THE MOST PRECARIOUS BUYING OPPORTUNITY OF 2013 IS HERE
We will begin with the most obvious fact: It is October. We will continue with the next obvious fact: We are in the midst of a governmental shit storm that is turning into a game of who can hold their breath the longest. We all know that eventually somebody will either give up or pass out, leading to some kind of resolution. The question that should be of concern to every investor and for that matter, every American, is the amount of damage that will take place in the markets and economy, in the meantime. I will make it clear that I am extremely bullish for Q4. In fact, to zoom in even further, I am extremely bullish for October. The problem is that I believe we are in a precarious enough position in the markets and news cycle that we are looking at a potentially brutal slip before we see the bounce. I don't necessarily want to be buying into any kind of slip before a base is observed. There is no need to be the first man in at the bottom. In my nearly 20 years of watching bottoms take place, I have not witnessed one that did not give investors the opportunity to get invested once it took place. Everyone will have their chance to get allocated if they remain patient. In the meantime, defense should be at the forefront of one's strategy, as opposed to catching the bottom tick. Over the past couple of weeks in my weekly review, I have been discussing the possibility of downside for the markets. Just this past Sunday, I pointed out the 1660-1670 level as a point from which we can stage a significant rally. We got the first hint today that the markets are also looking at the 1670 level, as the low of the day from which a nice rally took place intraday was 1670.36. What can open Pandora's Box for the bulls is described in the chart of the S&P from today: click chart to enlarge Perhaps all of this analysis rooted in caution will be all for not when we get a resolution this weekend and the market can look forward to earnings. That's the hope. But, unfortunately, I don't know of many investors who have thrived on hope. In fact, it is quite the...
5 CHARTS THAT WILL KEEP YOU IN PEACE AND NOT IN PIECES DURING THE WEEK AHEAD
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THE ASTOUNDING SIMILARITIES BETWEEN FACEBOOK AND YAHOO POST-IPO: PART 4
The counter-intuitive nature of the markets is one component of speculation that is without dispute. Human intuition is an asset in many situations we face on a daily basis. However, in the markets, it is a tool that investors use to deceive themselves into and out of positions they have no business being in, around or near. Our natural intuition or tendency as people is to want an explanation for not just some things, but for everything. This want has proven beneficial to consistent progress of humankind. Even when things are inexplicable, we tend to make up explanations that allow us to rationalize the situation, whether supernatural, spiritual or otherwise. That want of an explanation for everything that occurs transfers into the financial markets, as well. There are certain things that simply can't be explained. In fact, the need for an explanation inhibits the ability of the investors to profit from the situation. The most profitable opportunities in the markets are always those seem absolutely crazy because they fail at logical explanation. To take that one step further, it is often times the most logical investment thesis that will fail miserably because it attracts a consensus of intuitively driven investors who only choose to view the landscape in black and white without looking at the vast contrasts of grey that surround them. The relationship between FB and YHOO some 18 months following their IPOs fails explanation. It is, however, something I have been following since only a few months after FB came public. It started with the not so subtle headline of Facebook Is The Next Yahoo And That Makes It Very Bullish in August of 2012 when FB was trading at 20. In September I followed up with The Astounding Similarity Between The Yahoo IPO and Facebook IPO Continues To Be...Astounding in September. Part 3 of this study was posted in November with article titled The Facebook IPO in 2012 And The Yahoo IPO in 1996 Continue Their Strange Relationship. Now we have this...and it just gets more bizarre in the similarities as each month passes: click chart to enlarge What makes this study all the more plausible is the fact that we are following a very similar path as the market did from 1995-2000, when YHOO initially flourished. This is another study, although more macro-related, that has come in multiple parts over the past 12 months, the most recent of which was outlined here just this past week. The confluence of events that suggest FB is not just going higher, but much higher is simply too great to ignore. The question of what happens next can probably be...
THE DOW OF 1995 IS PROVIDING A PERFECT ROADMAP FOR THE REST OF 2013
Over the past couple years, I have presented numerous bullish studies that have pointed to a rally that is on par with what we saw during 1982-1987 and 1995-2000. Both of these were 5 year rallies that presented significant technical clues as they were getting started. The technical clues were focused around trajectory points. For those of you who have been following along for the past few years, trajectory points along with volume are the only technical tools I use to gauge price. Simply put, a trajectory point is a means of gaining perspective into price. There was a scene in the movie "The Aviator" where Howard Hughes was making "Hell's Angels." During the initial filming he was disturbed by the fact that the planes looked like they were moving slowly or not at all against a clear sky. It was only when he filmed the scene against a backdrop of clouds that viewers were able gauge how quickly the planes were actually maneuvering. Trajectory points are essentially the clouds that allow market observers to gauge how quickly the market is moving. Without them you have no reference point from which to measure movement. Where I was incorrect in the past study of the 1987-1995 market was where the market was in relation to breaking away from the trajectory. When I posted this chart in October 2012, I was expecting the market to begin accelerating away from its key trajectory point in 2015 based on where the Dow was relative to the 1987-1995 roadmap. Instead, it started its acceleration this year. What I think is important to pay attention to at present is the behavior of the Dow as it pulled away from its trajectory point in 1995. This is the exact same trajectory we are pulling away from at present. I am posting monthly charts to give a clearer picture of what has occurred as well as what to expect. The first chart is a long-term view of the trajectory point dating back to 1995 for reference: click chart to enlarge The second chart is the 90s Dow versus the current Dow as they accelerate away from the same trajectory after hugging it in the previous years. Many striking similarities as noted in the...
3 CHARTS THAT WILL HAVE YOU HOWLING ON THE NIGHT OF THE SEVENTH MOON DURING THE WEEK AHEAD
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REDEFINING EXPECTATIONS FOR THE PUT/CALL RATIO DURING SECULAR BULL MARKETS
Let's begin this post with what I think is an obvious presumption: We are currently in a bull market that is secular in nature. I base this presumption on a number of factors, most important is the simple fact that numerous important indices are posting consistent all-time highs. Without getting into the technical particulars (these are easy to find if you spend 20 minutes on this site), all-time highs in leading indices following an extended period of crisis, doubt and under-performance can generally be trusted to signify a bull market that is much more than cyclical in nature. If we accept this presumption, then we must also accept the fact of what a secular bull market entails at its core: An expansion of ranges for all available metrics. This is regardless of whether these metrics are technical or fundamental in nature. In other words, price/earning ratios form an expansive new range. Markets caps that were previously thought of as absurd become the new normal. Technical measurements of excess are rethought and reformed. The very nature of a bull market is rethinking what are acceptable measures of prosperity. With each new secular bull market this rethinking process has occurred, which eventually has led to instability due to the paradigm shift that takes the economy into places where protective legislative and corporate measures fail. We are far from this point, but the reason it is worth mentioning is to aide in conceptualizing how dramatic the shift in the pricing landscape (ranges in price) must be that it challenges the very structure of economy. Let's now use the aforementioned presumption in paragraph one and fact in paragraph two to look at a favorite measure for gauging sentiment. The put/call ratio is one of the most valuable tools to measure sentiment. There is one consideration, however, that investors fail to make during bull markets. The absence of this consideration creates false signals galore that dissuades investors from considering the put/call ratio as a bull market matures. The consideration is the fact that just as multiples, market caps and technical indicators will face an expansion in what is seen as normal ranges, so will the put/call ratio. This means that the measurement previously considered to be golden at picking tops for a bull run, will fail consistently as a market matures. As a bull market expands, so should an investors expectations of what is considered "extreme bullish sentiment." Let's look at a long-term chart of the combined put/call ratio using 20 & 100 day moving averages only, looking all the way back to 1995-present: click chart to...
3 CHARTS THAT WILL CREATE RIPPLES IN YOUR PORTFOLIO FOR THE WEEK AHEAD
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4 CHARTS THAT WILL PROPEL YOU ONTO THE THRONE OF SATURN DURING THE WEEK AHEAD
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