  this goes back to my point, if we continue to support the system with free money, S&P 500 up 50% in 2020 is possible!

Smaller articles, the titles sum up the gist, click through to learn more.

Consumer confidence down 4th time out of 5 months.

Manufacturing ISM Down 5th Month to Lowest Since June 2009

Nine States Projected to Contract in 2020: More on the Way
Cass Year-Over-Year Freight Index Sinks to a 12-Year Low
Manufacturing Has Peaked This Economic Cycle
No improvement in corporate profits since 2012
China Posts Slowest Growth in 29 Years But Still Overstated
Ticking Time bomb of record high corporate debt

World Bank warns of global debt crisis amid borrowing build up.

Global debt-to-GDP ratio has now hit an all-time high of 322%

Bills due on vacant chines properties    - ( China  is significantly financially worse than USA )

Capital flight: Money leaving China at record rate  - (If China has its crisis, the world will go with it )

250 Trillion in Global Debt: How Can That Be Paid Back?

China’s Birthrate Hits Historic Low, in Looming Crisis for Beijing

Decade old topping pattern completing

I wanted to share some thoughts on the current state of the market.  I will post later reflecting posts from 2016 to today.
All of this is just opinion, for your consideration.  No one knows exactly what next month or year holds.  I want to do my part in sharing my thoughts at this time.  The question should always be risk vs reward vs time you have in life to recover from a downturn.  Downturns can be years to get back to old highs.  (2001-1009 for example)

For interest rates, housing starts, unemployment, gold/bitcoin, and market valuations look at the chart and assess risk/reward yourself.  Consult a professional adviser.

Market Direction Indicator

First is an old indicator of the market direction, read more here.  Looking at weekly moving averages when the 20 SMA and 50 SMA cross, the market is changing direction.  Since 2008, there has been a couple of crosses that have reversed.  Even if you sell, you can buy back on reverse and not miss a significant portion of the market rise.  This helps remove the emotion from market trading and focus on a market direction indicator that historically has been pretty accurate.

The market has NOT crossed down currently.  If you stay in the market, please consider checking this indicator periodically by clicking here and respecting it.

Federal Reserve & The President

The stock market is at an all time high recently, with unemployment at a low.  But two major indicators of issues ahead was recently shared with the world.
First, President Trump was calling for the federal reserve to make major interest rate cuts as early as May.   I assert the president was informed the market outlook is very weak, and he was positioning politically that a market turn is 100% the fed and 0% political policy.  This announcement by the president is what they call in poker a TELL, he is signaling all is not well, are we listening?

The 2016-2019 rally WAS politically caused with cutting taxes to the rich, and enabling international corporations to transfer profits overseas to buy back corporate stock.  The president has claimed the market boom was Trump driven.   And this is key, for what 'easy buttons' are left for the president to pull for another leg up?  And if there is another easy button, why not press it?   I cannot think of an easy button, but then again I didn't expect in January 2016 that politicians would trigger all easy buttons left with a rising market.

Second, the Federal Reserve cut rates last week by a quarter of a point!  With the market at an all time high, the Fed is easing, why?  Again this is a tell, all is not well, are we listening?

This is very dangerous territory, when we mix private (the fed is private banking organization) with politics, historically countries currencies fail.  One can hope the structure of the US organizations can resist this political attack.

Interest Rates

Contrary to popular belief, the federal reserve cannot arbitrarily set federal bond interest rates.  We live in a world with a wide variety of global investment options.  If the Fed raises rates, it can definitely increase purchasing, with a higher rate of return.  If the fed lowers rates, US bonds must be purchased to finance rolling forward debt and 1 trillion dollar a year deficit.  If these bonds are not purchased, rates organically rise to get  buyers.   The recent fed cut in some ways is following, not leading when it comes to US Bonds rates.  If the market can support a lower rate, it is in part an indicator of higher 'safe play' purchases.

Unemployment Rate

Unemployment rate is at an all time low.  Since the fall of 2018, the rate has been influenced by unusual 'seasonal adjustments', I find this troubling.  The question is do we expect rates to go down to 3% or up to 5% as next likely level?  Generic observation seems like mass layoffs are on the rise.  Overall it can't be assessed until later this year with the data compiled.

Housing Starts

Housing starts seems to have peaked a few months back.  Chart for your consideration.  Housing starts are often a reflection of the health of the private sector.

Hedge Fund Commentary

I follow hedge fund manager John Hussman and Jim Chanos.  If you can find a reliable source of latest Jim Chanos thoughts, please post in comments!  Mr. Hussman does post his thoughts on his hedge fund web site.  Recently he gave thoughts about the market topping in post "They're Running Toward the Fire".  Its a good read, I highly recommend it.

Another great article is estimates rate of return of 60 / 30 / 10 of S&P 500 / Treasure Bonds / T-Bills predicted for next 12 years and actual returns.   Spoiler: Current outlook is 3%.

Article "How to Needlessly Produce Inflation"

Gold and Bitcoin

Recently Gold has been on the rise, I assert the new highs since 2012 is an indicator of a trend change in this resource.  While bitcoin I consider a 'collectible', it is along the same lines as Gold, a limited resource that is purchased as an alternate reserve of wealth.  It also is on the rise.
Both of these are 'fear alternate play' indicators.



Bitcoin

Market Charting

Market charting is a questionable methodology of using stock chart analysis to predict future results.  While I don't put 100% faith into this arcane art, it can have effect of influencing professional traders to follow the indicators.  This can make it self-fulfilling.  It also has benefit of zero emotion, just analyze the data.  For these reasons, it is worth considerations.

I follow a market chartist called "The Technical Indicator".  If this is of interest to you, I highly recommend a subscription.   Some of their language in their newsletter is pretty out there, but they do seem to be consistent with chart analysis.

Recently, their indicator has flipped to down for the next year.  The 1-2 year indicator has yet to flip down.

How to find stocks to invest in?

http://www.miningnerds.com/

Long Term Trading signal 2019

I posted about a long term investor trading signal in 2015 and in 2008.
This post will add current view and refresh on my take on these types of signals.

The signal I have been using is the S&P 500 index Weekly SMA (Simple Moving Average).
This trendline takes the weekly stock market value and averages it over a duration, in this case I use 50 week and 20 week moving averages.

If the 50 week goes higher than the 20 week, this is an indicator of a market trend change down, if the 20 goes above the 50 week, this is an indicator of market trend change up.

Another popular indicator is daily SMA 200,50.  Work on same principal but uses daily instead of weekly moving averages.

These indicators are important to help people try to remove the emotional attachment of their positions to a neutral indicator.   Also there is a herd mentality effect.  Professional traders are aware of these indicators are used and it can become self-fulfilling.

All indicators are not predictions, simply a datapoint to respectfully consider your disposition.
For a more indepth review, please see the original video I watched to learn about this.

Below are weekly and daily SMA for your viewing.
Click these links for current weekly and daily charts.

Kicking the can on inflation

I recently wrote about rising interest rates ahead, with unpredictable results on world currencies.
People may start to run to variety of wealth preservation schemes as the USD valuation starts to come under assault.   One of those stops will be precious metals / hard assets but this won't last.
The final end game has to be a new paradigm as technology has broken everything else in the wealth storage game.  Some sort of crypto type thing will be the answer, in my 2011 post "Ideal form of Money - Power to the People."


The question is however, why will there be inflation?  We are producing more than ever, at a lower cost, and people simply do not have the disposable income they did 40 years ago.

So if we are under-employed, with lower disposable income, inflation should be impossible!

One of the slight of hands in economic classes is they use 1 word to describe an effect (inflation) and simplify the root cause as one thing.

What we have seen the last 20 years is a variety of efforts to kick the can in rising costs on natural resources.  If we took on renewable energies aggressively, what I am about to describe would be much less of an issue.  However, USA thinks pressing on with solid fuels is the answer, and we will have to learn the hard way.

I wrote previously about peak oil, and how it was real.......until fracking emerged as acceptable.  Fracking did in fact kick that can, NICELY!   But the long term low-cost viability on fracking over a decade is much worse than traditional oil drilling.  The net means we will run through the 'cheap and plentiful' fracking sites quickly.  Once we exhaust the can-kicking option fracking will enable oil to get more expensive per barrel.

More expensive oil will force all costs to rise, and some cost (like shipping) could really accelerate those costs.  But fear not! Before fracking we dreamed up Ethanol as a way to kick the can!  What this gimmick did is set a floor for ALL FOOD must cost MORE than the profit of selling Ethanol as a fuel source.   Which means when oil prices rise, we will plant more Corn to make Ethanol, which will cause other crops to become more expensive as they must be equally profitable as Ethanol!

Unfortunately, in 2018 we are about to unleash yet another reason to force food prices to soar.  Marijuana is threatening to become legal.  Once it does, USA farmers will have yet another crop that maybe more profitable than food, Marijuana.   So food prices must be equal to profit of Ethanol and Marijuana.

Technology is advancing with vertical farming, but that in itself is more expensive than farming.  The good news is it will help put a ceiling (but lagged) on food prices.

Americans will see accelerated costs in food, energy, debt payments (interest rates), and falling house equity.
If only we could have seen this coming back in 2008 financial crisis, the world could have avoided these energy shell games.
Time to get this party started!

Heart of finance just had its first scare in 30 years

I wrote a few times back in January 2009 that the REAL crisis is not the stock market, but risk to Bond interest rates.  Then I wrote post in 2010 "Bonds, Cost of borrowing the heart of all finance" calling out when US 30 year bonds interest rates go above 30 year downtrend, we will enter a new world not since the 1970's, a rising cost to borrow.

Well, we finally broke this recently, as graph below shows:

Our economic model is based on debt, and for 30 years businesses and people could borrow and expect LOWER payments 2, 10, 20 years later.  In 2018, this expectation has shifted to higher rates for decades ahead.

I expect in the year ahead a new world financial crisis to start to emerge, as the debt based society can no longer 'roll debt forward' with lower costs.   I also expect FINALLY the Precious metal sector to get a boost, now that bitcoin has taken it on the chin.   I do expect however when precious metals soar, when they break, the action for rest of my life will be in the cryptocurrencies.   I do think precious metals have one more act in them before being retired from the global economy as nothing more than expensive rocks.

I expect USD valuation is where it will get strange, as our global economy has always judged health of fiat currency against other fiat currencies.    If I am right about interest rates, and fiat currencies are the main value store for next 30 years, then I would expect USD to keep rising and rates must rise to 'break the fever" of USD trading higher, like Volcker DOUBLED US interest rates overnight in March 1980 from 10% to 20%, producing the extreme graphs above and below.

Imagine today, with so many Americans citizens and companies rolling forward debt dependant on the kindness of 30 years of lower rates experiencing such a spike in rates!
.

I am making NO predictions except one, what the world knows as the 'right and wrong' things to do in the financial markets since 1982 is out the window.   Companies that have been stable for decades may wake up in deep trouble in the year or two ahead.   While we can have issues sooner, I expect this party to get start really cooking in the year 2020, USA next presidential election.

In the near term, I am watching a 2 year and a long term indicator for the world markets to enter a bear market.   Things look like a double top and we are about to hear the Bear roar.  But until the charting has confirmation, act with caution for a Bull or a Bear.  The 2 year indicator will mature October 31st, so clarity should come in late 2018.

See NEW related post on inflation.

Good luck!
Keep eye on GDX, GDXJ, and new markets such as 'Alternative Crop' stocks!

Market Rumblings

Below is a snippet from the weekend report of " https://www.technicalindicatorindex.com/ "
Consider a subscription for yourself.

Here is what they had to say.

The Bottom Line from Today’s Market Action: Something is up. Something big is coming. We cannot be sure precisely when or what, but there are warnings from the technical indicators and patterns from the market this weekend that tell us the stock market is in an extremely dangerous place. Caution is warranted. 

We look for the Plunge Protection Team to be active at this time. Whether they succeed or not is to be determined. Stocks were flat Friday, September 14th. The stock market generated its 11th Hindenburg Omen observation Friday for the official H.O. from August, and has now triggered 9 H.O. observations in consecutive days. This has not happened in the past 40 years we have tracked Hindenburg Omens. This tells us the market is in an extreme unhealthy condition, is fragile, and could plunge given a trigger event. 

This does not mean a plunge is coming for certain, however every stock market crash (declines greater than 15 percent) over the past 40 years have been preceded by a Hindenburg Omen. There are large and growing Bearish divergences evident this weekend between the major U.S. stock averages and their 10 day average Advance/Decline Line Indicators, their Demand Power measures, and there is a Bearish divergence between the S&P 500 and our intermediate term Secondary Trend Indicator. 

Rising Bearish Wedge patterns are completing in the major averages. Downside price targets suggest a plunge will follow. We show charts for all of these patterns in this report. 

Bear Market waking up

I put a panic alert out in March, then went positive in May.

Today unemployment numbers was released.  The headline shows 'steady as it goes', about same as past, 200K positive job growth.  But like most things, the details is in the 'fake news'.  The unemployment shows over 2 million people dropped out of the labor force for this report.  The assertion is 2 million people retired or gave up looking for work since the last unemployment report.  Considering currently we have only 58% of the population 'employable', we lost 1.5% of the work force this period.   The recorded job loss was 1.46 million jobs.  When you have 2 million drop out of the work force, we have a NET positive job growth.

If you believe above is fake news please stop reading.  If there is pause for concern, read on.

Being generous and using seasonally adjusted numbers this is the WORST report since January of 1999 , with 423,000 jobs lost.

Combine this with the trade wars starting, and the indicators I follow show a potential market trend change below.

I am putting on the caution warning for the markets, with unconfirmed price action for this being the next new recession starting.

I cut my investments by 40% today.

What makes me very concerned is interest rates are still VERY low, and with corporate tax cuts corporations pulled their cash from over-seas in record amounts with executives dumping shares.  If there is a downturn in the market, I have a hard time seeing what is the easy stimulus plan.

Positive outlook

Back in January, the trend indicator went negative first time in a while.  The indicators have been flip flopping ever since.  On May 11th, all trend indicators are pointing up!   The next expected challenge to this trend  is in August-September, about then the 1 year indicator anniversary is up, and closing in on the 2 year trend indicator.

It is possible to change sooner, if we do, that will be called a failed cycle, and it will be much more dramatic than January if that was to occur.  Swing back here in August for an update, or sooner if we have a failed cycle.

I may not be diligent on updating when this trend changes, so consider subscribing to the service yourself.  

https://www.technicalindicatorindex.com/

Good Luck!

Market Direction Change

I been emailing friends on the market since Feb 2nd, the upshot is we likely formed a top for the next 3 months, and very possibly a year out.  Unfortunately the year out part isn't clear yet.

I subscribe to two services, https://chartfreak.com/, which focuses on individual stocks and https://www.technicalindicatorindex.com/ , which covers macro trends of the market.

the screenshots below are from them, its a paid service, so I don't share the information except when I see extreme moments in time like we may be in now.

The ultimate confirmation will be when this indicator flips
http://websurfinmurf.blogspot.com/2015/10/long-term-investment-trading-signal.html
Food for thought on Market fall predictions using Fed Funds Rate
https://www.themaven.net/mishtalk/economics/chart-predicts-every-market-crash-in-history-ZQD5lS5qnEa6x0Yf0_UGWw


So lets recap!

Feb 2nd

Friends,

I subscribe to a market analyst that generated indicators of a down market for next 14 days, 30 days, and potentially for months.

Please see below the summary.

Unfortunately for me, I didn't check this earlier, I would have exited on 31st.

I'll keep SOME shares of most positions as a "reminder" of my exit position, and to watch in event this trend changes to re-establish.

Also for some precious metal miners I may keep a higher percent.

So while I am not panicking, I am taking serious this new sell signal after a parabolic run up.

Feb 11th

Friends,

The same indicators indicating Jan 30th time to exit the market, is now showing a counter-rally starting Monday.

Their prediction is we fail around the previous high (just short, or somewhat higher), then resume downtrend.

So if you wanted in, or didnt get out, we had a healthy sell off that may provide some cover for getting into or out of the market.

Unless I email otherwise, assume sentiment is ultimate failure for a confirmed  bear market to begin.  Could be a couple of weeks or later this year before the down trend breaks below here.

As for me, I will keep it short-term trading, no big position long-term holds.

Good Luck!

March 1st

Market is looking weak, the counter-rally from the initial drop may be over.

One more signal to trip to confirm reversal to next leg lower

March 2nd

Confirmation today.

I won't bother updating anyone again until I see the Purchasing Power/30 day/14 day/ and 1-3 month turn green.

My main concern was the parabolic swing up we would see would burst, and it did late January.

The counter-rally was a great time to get out or take a chance of this thing turning around.

At this point, unless I see all green, I am assuming we saw a 1+ year top.

Good luck!