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As many of you know, I will often read articles written by others — along with the comments — to gauge the overall sentiment of the market from an anecdotal perspective. During one of my recent perusals of articles, I noticed a quote of the following statement by Sir John Templeton:
“For 100 years optimists have carried the day in U.S. stocks. Even in the dark 70’s, many professional money managers, and many individual investors too, made money in stocks, especially those of smaller companies.
“There will, of course, be corrections, perhaps even crashes. But, over time, our studies indicate stocks do go up. As national economies become more integrated and interdependent, as communication becomes easier and cheaper, business is likely to boom. Trade and travel will grow. Wealth will increase. And stock prices should rise accordingly.” (more…)
I have been getting such a chuckle from the market of late.
As the market made its way down to our 2600 target region towards the end of October, more and more market participants and analysts became more and more bearish. In fact, the bearishness was palpable as we approached 2600SPX.
However, our analysis suggested that the market should bottom in the 2600SPX region, and begin a corrective rally, which then topped at 2815SPX.
But, the day after the market began a strong rally off the 2603SPX level, many were quite fearful that Oct. 31 would provide us with a market crash. You see, that was the day that a quantitative tightening was scheduled by the Federal Reserve.
Yet, that day provided us with a 50-point rally. Yes, you heard me right. And, again, market participants and analysts were looking the wrong way in a big way due to their fundamental beliefs about what drives the stock market.
I am starting to see evidence of serious stress from investors based upon the tone of the some of the comments I am seeing in my articles on the market. Well, at least from those who did not heed my warnings.
In fact, even though I warned about this type of drop well before it happened, some investors were taking their anger out on me even though the market did exactly what I warned it would do. This suggests a high amount of stress being felt by many investors after only a 10% drop off the highs. Can you imagine what it will be like if we attained the full 20-30% correction that we see as a strong potential?
I have even seen commenters begin to channel Barron Rothschild, and say that they are buying because of the blood in the streets. However, I suspect that the blood they are seeing is likely only as a result of paper cuts or knee scrapes rather than any serious injuries – at least for now. In fact, we really have not seen any real blood since 2008/09.
For many years, I have been a staunch bull. In fact, many commenters and contributors on Seeking Alpha and MarketWatch were quite vocal regarding how they thought I was crazy back in 2016 for expecting the market to go from 1800 to over 2600SPX, and potentially up through 3000. Needless to say, many of them remained bearish throughout that rally.
When many were extremely bearish in early 2016, I was pounding the table about a global melt up. When many were saying before the election that you should “sell everything if Trump gets elected,” we were again pounding the table for a rally over 2600SPX “no matter who got elected.”
And, now that I am taking off my bull-suit, and have sent out my bear suit to be cleaned and pressed, these former bears are claiming that they “learned their lesson” and are now strongly urging investors to buy the dip. (more…)
Editor’s Note: Welp, Mr. 3225 on the S&P is back. Interesting now that this price target is still offered, although now it may be “years away.’ Read on:
It seems the pundits have lost their way. The reasons for the market moves have now confounded most market participants and pundits to such an extent, and they are stretching so far to provide a reason for a market move, that we have moved from the ridiculous to the sublime.
In the last several years I have outlined how the market has completely ignored the dozens of negative geopolitical events that were supposed to have adversely affected our market as it has continued to rally towards our long-term targets.
So, do any of you ever realize how ridiculous many of these news reports sound when they try to link the market action to the news? As I have said, there is almost always some positive news of the day to which the media can relate positive market action, and vice versa. But when there is no news to which they can easily relate the market action, it highlights how silly it really is to relate the news to the market action.
In fact, the market action we have seen at times almost mocks those who believe that negative events will cause negative reactions in the stock market. The other week, we saw announcements regarding another $200 billion in trade tariffs. And what did the market do? Yup, it immediately rallied over 50 points. Please take a look at my attached chart, which highlights how we rallied 9% since the start of the trade wars:
The Fed controls the gold market. The manipulators control the gold market. The “swaps” control the gold market. The hedge funds control the market. Yes, I have heard about how everyone is controlling the gold market.
In fact, I even hear such ridiculous statements as, “The banks are pushing us down so that they can buy at lower prices.” The problem with this is that the banks have been long for weeks – yet they are still pushing us down?
There is so much misinformation about the gold market, it is truly astounding. A new investor into this complex is probably reeling from all the garbage that is being presented to them about how this market works.
But, I have news for you. This market works just as all other markets work. Once you can calculate appropriate support and resistance points, and understand market structure to identify which one is going to be targeted next, that is all you need to know to understand how to trade the market.
In this article, I am going to do something a little different from my usual articles and start with my perspective on market direction, and then move into the issues I see in the market today.
I have long believed that we can see the 3000+ region before we get that 30% correction I have been looking for in the 2019-2020 time frame. And, as usually occurs, that market top will be accompanied by excessive bullishness among the masses. While many of the pundits have believed we will crash every week for years, the public seems to ignore them (appropriately) and have become much more bullish of late.
As one indication of such bullishness, the University of Michigan reported on Friday that U.S. consumer sentiment jumped more than forecast in September to a six-month high as Americans grew more optimistic about the economy and their purchasing plans. While I do not believe that this suggests that the 30% correction I am expecting will begin immediately, it certainly provides evidence that we are approaching that top.
I have been living and breathing Slope all through the holiday weekend, implementing the new multi-level membership system, and I stumbled upon a SocialTrader I had sort of forgotten about named Heccis – – what I remember so distinctly about this fellow is that back in early 2009 he sent me projections he had made about what the stock market was going to do, and it basically had predicted the financial crisis but then went on to show equity markets were going to soar. Idiot permabear that I am, I rolled my eyes at this and dismissed it.
Suffice it to say his prediction was true (which called for absolutely outlandish prices – – in other words, pretty much what happened). Early this year, however, he made some new posts, and let’s just say I was more receptive to them this time.
Gold is taking a bit of a breather after earlier climbing to a new recovery rally high at $1220.70 in the December futures (GC), a full $53.60 and 4.6% off its August 16, 2 1/2-year low at $1167.10.In a very bullish set-up, gold (GC) should digest recent gains above the $1207 area, where the 5 DMA has just crossed above the 20 DMA. However, if $1207 is violated and sustained, then we should expect gold to press into a deeper correction of its $53.60 rally, towards the $1195-$1190 support zone, which MUST contain the weakness to avert a complete retrace of the August advance.
If either the shallow ($1207) or deeper ($1195/90) corrections unfold, the subsequent upleg will point to $1250.00. (more…)
The Emini S&P 500 (ES) continues to stair-step higher, reaching my next higher target of 2853/56, and now in route to 2868/72. However, if we view all of the action from mid-July to the Aug 2 test of key support at 2791 as a failed head & shoulders top formation, then the subsequent up-move from 2791.00, which has climbed above the levels of both Shoulders at 2822-2825, and above the peak of the Head at 2849.50, now has an upside “failed pattern” target of 2885.
In my decades of experience, when a head & shoulders top fails to break the neckline, and then reverses to the upside, its target is measured by adding the distance from the head to the neckline to the top of the right shoulder. In this particular case, we arrive at a major target in the vicinity of 2885. (more…)