What kind of market is this? It’s the market of disorder, in case you forget. Disorder knows no order, and there is no discernible pattern if one employs traditional tools (only). Common sense should trump logic to discern delicate market patterns, and Mass psychology should overrule everything. Technical analysis has its place. Some fundamental analysis elements, like short interest ratio, insider activity, can help fine-tune the outlook. Still, as standalone tools, toilet paper is generally more helpful, at least nowadays. And going forward, those experts that just rely on a set of tools they thought would or will work forever will find that they might have to exchange positions with the janitor. Examination of past Dow Trends indicates that the Stock Market Bull of 2021 is going to catch a lot of top investors with their pants down.
The market is not your friend; it cares not about your problems, whether that dollar in your brokerage account is your last dollar. It will gladly take away everything just to teach individuals that hope is one of the most dangerous afflictions’ to have when it comes to investing; the most dangerous and useless is fear. The rule of the Jungle applies when it comes to the Markets. Adapt or die; there is no middle ground. We have been warning subscribers for a while now about this market, and that is why this year we labelled this market as “the market of disorder”. We don’t come up with these phrases just to appear cool. This market will destroy a vast number of former experts, many of them from the so-called elite five-star club. Here is another former star facing difficult times
Being too bearish in this pandemic-stricken US stock market can be costly.
That is apparently the lesson that Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co., learned this year as his fund has seen clients pull billions of dollars from his flagship fund as it has badly trailed the broader stock market Gratham has been painting a very dire picture of the investment landscape in the US, suggesting that rampant trading by out-of-work investors and speculative fervor reflects a market that may be the most bubbly he’s seen in his storied career.
“The cruel logic of being a value manager is that at the very time when your opportunities are at their best, your credibility with clients is at its lowest ebb,” he was quoted as saying. https://cutt.ly/Yhh450a
Dow Trends: Is value investing dead?
Sadly, value investing is dead for there is too much hot money in these markets over the long term. With the interest rates stuck in the ultra-low ranges, individuals are looking for ways to quickly double or triple their money. Most of these investors will lose everything they have and more, but that won’t stop them from aiming for the stars. Value Investing stocks will experience rallies here and there. Still, in comparison to AI and tech-based stocks, their rallies will be muted in nature.
Being a bear is one of the most dangerous positions to adopt when it comes to the markets. For markets trend upwards almost 5X times as long as they trend downwards (especially now given that we have a Fed that is consuming a mixture of crank, crack and cocaine). Dalio is another dude who was painting a dire picture and continues to do so. Insanity is doing the same thing repeatedly and hoping for a different outcome despite knowing with a high degree of certainty that failure is all that awaits you at the end of the tunnel.
In 24 to 36 months, many former star players will be biting the dust or will have bitten the dust. From now on, be particularly careful of experts that allow emotions to taint their analysis. Students of the markets should understand that flipping a coin offers better odds than hope and prayers when investing in the markets.
Dow Trends 2021: Park your emotions at the door
Hence if these so-called experts know this, why do they insist on tainting their analysis with useless emotions? Therefore, be wary of emotional experts. While some of them might have had a nice run in yesteryear markets, this market will move into a ballistic phase very soon. When it does, these guys are going to get the shock of their lives. When the V-indicator trades past 10,000 (it only needs another 70 points to hit this milestone) expect the “polarisation” factor and madness levels to surge to levels never seen before. The crowd will throw logic out of the window; common sense will be replaced with stupidity, and those that attempt to awaken the infected will be in for a severe and painful lesson.
Over the past few years, we have been gently warning our subscribers not to wear their emotions on their sleeves. When these readings surge past 10K, do not even think about trying to awaken the dead. When in Rome, do as the Romans do. If you are in a room with individuals with opposing views, do not dare challenge them unless you are well armed and with a group of friends and are looking for a bloody fight.
The smartest move would be to take a neutral stance, nod your head in agreement, and then move along. The V-indicator is now in an ultra-super trend. When it was first launched many moons ago, readings were under 500; consider how far it has moved since then.
The rage discontent index has put in another high, and we have had three large spikes in the GP index within four weeks. These developments do not only foreshadow something big that could occur before Jan 20th, but they are indicating that massive long trend changes are already underway. Nothing can be done to stop these trends. One of the super trends is the AI trend. It could end up turning into an ultra-super trend. If the trend changes, we will see AI units with more processing power than 10k to 100K human minds in less than ten years. This also means life extension therapies will be a certainty. The only way for the average human being to remain relevant will either be through morphing with AI (cyborg) or moving at least to the 4th level. Most humans operating at very high capacity can’t surpass the third dimension or third level.
The masses are stuck between level 2 and level 3. Anything past level three involves a complete change in perspective. In theory, it’s simple. However, the simplicity of the process is what makes it complicated for the human mind is wired to believe that remarkable results are achieved by utilising complex models. This topic is outside the scope of this publication. Still, we have provided basic materials (in the form of books) and started a thread in the Market Update Forum and the AI trend trader forum. These are private forums that are available to premium subscribers.
There is a lot of cash sitting on the sidelines, so any crash will be short-lived as much of this cash will find its way to the markets. The Fed is not messing around; it’s going to force everyone to speculate or get fried.
The total amount of money invested in money market funds, which are mutual funds that invest in short-term bonds, hit an all-time record high of $4.8 trillion in May, according to Chicago-based Morningstar Direct. Although Morningstar reports total money market fund assets fell to $4.5 trillion in August (the most recent data available), those numbers are still way above the previous January 2009 peak of $3.8 trillion in total money market fund assets.
“Even though not all of it is individual investors, it’s fair to say that individuals are holding more cash than usual,” she said. “Looking back over the past 12 months, it’s been a significant move out of equity funds into fixed-income funds, including money market funds.” https://cutt.ly/whh6Tmi
Nervous nellies never win; their attitude ensures that they will always be on the receiving end of the stick. This Fed is now operating from a super aggressive mode; if necessary, another pandemic will be created to pour even more massive amounts of capital into this market. People are underestimating AI’s power. If it enters into the Ultra Super Trend stage, the AI sector alone will be worth more than almost all the other sectors combined. What does this mean? AI has opened up the possibility of increasing the world GDP by such a massive factor that the Debt to GDP ratio could fall even in the face of all this newly created debt. However, that is a topic for another day. We will only delve into it once we have validated that the AI trend has moved into the Ultra Super Trend Phase.
V-readings are incredibly high, and market participants are no longer as bearish as they were a few weeks ago. One of the characteristics of higher V readings is that they can widen the trading ranges. In simple words, it widens overbought and oversold ranges. For example, before the surge, Dow 30K would have been considered extremely overbought, but with the move up, the extremely overbought zone would start in the 30,600 ranges. Market Update Nov 24, 2020
If the current pattern remains unchanged, then the above ranges could be tested within a relatively short period.
The gauge on the anxiety index continues to move upwards; the current move has been the fastest in over two years, indicating that we can expect a correction in the 15% to 22% ranges when the markets do pull back. We seem to be moving into a new phase in terms of sentiment.
A rise and then a slight pullback and then a move up again; it’s like a wave pattern. If this continues, it suggests that the markets won’t correct until bullish sentiment surges to the 60% to 63% mark. This pattern can be seen from the last three bullish sentiment readings of 55, 48 and 50.
We have also added a new level to the bullish side (ecstatic) as we now believe that the markets will only put in a long-term top when the crowd is frothing with madness.
Examination of Dow Trends, Indicate That the Markets still have room to run
The MACD’s have not experienced a bullish crossover yet, but if they do, the odds are quite high that the Dow should at least be able to trade to the 30,800 to 31,200 ranges with an overshoot and get ready for it, with an overshoot all the way to 33K. After that, the subsequent correction will be quite sharp, and the naysayers will focus on the pullback and mislead the crowd into believing the correction is the end of the world, when in fact the markets will stabilise and most likely put in a higher low. Market Update Nov 24, 2020
The Dow appears on course to test the 30,600 to 30,900 ranges and could overshoot by a much wider margin. We will wait until the MACD’s on the weekly charts have experienced a bullish crossover. However, the Nasdaq is probably the strongest market right now, and it is showing no signs of folding. It is the market that leads the way up that almost always also leads the way down. The first clues on how strong the ensuing correction might or might not be will come from the Nasdaq. Market Update Dec 09th, 2021
This outlook remains valid; if the MACD’s on the weekly charts experience a bullish crossover, traders should be prepared for a furious upward reaction. We suspect that 2021 could be another year where the Dow experiences a move of 10K to 15K points. For example, the Dow sheds 6000 to 7500 points, then from the bottom, it tacks 10K to 15K points, for a net gain of 4K to as much as 9K points. Be ready for the unexpected; many traders are going to get butchered over the next few years. On the top of the chopping block will be value investors and investors that keep saying this style does not match my style of trading. The only technique that will work is trend investing (based on MP). Traders looking for a style that fits with what worked yesteryear will find out with shock just how unforgiving the markets will be over the next 6 to 33 months.
Other Articles of Interest