Navigating Recent Market Calls:
The Dow is still on course to blast upwards to a series of new highs. Market Update Jan 22, 2014
The strategy now used by the central bankers and top market manipulators is becoming more psychological. The focus is on altering the perception. Once the perception is changed, it does not matter what the reality is, for a new alternate reality has been created. This alternate reality will replace reality and remain valid until the masses manage to break free from its hold. For months now, the Fed has been giving hints that it would taper off its $85 billion a month program, but when the markets reacted badly, it always backed off. However, this time the needs are holding up reasonably well; it appears that they have priced in the fact that the Fed will start looking for a way to cut back on this program. In this sense, the markets are holding up relatively well, and one would have to say that they are now actually climbing up a wall of worry.
The new reality is that the mom-and-pop investor has just jumped into the market, and they have been sitting on the sidelines for a very long time. They have also been finally brainwashed into accepting the alternate reality that all is well. On that basis, we can expect the markets to rally much higher before they finally run into a brick wall.
The perception is changing; the masses are now becoming optimistic; thus, unless the trend changes, we can expect the markets to rally even higher. Another thing to understand is that even though the rally in the markets has been artificially induced, the markets have recently issued “a true bullish signal.”. What is this signal, you ask? Well, both the Dow and SPX are trading at new highs. A true bull market is not in session until the old highs are removed. 9 out of 10 times when this occurs, the market rallies significantly from the breakout point; the breakout point, in this case, is roughly 14200 (the old 2008 high. Market Update Dec 12, 2013
Using trend analysis and a few other tools, the targets we come up with will sound outrageous right now.
1st target is for a test of the 19,500-20,000 ranges.
2nd target is a possible test of the 21,000 range. Market Update Dec 12, 2013
The small mom-and-pop investors have finally turned bullish, but contrary to the stance most contrarians and bears will adopt, it is not time to short the markets aggressively. In fact, from this level, the markets could run up significantly as all this money that was sitting on the sidelines makes its way into this market. We need to wait for the feeding frenzy stage (Euphoric) and at that point, it will make sense to open up shorts aggressively. At this point, the mom-and-pop investor is simply optimistic, and a wide chasm separates optimism from euphoria. Market Update Nov 30, 2013
To reiterate, until the weekly trends change, the longer-term outlook still calls for the SPX to trade higher and thus, as mentioned in the last update, it is still possible for it to trade to and past 1700 again. Sept 10, 2013
Overall, even though we expect the markets to go through a tough phase in the 4th quarter, the SPX could potentially trade above 1700 one more time before experiencing a larger correction. Market Update Aug 17, 2013
As long as the weekly trend remains up, no matter how strongly the market pulls back it will recover and rally again, possibly to new highs. At this point, we continue to look for decent to moderate correction but should the outlook change we will have time to take advantage of this development. Market Update June 16. 2103
The most important development this week is that we have a new daily sell on the SPX. Now it’s time to see whether the SPX will follow the path taken by the Yen and bonds, both of which had two daily signals neutralized before the third signal produced a very strong effect. In the case of bonds, two buys were neutralized and with the Yen, two sells were neutralized. Even though we expect a strong correction based on the SPX neutralising two daily sell signals, the longer-term outlook will remain bullish unless the weekly signal changes. At this moment, the weekly is firmly in the buy territory. Until the weekly buy is neutralized, the SPX will test the 1650-1700 ranges this year. April 17, 2013
FXI
From a very long-term perspective, it makes sense to start nibbling at FXI and other key Chinese companies such as YZC, BIDU, HNP, ACH, CHL, SNP, GSH, TSL, etc. However, from a midterm perspective, we would like to see some more strength before opening up positions in FXI and some of the above listed companies. Market Update September 10, 2013
Note we stated that the Chinese markets were also extremely oversold not too long ago and continued to do this for awhile; we were a bit early, but as the saying goes to the early bird comes the worm to the late bird the bullet. The Chinese markets started to rally nicely since October of this year and topped out with our markets and should continue to resume their upward trend. One day we see FXI trading past 200 and RSX north of 70. Market Update Dec 21. 2014
Recent Market Calls 2013
China
In the last update, we compared the Shanghai Index with our markets, and the differences were striking. A weakening economy (USA) had the stronger market and vice versa. As stated in the last update from a long-term perspective the Shanghai index is in a bottoming phase. What this means is that, a bottom could take hold soon or the lows (roughly 1800) could be tested again.
There is a relatively strong amount of support at 2,000, and unless it closes below 2000 on a weekly basis, this level of support should hold. In the event, 2000 is breached; the next level of support falls in the 1750-1800 ranges. There is a very small chance that it could spike down to the 1000 range and test an extremely strong zone of support, and in the small chance that this occurs, it would represent a screaming once-in-a-lifetime buying opportunity. Instead of panicking if this ever comes to pass, become greedy and load up. The support in the 1750-1800 ranges is solid, so we would need a shock-type event for these levels to be breached.
On the positive side, FXI is already showing some signs of strength, and if this index can close above 2,400 on a weekly basis, it should easily manage to test the 3000-3200 ranges before running into resistance.
The point is not to focus on the actual bottom, but to understand that this represents a great long term opportunity. With that in mind, traders can use FXI as a proxy for this market. Use pullbacks to open positions in FXI. Later on, when the weekly trend turns positive, we will look towards purchasing calls with the longest available time premium: currently, the time limit is roughly 2 years. Market Update August 17, 2013
One should expect Chinese markets to continue rallying higher, albeit the normal corrective moves (corrections mild and severe) along the way up. We expect when things calm down that Russian markets will also experience similar moves, perhaps even stronger, because they are being pushed lower via artificial means.
The weekly trend is still positive but showing signs of being extremely overbought and thus the current pullback is healthy; the same outlook applies to the monthly trend. As long as the weekly trend does not change, all pullbacks (including the current one) have to be viewed as buying opportunities, even though we might feel otherwise. The trend on the daily chart is still up, but all secondary indicators are overbought and indicating that the current pullback is healthy. We have support in the 2000-2015 ranges; if that is taken out, the SPX will most likely revisit the lows of Dec 2014. The last update for Dec 2014, sent out Jan 3, 2015
So if we look at the current chart, it appears that the markets followed the path we laid out for them as early as August of 2013. The Russian markets could end up doing the same thing. They have already off to a pretty good start. The last update for Dec 2014, sent out Jan 3, 2015
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