Sunday, November 23, 2014

An update to Schoolhouse Rock!: I'm Just a Bill

Tuesday, November 18, 2014

GruberGate: Who knew?

Who knew that being ruled by psychopaths could be so funny?!
Q: What happened to my health insurance?
A: It's been Grubered, you Useful Idiot!
The following video is less than 2 1/2 minutes long - enjoy it before these power-hungry liars take control of the internet, too:

Friday, October 31, 2014

That was fast

The stock market correction that started on September 19th reached its nadir on October 15th with a dip of 7.4%.  As of today (October 31) the correction is already over, and the S&P 500 index has reached a new all-time high of 2018.  I predicted in my previous post that the market was destined to continue rallying in the next few weeks, but I didn't think it would resume this quickly.

Short-term investor emotion is still pessimistic (which is a bullish indicator), internals are still bullish, and the seasonal cycle is at its peak bullishness.  Thus, despite our serious economic problems, the objective technical forecast for the stock market is UP.

In other news, the price of gold has reached a 4-year low, which is what one would expect in a deflationary scenario, rather than the inflationary situation that we've been in thanks to the counterfeit money printing quantitative easing by the Federal Reserve Bank.  This counter-intuitive behavior is yet another example of why I try not to make forecasts based on economic fundamentals.

Monday, October 13, 2014

A real correction at last

"Real" stock market corrections - declines of 5% to 20% within a rally - have been rare lately.  When the S&P 500 index closed at 1906 on Friday, it marked a 5.2% drop from the all-time high mark of 2011 reached on September 18th.  The last two corrections before that were in February of this year and June of last year, and both of them bottomed-out at around 5.5% below the previous highs, meaning they barely qualified as corrections.  We're overdue for a bigger correction of 10% or more.

The place-holding version-1 marketbots are now pegged optimistically at an internal price forces number of 10 out of 10.  This is due to a dependable multi-year seasonal factor that tends to trump almost every other indicator.  Even so, the other internals that the marketbots are now ignoring are still mostly bullish, and there's no sign of a pending crash signal, so the long-term prognosis for the market is now about as favorable as it can be from a technical perspective.  Of course, if World War 3 breaks out tomorrow then all bets are off - some events can't be predicted by market data.

Yes, the S&P may continue to fall for the next couple of weeks and complete a more significant correction, but objective seasonal factors and internals favor a continued rally in the long term.

Tuesday, September 09, 2014

Why 2K?

The S&P 500 index passed 2000 on August 25, and closed above 2000 for the fist time on August 26.  Since then the index has stuck to within 10 points of the psychologically significant 2K mark.

The marketbots continue to be bullish on stocks, with the Internal Price Forces number still on the bullish side of neutral at 5.9.

Friday, June 27, 2014

Why I don't watch "fundamentals"

The stock market's performance has little to do with the newsworthy economic factors that most people fret over, and even if it did, economic "data" is plagued by inaccuracies, guesses, and political massaging.

A recent example of the uselessness of economic data is the growth rate of the US economy in the first quarter of 2014.  As recently as April 30th - less than two months ago - the Bureau of Economic Analysis announced that the nation's economic growth rate was 0.1% in the first three months of the year.  It was a small number to be sure, but at least it was positive.

By the end of May, the first-quarter growth had been revised downwards to a shrinkage of 1.0%.  Now the latest revision has the economy shrinking by 2.9% from January through March, which is not only characteristic of a recession, but also represents the largest downward revision in GDP growth on record.

So, what did the S&P 500 Index do during this horrendous quarter?  Why, it rose of course!

For those of you who think the stock market does (or should) fall during economic contractions, and that savvy investors therefore should get out of stocks when the GDP falls, the first quarter of 2014 presents two conundrums:
  1. The stock market actually made a small net gain when the economy fell at an annual rate of nearly 3%.
  2. We didn't even know the economy was contracting until months after the fact.
So I don't worry about GDP growth, the unemployment rate, interest rates, or any of the other numbers that get breathlessly reported on cable TV or announced in bold font on financial websites.  The simple reality is that stock prices rise when a majority of investors are buying, and they fall when most investors are selling; it may sound like an obvious rule of thumb now, but it's easy to forget sometimes in the deluge of 24/7 news.

Friday, June 06, 2014

70th Anniversary of D-Day - June 6, 1944

We have few leaders today who understand what we did then or why we did it, and I fear today's ceremonies will be heavy on glitz and light on wisdom.

President Reagan's understated address on the 40th anniversary in 1984 stands the test of time.

Monday, April 28, 2014

No correction after all

The stock market has actually rallied back since the April 10 "day of panic", and the S&P 500 index only managed to fall 4% below its recent all-time high before recovering, so we didn't have an official correction.  As of this afternoon, the S&P is only 1% away from returning to the April 2nd high mark of 1890.

Short-term indicators are still bearish, as the recent market action was not sufficiently scary to panic traders.  I expect another real correction (> 5%) to manifest sooner than later.

The long-term prognosis for the stock market is also unfavorable.  According to seasonal cycles, the expectations for the next six months are as bad as they can be.  In addition, a new measurement of "market health" that will be part of the Version-2 MarketBots indicates that conditions are favorable for a crash of 20% or more.  In other words, if I see a pre-crash signal in the next few months then I'll sound the alarm without hesitation.

Thursday, April 10, 2014


Yahoo Finance: Market nose dive...
Bloomberg: Nasdaq falls most since 2011...
MSN Money: Nasdaq falls 3.1%, worst since Nov. 2011...
Drudge Report: Stocks collapse - Nasdaq plunges...
CNBC: 2014 crash will be worse than 1987's: Marc Faber 

The S&P 500 index fell 2% today, which is hardly a "collapse" or "nose dive".  What the headlines don't tell you is that after the Nasdaq fell more than 3% in one day November 2011, it went on to gain nearly 80% in less than 3 years.  So much for today's drop signalling a crash.

Although we had a 5% correction (over several days) in late January, it was barely a correction, and it wasn't enough to cause real fear in the market; the resulting lingering complacency is bad for prices in the short-term.  The last correction of 10% or more was in the Spring of 2012, so I think we are still overdue for a decent fear-inducing correction.  A 10% correction in this case would take the S&P 500 index down to about 1700.

The Internal Price Forces numbers are still on the positive side of neutral at 6.1 out of 10, and I don't see an official pre-crash pattern in the S&P or in the Dow, so the bots (and my own judgement) are still bullish on a multi-month time frame.  I expect this correction to bottom out over the next few weeks, accompanied by more pessimistic headlines, after which the long-term rally will resume.

Tuesday, February 04, 2014

Health-restoring correction finally arrives

Yesterday's market decline finally sent the S&P 500 index more than 5% below last month's all-time high mark of 1848.  The last real correction of 5% or more was in June of last year, so the market was definitely due for one.  That long steady interval of market gains was probably one of the reasons that investors became so optimistic (which is bearish in the short-term) and this correction will help to clear out some of the fidgety day traders who can't stomach short-term losses.

The market bots are still invested in stocks, and the internal price forces number is now 6.5 out of 10, which is on the bullish side of neutral.

Friday, January 10, 2014

Key month for gold

The price of gold has been forming a descending triangle pattern for the past year or so, as shown by the chart for the gold ETF (GLD).

Normally these patterns end with the price falling through the flat floor of the triangle, which is at about $115 for GLD, or $1200 per ounce of gold.  Given how close the two trend lines are, the price has to resolve one way or another very soon.

I don't usually look for short-term plays in a single investment, but the clear price pattern in this case is almost too good to pass up.  If the gold price falls through the lower support line, then I'll consider jumping into the ProShares ultrashort gold ETF (GLL) that goes up in price when gold declines.