Category Archives: Investing

Nickel Stocks Has Put In A long Term Bottom

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nickel stocks

Nickel: Is This The Beginning of A new Bull Market

If you look at a shorter-term chart 1-3 years, it looks like the main move is underway already. However, looking at a ten-year chart, we can see that Nickel is at an important junction. It needs to close above 1100 on a monthly basis; failure to achieve this could push it back down to the 820-855 ranges over rather quickly.  If one is looking for a solid confirmation, then a monthly close over 1200 should do it; this would set the pace for a test of the 1500 ranges with a possibility of trading to 1800.

We looked at several large producers of nickel, and all their charts illustrated that the stocks were consolidating, which suggests that Nickel is likely to pullback before trending higher unless the metal is going to diverge and trend in the opposite direction.

Let’s take a look at some Nickel Producers

VALE, which is the world’s second-largest producer of Nickel, appears to be consolidating while nickel prices trend higher and the same appears to be true of NILSY (Norilsk Mines).  What could be taking place here is that the stocks are pulling back and building energy for the next phase upwards.

On the monthly chart of VALE, we can see that the stock is holding up quite well, while our indicators are letting out some steam. If one were willing to take some risk and wanted to act before our indicators moved into the oversold range capital could be deployed in the 9 to 10 dollar ranges.

The pattern is quite interesting here; this is one of the few stocks in the sector that has not experienced a nice upward move. The other stocks are now consolidating building up steam for the next leg up, however, this chap is still trading in the extremely oversold ranges and technically could mount a rally at any moment. However, note that this is a speculative play.

This company also trades in London under symbol GLEN (LSX: GLEN), and it is currently the world’s 4th largest nickel producer.  Risk-takers could deploy some capital in the 3.25-3.30 ranges and another lot deployed if it drops down to the 2.90-3.00 ranges. We would hold onto the third and deploy it after one of our customer indicators generates a buy signal.

Courtesy of Tactical Investor

Random views on Nickel Stocks

Use of nickel has been traced as far back as 3,500 BC. In more recent times nickel has been used in coins (a nickel), but is best known for its use in stainless steel driven mostly by Chinese construction. With the current negative sentiment due to the US-China trade war and some mild slowdown in China, nickel prices have fallen to a low level, as have the nickel miners. Provided we don’t head into a significant China or global slowdown, any resolution in the trade war with China should lead to some recovery in nickel prices and the nickel miner’s stock prices.Class 1 nickel demand forecast to increase 17 fold from 2017 to 2025 due to the EV boomAccording to McKinsey research if annual electric vehicle (EV) production reaches 31 million vehicles by 2025 as expected then demand for high-purity class 1 nickel is likely to increase significantly from 33 Kt in 2017 to 570 Kt in 2025. Class 1 nickel is the “high purity” nickel that is used in electric vehicle lithium ion batteries. The stainless steel industry uses both class 1 and class 2 nickel (lower purity) and is the main driver of overall nickel demand. Full Story

The share price of nickel mining stocks rose significantly in the Philippine Stock Exchange last week. This was driven by the sharp increase in the price of nickel traded in the London Metal Exchange (LME). The price of nickel is currently $14,860 per ton, up 17 percent compared to its end-June level and up 39 percent compared to its end 2018 level. This is despite the slowing global economic growth, which is pulling down the price of most commodities.

The higher price of nickel in LME is largely due to the steep drop in inventory levels. From 200,000 metric tons during the start of the year, LME’s inventory level fell to 160,000 MT as of end-June and is now down to 149,000 MT. This is equivalent to less than two months’ worth of supply and indicates a potential shortage, according to Jervois Mining executive general manager Michael Rodriguez, as reported by SmallCaps.com.

A reason for the decline in nickel inventory is growing demand for lithium-ion batteries used in electric vehicles. Note that various groups are projecting demand for electric vehicles to increase by a compounded annual growth rate of more than 20 percent in the next five to 10 years as governments globally are encouraging the adoption of electric vehicles due to environmental reasons. Consequently, demand for nickel used for electric vehicle batteries is also increasing and is expected to account for more than 50 percent of total nickel demand by 2030. Full Story

 

2016 was lithium’s year, 2017 was cobalt’s year, and 2018-2020 are likely to be nickel’s years as nickel inventories decline and nickel prices finally start to rise. Strong Chinese and global stainless steel demand and ever increasing demand from electric vehicles [EVs] using higher nickel content batteries NMC (8:1:1).

In this article the first 2 stocks are more solid and safe diversified nickel investments (with exposure to other metals) that will do ok even if the nickel boom is delayed until 2020. The last 3 stocks are nickel-cobalt optionality plays that can give out-sized returns should the nickel price continue to improve as I expect. They will also be helped significantly by strong cobalt prices. In all cases investors will need some patience with a 5 year plus investment time frame.

Nickel price and inventory

Nickel is only just recovering now from a severe bear market from 2012 to early 2016 (low of just below US$4/lb), with the price moving up in 2017 and reaching USD 6.10/lb by late January 2018. Inventory is finally slowly declining and price is recovering. Whilst some Philippine supply is expected to come back, the demand picture is strengthening as global economic growth picks up and the mass market EV boom begins.

In 2017 nickel prices rose 27.51% on the back of solid Chinese stainless steel demand. I expect something similar each year from now until 2020, as demand is steadily boosted from the EV boom. Full Story

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BitCoin VS Precious Metals

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There is no absurdity so palpable but that it may be firmly planted in the human head if you only begin to inculcate it before the age of five, by constantly repeating it with an air of great solemnity. Arthur Schopenhauer

 Gold bottomed in 2002, and it took nine years for its trade to a high of roughly $1900 (September 2011). Contrast that to Bitcoin, in less than 1/3rd of the amount of time it is showing gains of more than 11,000%.  It took nine years for Gold to show gains of roughly 700% and Gold has given up a substantial portion of those gains.

 

We bailed out of Gold in 2011 for two reasons:

  • Gold was trading in the extremely overbought ranges, and the Gold Bug Camp could not contain their glee; they thought the sky was the limit. Instead, they found out that the Ground was a lot closer.
  • The masses were not embracing Gold, and they refused to treat or view it as a currency.

Only those from the hard money camp continued to believe that Gold was a currency,  but sadly their numbers are dwindling with the passage of each day. The masses view Bitcoin as cool and secure; a feat Gold has struggled to achieve and is not likely to achieve in the foreseeable future.  Whether this is true or not, hardly matters for when it comes to investing, perceptions are all that matter.

Does this mean the precious metals sector is dead?

Well, that depends on what one means by dead.   Gold has performed abysmally since (it topped out)  2011.  The money supply soared, and Gold tanked, not exactly a good sign. In doing the opposite of what was expected from it, Gold cemented the view that it was an ancient relic that has no place in today’s monetary system. We are speaking in terms of Mass Perception. What we think, matters not; we follow trends, and we don’t waste time trying to look at things from a personal vantage point.  There are many reasons for Gold’s underperformance after 2011; one of them was the “velocity of the money supply” which all but stalled after 2011. However, the masses don’t waste time on details like this. They look for simple cause and effect answers. Money supply soared, Gold did nothing, and hence Gold is a waste of time.  A bit simplistic but that’s the mass mindset for you.  However, looking forward some factors could limit Gold’s lustre

Demand for Gold continues to drop

 India’s gold consumption is likely to drop to its lowest in eight years in 2017, hit by government moves to make bullion trading more transparent and by faltering demand from some rural areas, the World Gold Council (WGC) said on Thursday.

Evidence of weaker appetite in a country where gold is used in everything from investment to wedding gifts could drag on global prices that have been hovering near their highest in three weeks. India is the word’s No 2 consumer of gold behind China. Full Story

The Dollar appears to be putting in a base

US dollar ready to rally in 2018, Good for Bitcoin bad for Gold

The dollar topped in early 2017 and what did Gold do? Absolutely nothing; instead of surging to new highs it could not even trade past its July 2016 highs.  The dollar, in contrast, has been going through a well deserved period of consolidation after mounting a stunning rally that started in 2011.  It tested support and held, and as long as it does not close below 90 on a monthly basis, the outlook will remain bullish.  Consequently, a monthly close above 94.50 will open the possibility for a test of the old highs.

Conclusion

The dollar is getting ready to mount a rally, demand for Gold is declining, and Gold has been unable to trade past $1350 even in the face of a weaker dollar.   Then we have the Bitcoin market, which the masses (especially millennia’s) find to be a lot more exciting and rewarding than Gold. All these factors don’t bode well for Gold.  It appears that Gold is likely to test the 1000 ranges unless it decides to diverge and trend upwards in tandem with the dollar.   Bitcoin, on the other hand, is now in the feeding frenzy stage, so this market is ripe for a correction. However, the upward move is still not over. After a hard correction, Bitcoin is likely to resume its upward trend.

Gold will probably never experience a move akin to that of Bitcoin, but that does not mean it won’t make for a good investment one day. For now, the trend is neutral;  a weekly close below $1100 will darken the outlook for Gold, but a monthly close above $1350 will indicate that Gold is ready to trend higher.

Word to the wise

Never fall in love with any investment.  In the end, it’s the trend that you should pay attention to, for no sector can trend upwards forever.  The odds of the Dow trading to 29,000 are far better than of Gold trading to $1900.

 

Published courtesy of the Tactical Investor

 

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Bull and Bear 2019: Which one is the winner?

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Bull and Bear 2019

Bull and bear market: Before we get into any commentary take a look at the images and charts below.  Remember that the best time to buy from a long term perspective is when blood is flowing freely in the streets and blood is flowing now. Finally, keep in mind that we have always advocated that crashes are nothing but long term buying opportunities. Pull up a long term chart and you will be forced to arrive at the same conclusion.The Big player’s game strategy is to get individuals to focus on words such as bear market, crash, and end of the world, etc; in doing so, the crowd focuses on the tree and forgets the forest.

Anxiety Index - Tactical Investor

Source: Tactical Investor

The anxiety gauge has red-lined, and the gauge is in unchartered territory;  it has set an all-time new high.

Bull and Bear Chart - Tactical Investor

Source: Tactical Investor

Bearish sentiment is approaching the seven-year high level. Fear and hysteria are trading at off the chart levels.  Mass psychology states that stock markets never crash when the masses are in a state of panic.   Bull markets emerge when the masses panic, so forgot about the what happens if the stock market crashes scenario? If it does crash, run out and buy all the top companies; from a long term perspective stock market crashes are fantastic buying opportunities.

If things were declining retail sales would not be improving. Holiday season retail sales are set to exceed the $ one trillion mark for the first time.

Holiday Season Retail Sales

Source: emarketer.com

Random Views on Stock Market Bull and Bear 2019

Big-money investors see the bull market ending in 2019

  • Institutional investors believe the bull market in stocks will come to an end over the next 12 months.
  • They also expect the next financial crisis to come in one to five years, according to a Natixis survey.
  • The results come as market tumult has left stocks barely positive for 2019.

The longest bull market run in history is coming to an end in 2019, according to the pros who handle Wall Street’s big-money clientele.

A survey of institutional investors show that 65 percent see a change coming, with the biggest threats being geopolitical tensions and rising interest rates, according to Natixis, which surveyed 500 managers of pension funds, endowments, foundations and the like. Respondents also included sovereign wealth funds and insurance funds.

In addition to seeing the bull market stopping, they also anticipate the next financial crisis coming in one to five years.

Despite the pessimism over where the market is heading, the collective portfolio allocation to stocks is expected to dip only slightly — from 38 percent to 36 percent. But 41 percent of those surveyed said they will be reducing allocation to U.S. equities.

Allocations are expected to increase slightly for bonds, from 37 percent to 38 percent, and cash, from 5 percent to 6 percent.

“The market is catching up to what they’ve been thinking about. I think they’ve been positioned for this for quite a while,” he said. “For the most part they’re staying put, except U.S. equities.” Full Story

Opinion: A bear market and 6 other forecasts for 2019

A new year is usually a time for fresh starts and empty promises. But investors begin 2019 in a state of high anxiety.

That’s because despite a post-Christmas rally, stocks still had their worst December since 1931 and their worst year since 2008 (both ominous comparisons). By Christmas Eve, the S&P 500 SPX, +0.00% was within 0.2 percentage points of a 20% bear-market decline, before a Santa rally kicked in.

So are we in a bear market? Is recession around the corner? And how will Democratic control of the House of Representatives and the looming 2020 presidential election affect markets this year? Here’s my take.

1. A trade deal with China will boost markets and investors’ confidence. President Trump already has hinted (or tweeted) that trade talks with Chinese President Xi Jinping are making “big progress.” Both men really need a deal—Xi, because of the slowing Chinese economy, and Trump, because of plunging stock prices.

I expect they will cut a cosmetic deal in which Xi makes some concessions, but ultimately Trump will cave on his major demands, as he did with North Korea (which still shows no sign of real denuclearization). But both will declare victory and that will be good enough for hardcore Trumpkins and for Wall Street, which just wants markets to go up.
So stocks will rally sharply… Full Story

Will 2019 be a Bear Market or Bull Market?

AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

Is The 2019 Stock Market Crash Over? Or Will The Bear Market Continue?
In this video we’ll do a quick market review to see whether we’re headed higher from here in stocks or if the bear is still creeping behind the corner.

The market is battling through the major supply overhang (red zone) that I pointed out a few weeks ago. I’d expect a selloff from these levels over the next few weeks. This bounce is technically overextended (price is near the upper Bollinger Band) and one more good washout would really set the stage (both from a technical and sentiment point of view) for another major leg higher.

Of course, we don’t need to see a selloff. We could see persistent strength and have the market move higher from here. But, I believe it’s odds on we see a reversal before the market makes another major move.

The market has so far, though, given us a number of things to be optimistic about. Both credit and Cyclical vs Defensives have been confirming this rally; which is just the type of action we need to see in order for a significant bottom to be in place.

And various breadth indicators are showing extremely large buying pressure coming into the market. My longer-term breadth indicator is moving in the right direction. Full Story

Conclusion

The correction of 2008 was warranted as the masses were euphoric in terms of the housing sector; it took a turn for the worse when Lehman brothers were purposely thrown to the curb by the Fed.  Regardless of this development, you can see that the markets were trading in the extremely overbought ranges and masses were euphoric.

The same sequence of events occurred during the dot.com bubble and the not too late Bitcoin bubble. If there were charts, we could demonstrate the exact setup going back all the way to the tulip bubble.  The masses are not euphoric and the markets are not overbought; hence the current pullback most likely falls into the “opportunity” category.

 

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Buffett Indicator: Pure Nonsense

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Buffett Indicator 2019

The Stock Market is going to Crash; that’s the rubbish experts want you to believe 

One jackass (oops we mean expert) after another, has been predicting that a Stock Market Crash is coming.  The problem is that these brain surgeons have been making this argument for so long it almost sounds like the definition of insanity. Insanity boils down to doing the same thing over and over again and hoping for a new outcome. These predictions are so off the mark that they make a broken clock look fantastic which happens to be right once or twice a day depending on whether you follow military time or not.

Some Experts point out that Warren Buffet is betting on a Stock Market Crash

This claim is based on the fact that Buffett is sitting on $86 billion in cash. They use this information to create the illusion that this Buffett Indicator 2019 is predicting a stock market crash.

To us, this seems like the ramblings of an insane individual. Just because Warren Buffett is sitting on billions of cash does not mean he is waiting for the market to crash. He is probably waiting for a good deal; that’s all.

Some might point out that it’s the biggest hoard of cash the company has ever built up and that this indicates that Buffett is nervous. Being nervous does not equate to betting on a stock market crash. Buffett is a valuable player and he is looking for a deal, so correction not crash might be all he is waiting for.

Buffett Does not believe stocks are overpriced; hence he is not expecting a stock market crash

While Buffett agrees the market can go through a period of turbulence, he stated that   “no one can tell you when these traumas occur.”

“American business—and consequently a basket of stocks—is virtually certain to be worth far more in the years ahead. Innovation, productivity gains, entrepreneurial spirit and an abundance of capital will see to that,” Buffett said.

Bottom Line Buffett would view these pullbacks that could range from mild to extreme as buying opportunities and so do we.

In a recent article, Buffett stated that stocks were on the cheap side; one does not make a comment like this if one believes the stock market is going to crash

The Buffett Indicator of 2019 Is Predicting a Stock Market Crash theory is not valid based on Market Sentiment

This market is unlike any other market; it has moved from being the most hated bull market to the most insane bull market (fanaticism stock market crash) of all time. In such an environment technical analysis is technically trash and fundamentals are fundamentally flawed. In fact, for the most part, market technicians have no idea of what they are talking about; they figure that by studying someone else theory or drawing squiggly lines on some chart they can decipher the market.

We have dealt with at least 15 so-called expert technicians who claimed to have found the Holy Grail; in the end, their theory was full of holes and could not account for sudden and rapid trend changes. Technical’s do not drive the markets, and neither do fundamentals; emotions drive the market. Understand the emotion, and you can identify the trend. Identify the trend, and you can determine the primary direction of the market. If the trend is up, then you don’t need to worry about crashes or correction; the market will not crash when the primary trend is up. It will, however, experience corrections, all of which will prove to be buying opportunities until the trend changes.

Simple, prudent money management skills will protect your profits and reduce your losses.  Fundamental analysis is even worse; at least technical analysis can be useful when combined with sentiment analysis. Fundamentals boil down to pouring over standard data, and you are usually looking at what happened and not what will happen. We will not spend more time on that topic as in our opinion fundamental analysis is in today’s markets is a total waste of time.

The NASDAQ achieved a very important milestone and does not support a Stock Market Crash Scenario

NASDAQ stock market crash

Experts almost always fall into the category of “all talk but no action.”

What many experts fail to understand is that a bull market starts only after the old high has been taken out. Until that occurs, it’s not a real bull market. In that sense, the NASDAQ bull has just started. For over 15 years the NASDAQ struggled to overcome this hurdle. Jack in the box is what comes to mind; so like a coiled spring, it is ready to trade a lot higher before it breaks down.  The NASDAQ has already broken past the psychologically (contrarian investing) significant 6000 level, so the odds are fair to high that it should roughly double from its breakout point; a move to the 9000-10,000 ranges might appear insane now. Experts would have felt the same way if someone told them that the Dow would be trading past 21K after it dropped below 7,000 in 2009.

Don’t expect the upward journey to be smooth; the higher the Nasdaq trades, the more volatile the ride will be. In the interim, it would not surprise us if the Nasdaq eventually dropped down to the 5200-5400 ranges with a possible overshoot to 5,0000 before testing 6700.

The Crowd is Nervous Proving that Stock Market crash Mantra is Not Valid

Sentiment continues to paint a fascinating picture as it indicates that for the 1st time in decades the crowd is not driven by panic or euphoria.They are uncertain, and uncertainty is the 1st stage of fear, indicating that the markets are a very long way off from hitting the Euphoric zone.

Overall, looking at the situation from a mass psychology perspective what we stated in 2014, 2015 and 2016, continues to hold; this bull market could end up running a lot higher than the most ardent of bulls could ever envision. It has already caught some of the most ardent of bulls by surprise; some of them even turned negative this January.

Tactical Investor Stock Market Chart

Tactical Investor Anxiety Index

54% of Americans Have $0 Invested in Stocks 

Furthermore, according to CNN most Americans are not investing in the stock market

“I have a little bit in my checking [account], a little bit in my savings,” Coomer, a grandma of three who still works 55 hours a week at the gas station, told CNNMoney. Coomer is part of over half of America that has $0 invested in the stock market, as research reports and surveys have found. One survey from Bankrate found that 54% of Americans have no money in the stock market.

That means no money in pension funds, 401(k) retirement plans, IRAs, mutual funds or ETFs. “For the majority of the people here, the stock market is something interesting to look at,” says Chuck Caudill, general manager of the local newspaper, The Beattyville Enterprise.

Therefore until the masses embrace the market, this bull will trend a lot higher as the only way the top players can bank their paper profits is to unload these shares onto the unsuspecting masses.  Many would point out that the masses are broke.  Banks and various lending clubs are already offering unsecured personal loans ranging from $2,000 all the way to $100,000. However, we expect the rates to drop even further but more importantly supportive documentation requirements will be dropped to a bare minimum.  We will move back to the era of Liar Loans

Two factors invalidate the Buffett Indicator Is Predicting a Stock Market Crash Hypothesis

A back breaking correction needs at least two elements; the masses should be euphoric, and the market needs to be trading in the extremely overbought ranges. At the moment, the market satisfies only one of these conditions. A small wave of selling will propel the masses into the hysteria zone, which will create a mouth-watering opportunity. Markets don’t crash when the masses are in disarray; they crash when the crowd is jumping up with Joy.  The experts will probably confuse the next correction for a crash, but what can one expect from individuals who have been on the wrong side of this Bull market since its inception.

Naysayers are trying to Con the Masses into Believing a Stock Market Crash is around the Corner

This Video Illustrates How the Crowd is manipulated: Fear Mongers love to sell Stock Market Crash and other Doomsday scenarios.  Misery Loves Company so don’t fall for the nonsense that the Buffett indicator is predicting a stock market Crash mumbo jumbo prediction. Instead, try to view stock market crashes as buying opportunities for until Fiat is eliminated the markets will always trend upwards.

Published courtesy of the Tactical Investor

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Experts Are Not Smart Enough to Spot Stock Market Crash 2017

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Stock Market Crash 2017

Stock Market Crash 2017 boils down to all bark and no bite 

For the past few years much the angst of many experts we have consistently stated that the markets were not ready to crash. Moreover, we believe that Experts are not Smart Enough to Spot Stock Market Crash 2017. If they were they would not have made the same predictions in 2014, 2015 and 2016. All these predictions of disasters proved to be nothing but idle chatter.
From late 2016 to early 2017, many former Bulls who predicted the direction of this market quite well, suddenly decided that the stock market was ready to crash. We, however, begged to differ, and we provided two very simple reasons for our stance.

Experts Fail To Realise that Emotions drive the markets:

The masses have remained nervous throughout this bull run; no bull market has ever ended when the masses are nervous.  History indicates that stock market crashes begin on a euphoric note and end on a note of hysteria.

The trend clearly states that the Experts are on the wrong side of the Stock Market Crash 2017 argument 

We focus more on the psychology of the masses than on any other single factor. However, the 2nd most important factor is the trend. The trend has remained positive throughout this bull run; occasionally it has moved into the neutral zone, but it has never turned negative.  We are not talking about the trend based on the drawing of simple trend lines but one that is calculated utilizing several factors one of which happens to price action.

So when the experts started to scream over and over again about the impending stock market crash of 2017; these are some of the comments we recently made to our readers and or subscribers

Let the experts sing their songs of doom and con the masses; it takes two to tango, one to cry and three to have a party. We have experts from the technical analysis side and experts employing fundamentals trying to use to back their faulty assertions. Unfortunately for these penguins both of them are wrong. They have failed to pay attention to the psychological factor. There is no factor more important when it comes to playing the markets then market psychology.  Market Update April 30, 2017

The market marches to its beat and those that resist are drained; financially speaking that is.  We are not fortune tellers; we reserve that noteworthy task for the experts who seem to take delight on spewing rubbish week after week. The media then regurgitates this rubbish, and a jackass is suddenly made to look like a movie star. What a wonderful world we live in and people wonder why they lose money after listening to these wise men.

We, on the other hand, prefer to listen to what the market is saying and that is why we never listen to our gut instinct or let our emotions into the equation.  We look for trends. Market Update May 19, 2017

Stock market crash anxiety index

 What’s The most nonplussing factor in this bull market?

The emotional state of the masses; the herd, for the most part, has been oscillating back and forth from the neutral to the Bearish camps; very few have dared to venture into the bullish camp. This probably explains why the bullish readings never even came close to testing the 60% ranges for the past 15 weeks and counting. During that time the market has been trending higher and higher. This has caught many an expert with his pants down. But there is no surprise here; the reason as we have stated so many times over and over again is that the Crowd is not euphoric and the trend is still bullish.

 

The same pattern holds true for most of 2015 and 2016; the number individuals in the Bearish and neutral camps outnumbered those in the bullish camp. If you are in the Neutral camp one of two things one of two things apply; you are either are a bear that got burned or Bull with no courage to take a position.

Our proprietary sentiment indicator also confirms that the masses are still antsy.

Market Structure

If the markets were extremely overbought, then it should be almost impossible to find stocks that are trading in the oversold ranges on the monthly charts. On a monthly chart, each bar represents one month’s worth of data on; these charts provide great clues of what to expect from the markets.

In the Dow, we spotted several stocks that were trading in the extremely oversold ranges to oversold ranges on the monthly charts.  AAPL, HD, DIS and NKE are examples of such stocks.

We also examined roughly 150 random Midcap to large cap stocks (ETF’s were included in this analysis) from various sectors; we found that almost 60% of the stocks examined were trading in the oversold ranges; one ETF that caught our eye was IBB; it is trading in the extremely oversold ranges.

We also noted that the net number of new 52 week highs continuously exceeded the net number of new 52 week lows. Why is this important? It indicates that the internal structure of the market is healthy.

Tactical investors Alternative Dow theory states that the experts have it wrong

Our stance for the past 11 years has been that the Dow Theory is dead; we provided an alternative Dow Theory that has proven to be far more accurate than the original.  This theory states that it is the utilities that should be followed and not the transports. We will cover this in more detail in a follow-up article next week. In essence, it is the Utilities that lead the way and not the transports.

Tactical investors Alternative Dow theory states that the experts have it wrong

The utilities started to consolidate roughly from Aug of 2016 and bottomed out in Nov 2016 and had consolidated for roughly three months before they started to trend upwards. The utilities are now surging to new highs, and this bodes well for the overall market. The alternative theory states that the Dow should follow suit.

This is a mature bull market so one should not expect it to trend in one direction only; it will experience several corrections ranging from mild to severe. Unfortunately, the Dr’s of doom will confuse this correction for a crash as they have mistakenly done so for the past eight years and counting. When the masses embrace this market, the end will be close at hand; until then strong corrections should be embraced.

Dow theory states experts wrong

There is a lag period between the utilities and the Dow; sometimes it comes down to just a few weeks, but usually, it ranges from 3-5 months.  The Dow has been consolidating since March; it has essentially been trading in a tight range. Even though the Dow did not pull back strongly, the sideways action helped it blow out a large dose of steam as envisioned by the MACD’s and several other technical indicators that are trading in the oversold ranges. The lag period was roughly three months as the utility bottomed out in Nov and the Dow started to consolidate in March of 2017.

 

The stock market crash theme makes for great headlines as fear sells well, but that is all it has been good for so far.  The market will experience a much stronger correction over the course of the next 6-15 months, but until the masses embrace this bull market, those corrections will prove to be buying opportunities.

The overall Market sentiment illustrates that the masses are not jumping with joy.  The trend is positive, and the Dow Utilities have surged to new highs.  Therefore under such conditions, it is hard to envision a crash like a scenario.

Every bull market experiences one back breaking correction that is mistakenly labelled as the beginning of a new bear market. When that occurs, it will be a sign that the end is close at hand. That strong correction will subsequently trigger an even stronger rally and fuel a feeding frenzy. Sentiment will turn bullish, and the masses will dance with Joy, then the bottom will drop. However, we are not at this stage, so there is no point in further developing this story line.

Our ideal setup would call for the Dow to shed 600-1000 points over a very short period; this would drive the masses into the hysteria zone. A small push is all it would take to drive the fear factor through the roof. We all know what happens next; the masses stampede, the smart money swoops in, and history repeats itself once again. For the masses, it is groundhogs day every single day.

 

A genius can’t be forced; nor can you make an ape an alderman.

Thomas Somerville

 

Published courtesy of the Tactical Investor

 

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Identifying Market Trends

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Market Trends

Identifying Market Trends: Jump in Before the Masses do 

A new trend can begin that is based on fake news or false data to create the illusion all is well. Remember that the truth or lies are just a matter of perception. One person will swear that he is telling the truth, while another will swear that he is lying. From an observer’s perspective, both are correct.

They are convinced of their position, so all you will do is waste your time and energy trying to sway them. Instead, you are better of letting them battle it out, while you sit down and take a look at the real events that are unfolding, most of which the masses are oblivious too. The main principle of trend investing is not to focus on the noise factor but to pay attention to the “reality factor”. In other words, trend investing focuses on what is going on minus the morality or judgemental angle.

 The  observer’s perspective to Identifying Market Trends 

Personal views are on par with toilet paper regarding their relevance in determining trends. Oh, by the way, we also include ourselves into the equation. This is why we do not voice our personal opinions as nothing will change, and if we let our personal opinions cloud our judgement, then the ability to look at the situation objectively is lost.

Over time it gets easier and easier to do this, and then one day you wake up, and it is almost like breathing. Practice makes perfect, and there is no better time to start than today for tomorrow never comes. Today is the tomorrow you dreamed of starting something new yesterday but never did and most likely never will.   If you want to spot new trends you can’t allow your emotions to do the talking; once you emotions talk, logic goes out the window and stupidity

Keep Your Emotion in Check when Identifying Market Trends

In order to spot new trends one should not allow one’s  emotions to do the talking; once your emotions take over, your logic goes out the window and stupidity is in charge of the situation.  This is the first principle you need to muster before you can develop the ability to spot new trends.

A Trend in Motion Is unstoppable 

Whether you and I agree with it or whether it is morally right or wrong is irrelevant. Nothing can stop a trend in motion. This bull market is a perfect example of fake news driving a new trend; all the data imaginable has been manipulated to create the illusion that the economy is doing well. If we had allowed our personal opinions to dictate the way we trade, then like all the fools out there we would have missed the biggest bull run of all time.

Trend investing provides you with the opportunity to see the real picture as opposed to the one the mass media forces you to focus on. The idea is to sell when the masses are dancing and buy when they are nervous.

The trend is your Friend

Trend investing states that the trend is your friend, everything else is your foe. Mass Psychology clearly states that the crowds always oppose the trend and as a result, they are always on the losing end of a trade.

Posted courtesy of the Tactical Investor

Despised Bull Market Will Continue to Trend Higher

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Despised Bull Market Will Continue to Trend Higher

The Most hated bull Market is not ready to drop dead 

Throughout this bull-run, a plethora of reasons has been laid out to indicate why this bull should have ended years ago. Mind you most of those reasons are valid, but that is where the bucket stops. Being right does not equate to making money on Wall Street. In fact, the opposite usually applies.  The Fed recreated all the rules by flooding the markets with money and creating and maintaining an environment that fosters speculation.

So why is this the most hated Bull Market

The reason this is the most hated bull market in history is because there is nothing logical reason to justify it.  In the 2008-2009 volume on the NYSE was in the 8-11 billion ranges and sometimes it surged to 12 billion. Before that, every year, the volume continued to rise, this indicates market participation. From early 2010 volume just vanished, it dropped to the 2-3 billion ranges and even lower on some days.   Hence, all market technicians and students of the markets assumed that the markets would tank as markets cannot trend higher on low volume and that is where they erred.

Share buybacks  are pushing this bull Market higher

We were and still are in a new paradigm, just as the US uses shell companies or brokerages to mask their trades in the US, they employ the same trick in overseas markets.   The US government stepped in and started to support the market directly that is why volume dropped so dramatically. However as there were no sellers, the markets drifted upwards. Later on, they got the corporate world in on the scam.   They set up the environment that propelled corporations to buy back their shares by borrowing money for next to nothing and then using this trick to inflate their EPS, without doing any work or even increasing the profitability of the company. Mass Psychology states that the masses are destined to lose; do not follow the crowd for they will always lead you

Mass Psychology states that the masses are destined to lose; do not follow the crowd for they will always lead you astray.In between a few minor corrections were allowed to transpire almost all of which took place on ever lower volume, to create the illusion that there was some semblance of free market forces at play.

Dark Pools could be contributing to Hated bull Market Run

We also have something known as Dark Pools, this, in essence, allows big companies to purchase large blocks of shares without the trade showing up on the NYSE or any other major exchanges. In essence, it gives the government an avenue to manipulate the markets without actually leaving a footprint.  As the US can print as much money as it wants, this is a perfect backdrop to do whatever it wants.  By the way, don’t believe the hogwash that our debt is only 18.9 trillion.  There is no real mechanism in place to check how much money the US creates.  Nobody is allowed to audit the Feds books.

How to handle this Hated bull Market

The Fed is hell bent on forcing everyone to speculate, and that is why we have moved into the next stage of the currency war games and the era of negative interest rates.  Negative rates will eventually force the most conservative of players to take their money out of the banks and speculate.  This process will be akin to another massive stimulus and will provide the bedrock for another huge rally.

Make a list of stocks that you would like to own and use strong pullbacks to add to or open new positions in.  Some examples are OA, AMZN, BABA, GOOG, CALM, CHL, etc.

Published courtesy of the Tactical Investor

The Psychology of Contrarian Investors

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Contrarian Investor

A contrarian investor focuses on the facts and not the noise

We are going to use the precious metals to illustrate some of the Psychological principles of being a Contrarian investor. Keep in mind that most contrarian investors are not real contrarians but fall under the category of Fashion contrarians.

Contrarian investing is based on taking a position that is opposite to that of the masses. In general contrarian, investors get in an investment too early as their analysis is based on doing the opposite of the masses.  In contrast mass psychology dictates that you wait for the emotion to hit a boiling point, euphoria or panic before a position is taken. Mass psychology involves the actual study of what the masses are doing as opposed to just determining that their current action is wrong and using that information to take a position in the opposite direction.

A contrarian Investor takes a position that is contrary to the Masses

Contrarians only take a position that is contrary to the masses and that about wraps up the ideology of being a contrarian today. Very few of today’s contrarians are true contrarians; they fall into the category of fashion contrarians.

Contrarian Investors Psychology Zebra

Investors that adopt the doctrine of mass psychology correctly look for something more.  Mass psychology takes the principle of contrarian investing and then pushes it to the next level.

Mass psychology focuses on extreme situations

Students of Mass Psychology look for extreme type situations. In other words, sentiment should not just be bullish before an opposing strategy is put into play, it should be at the boiling point and only then will the student of mass psychology look for an exit and attempt to take an opposing position to that of the masses. To illustrate this point, we will use the following example.

The commodities sector has several components to it, two of them being the Gold and Silver. Throughout 2002 and early 2003, the hate and disgust for both these sectors were extremely high. Fast forward to 2004 and Gold was being mentioned everywhere; even CNBC had a little ticker that stated what the price of Gold was throughout the day. The hate or disgust for both these sectors was no longer there, and even though both these sectors have a long way to go before the masses fully embrace them, they did not provide a psychological basis for taking an opposing position to that of the masses in  2004.

Gold went on to soar to untold heights, heights that most would have deemed impossible in 2003. All along the way we continually stated that Gold would continue to trade higher and higher until 2011. We warned our subscribers to bail out of Gold very close to the top.

 A Contrarian Investor pays close attention to what the masses are doing

Even though the masses have still not fully embraced Gold, this concept does not matter in the long run. A more important criterion would be to find out what % of investors has taken positions in these sectors or not. Next one would try to find out what the Gold bugs (the most bullish individuals ever created on earth) are doing. If all the Gold bugs are bullish, then based on the contrarian rules of investing you should take a contrary to a neutral position because all the individuals in your group are now optimistic.

Do not pay attention to the masses; they know not what they are doing when it comes to investing

Should one care what the masses are doing that much or focus on the Gold bugs (the group) that are emotionally tied up with Gold?  The masses in general, will not embrace Gold fully until it becomes fashionable and by then a large portion of the Bull Run will be a thing of the past. In the last Gold Bull Run, the masses did not even know what was going on, let alone take a position in this sector.

So one measure would be to determine if all the people who believe in Gold have already taken positions if they have then the market has become saturated. The only way the market can continue its upward run is for momentum players to jump on the bandwagon.  These players have very short time spans of concentration, and thus, they jump in and out very fast. Once they decide to bail out the corrective phase could be very painful as was the case of precious metals topped out in 2011.  The housing collapse and internet bubble serve as two stark reminders of what happens once momentum has run its course.

A Good Contrarian Investor understand the core principles of Mass Psychology

Mass psychology is the constant analysis of the playing field to determine how the game is being played. Are the rules changing, are the players become more aggressive or docile, is the playing field soft, rocky or worse yet on extremely high and treacherous ground.  One has to take measures at different levels and then compare it the pattern you have already established from past observations.

In this sense, mass psychology is dynamic compared to the methodology most contrarians put into play. Contrarians do not measure their position relative to those of other contrarians; they only measure their position relative to that of the masses, and therefore, they fail to obtain a vital piece of data.  This usually results in pain, misery and taking on substantial losses   In, other words; they do not measure the intensity of emotion in their camp.

The gold bugs are a classic example of contrarian investing gone wrong. They moved from the Euphoric phase to the having found religion period, to the gnashing of teeth and pure misery phase, as they watched Gold plunge from 1800 ranges down to the 1000 ranges.  They still cannot fathom why this happened, especially as trillions of more dollars have been created since 2011.

The Internet boom lasted one-year longer after all the TA and contrarian indicators were in the extremely bearish zones. Euphoria for this sector was running sky-high.  If one had shorted the markets based on these contrarian factors only one would have lost one’s pants and well as underwear. In other words, you would have most likely lost a small fortune.

Gold bugs should have banked some of their profits. Instead, they continued to plough money into Gold, and as it pulled back, they jumped in joy and added even more. Once the correction moved from the mild to the wild phase, they panicked and started to pray. Today the sentiment is almost as bearish as it was in 2003.  From a long term perspective, a great buying opportunity could be at hand.

Be A true Contrarian Investor and not a fashion contrarian

Most so-called contrarians were caught flat-footed when the Equity markets mounted this huge rally from Oct 2004. Their contrarian indicators suggested that taking a short or neutral position was the right thing to do.  Only 10% of the investors can win at any given time. The moment the number surges past this level (no matter what side of the fence they are on contrarian or the masses side); the markets will adjust to bring this ratio back to its norm.

Investing based on psychology amounts to not only taking a position against the masses but also against the fashion contrarians.  Once sentiment has reached the boiling point, one should go into cash; risk takers can consider shorting the markets.  Finally, less attention is being given to the precious metals sector, so establishing a position now could be viewed as a prudent long term investment.

On the same token, most investors and experts expected the Market to Crash after Trump won and we stated that it would create a buying opportunity just as Brexit did. In fact, since 2013 we have been stating that a stock market crash was a long way in the making and that all strong pullback should be viewed through a bullish lens.

Published courtesy of the Tactical Investor

 

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Will Bitcoin Crash Chart

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Bitcoin Crash Chart

Will Bitcoin Crash or Backbreaking Correction? (Bitcoin Crash Chart)

The dot.com insanity experienced a backbreaking amendment before the market launched and beat out toward the finish of 1999. The picture below represents that Bitcoin likewise experienced such an adjustment, but since of the expansive finish move it has all the earmarks of being only a blip. Tactical Investing amounts to combining Technical analysis with Mass psychology  creating a system that is second to none.  The Trend Indicator is an example of such a system.

Bitcoin Crash Graph

It combines the most important aspects of Mass psychology with the best of Technical analysis to yield a system that identifies the trend in advance of the event. Our technical indicators also enable us to identify crucial turning points in the market accurately.

Think about that from a high of 2977 (June 10, 2017); it dropped to a low of 1808 set on the fifteenth of July 2017; it shed generally 40% in that brief period (shown by the green box). Everybody recognizes what pursued.

Depressed people tend to depress everyone around them, however it keeps an eye on Pay’s all around inadequately over the long haul

It looks horrid, the media is siphoning apocalypse type situations, solid bulls are appearing of shortcoming, and even contrarian investing specialists are beginning to break. Unadulterated Contrarian Investors are more intelligent than the majority, yet they do have imperfections; the most astute financial specialists are the ones that put the standards of mass brain science into play.

They watch the mass outlook, and they comprehend that notwithstanding when dread begins to crawl into the condition, they are constrained to make this inquiry: Was the group in a condition of elation when the market beat out? On the off chance that the appropriate response is “no”, at that point regardless of how horrendous the image may look, the end amusement is that the group is being set up for a bogus descending move. Furthermore, the ordinary reaction would “why”. Basic answer, this is a propelled type of Pavlovian preparing.

The Bitcoin Crash Chart resembled the Tulip Bubble, it was a trick from the earliest starting point. The ones that made the cash were the ones that got in first, the ones that got in late were given their heads on a stinky tin platter. Never get into a speculation when the majority are euphoric, purchase when there is blood in the lanes and the other way around.

Financial exchange crashes are diverse as they don’t speak to one segment, so it is simply an issue of time before the business sectors will return to the standard. From a mass brain research point of view, financial exchange crashes are only long haul purchasing openings. Disregard the what occurs if the securities exchange crashes situation, and spotlight on what you would do if stocks you were biting the dust to possess before are currently selling for pennies on the dollar.

Pavlovian Type Training Is Being Used On The Masses

At the point when the market puts in a base subsequent to encountering a backbreaking remedy, and after that proceeds to mount an amazing rally; the group engraves the accompanying information in their brains. Purchase the pullback, since it is a phony snare to drive us out; they likewise begin to have confidence in the accompanying mantra “the more grounded the pullback, the better the chance”. Next time when the Market puts in a best, bullish slant will remain bizarrely high, and that will be the notice to understudies of Mass Psychology that the genuine skull pulverizing revision is en route. Once more, we point you toward the not very far off Bitcoin stupendous buyer advertise and the similarly fabulous accident. From low to high Bitcoin attached 11,000% in increases and the majority still expected that the main bearing it could exchange was up. When it bested the Bitcoin swarm was past overjoyed.

Concerning whether the bitcoin crash is finished, we trust that one should hold up somewhat longer before bouncing in and in every way that really matters, Bitcoin chart is exceptionally far-fetched to test the 20,000 territories for quite a while. On the drawback, bitcoin is probably going to test the 3000 territories with a conceivable overshoot to the 2,500 territories before a significant base grabs hold. Right now, there are numerous different stocks that look fascinating and unmistakably more appealing than bitcoin, for instance, PG, MRK, TCEHY, and so on.

Courtesy of Tactical Investor

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Rate of Inflation not an issue according to Bond Market

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Rate of Inflation not an issue according to Bond Market

The Bond market is Indicating that The Rate of  Inflation is not an issue in 2017 

Bonds should have continued to plunge, but notice that bonds bottomed in April and have started to trend higher. After the July rate hike, bonds should have taken out their April lows, but they did not.  Instead, they went on to put in a series of higher lows; higher lows are usually indicative of higher prices. Furthermore, the stock market hardly reacted to the last rate hike; after a very mild reaction, it has continued to trend higher.

rate of inflation

We tend to focus more on the technical and psychological outlook, and both are indicating that inflation is still not an issue.    The Gold market is also indicating that inflation is not an issue. Last July Gold traded past $1400; at that time rates were lower and the US dollar was trading at higher levels.  But today rates are higher today, and the dollar is trading lower than it was in 2016, but Gold instead trading at or above $1400 can’t even trade above $1300 for a sustained period.

Mass Psychology seems to support the theory that US inflation is not a big problem

The psychological factor does not support higher prices; the economy is not doing well as the consumer is not spending wildly. Consumer confidence is increasing, but consumer spending is not marching in tandem with consumer confidence.  Income growth is weak; the rise in incomes and net worth has primarily benefited high income and high net worth households. These are the same individuals that have the most money invested in the stock market which has tripled since its March 2009 lows.

We have listed a plethora of factors that illustrate that inflation is not an issue; at least not yet.

Even James Bullard, president of the Federal Reserve of St Louis went seems to be in agreement

“Low inflation has been the major surprise of the era,”

He also went on to state that he was still waiting for inflation to return to the 2% ranges and would not support any increases in the Fed’s benchmark rate until 2018 to allow inflationary forces to recover. He might have to wait a lot longer than that. AI and technology, in general, are going to continue to fuel lower prices. The retail sector is in freefall; the remaining players battle it out, and price wars will continue for the foreseeable future. Food prices are going to plunge due to the price war that new entrants like Lidl and Amazon have triggered.

The bond market is not supporting the higher inflationary outlook, in fact by all measures the bond market appears to be building momentum to trend higher.

US Jobs Report misses the mark

The unemployment rate edged up to 4.4% and wages barely grew. Only 156,000 jobs were added as opposed to the 180,000 consensus number.

The retail sector continued to get hammered; retailers shed 9,00 jobs, while the public sector shed another 9000 jobs.

“In months where there are anomalies like this, we look at the three-month average, which is 185,000,” said Michael Gapen, chief United States economist at Barclays. “The labor market is healthy, but we still have the conundrum that solid employment gains haven’t translated into faster wage growth.”

One wild card in the second half of 2017 will be gasoline prices. The surge following Hurricane Harvey’s devastation in Texas will leave less money for consumers to spend on other goods and services.

“For the economy, it’s steady as she goes, but for the markets, it’s Goldilocks,” said Torsten Slok, chief international economist at Deutsche Bank, referring to the not-too-hot, not-too-cold August payroll increase.  NY Times

The markets are holding up well and trending higher as we stated they would all along in 2016 and now in 2017.  Until the sentiment turns bullish the markets are expected to trend higher.