The Real Reason Behind Stock Market’s Decline & What’s Next – Summer Hiatus

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Daily Chart August 21 20158/21/2015 - Another massive down day with the Dow Jones down 530 points (-3.12%) and the Nasdaq down 171 points (-3.52%). 

I AM TAKING A LITTLE BREAK FROM BLOGGING.  BACK AFTER LABOR DAY OR SEPT - 8TH. OUR PREMIUM SERVICE REMAINS FULLY FUNCTIONAL. 

This has not been a good week for the market. The Dow, Russell, NYSE and S&P  are now firmly in the negative territory for the year. The Nasdaq is at a break even point, but barely so. And while we are likely to get some sort of a bounce, sometime soon, this SHOULD cause some concern. Perhaps the analysis below can clear things up.

Below is a comprehensive longer-term review of the stock market and what the next few years hold. 

In the early January of 2000, the US Economy wa s booming. The Dow was fast approaching 11,800 and the Nasdaq was a stone throws away from its improbable benchmark of 5,000. Everyone was making a ton of money and as far as most people were concerned, the future looked very bright.  So much so, that very few people predicted a bear market of 2000-2002, let alone a secular 2000-2017 bear market that was about to begin.

The only way to do so was to know and to understand the cyclical TIME structure oscillating within the stock market.  For instance, an analyst working with such time cycles would know that the stock market's 17-18 year cycle was topping out in conjunction with the 5 year cycle that started at 1994 bottom.  The bull market that started at the bottom in August of 1982 was coming to a conclusion. In fact, it would top out exactly 17.5 years after it had started or on January 14th, 2000 at 11,800. The 5 year cycle that started in December of 1994 would top out at exactly the same time; 5 years and 35 trading days after it had started.

What does this have to do with predicting a severe bear market of 2014/15-2017?

Everything.  Based on my work the stock market is a mathematically precise entity. And while there are hundreds of TIME cycles oscillating within the stock market at any one time, I will concentrate on only two to prove my point.  The 17-18 cycle and the 5 year cycles. We will look at these cycles over the last 100+ years and I will prove to you, without a shadow of a doubt, they work.

THE 17-18 YEAR CYCLE IN THE STOCK MARKET:

Long Term Dow Structure3

Long-term cycles within the stock market tend to oscillate going all the way back to the first day of trading, in May of 1790.  If you would be inclined, I would encourage you to verify that information for yourself. For our purposes we will start our analysis a little bit later or exactly 100 years ago. As the chart above indicates, the stock market tends to oscillate in clearly defined 17-18 year alternating Bull/Bear market cycles.

  • 17.5 Year Bull Market (1914 bottom to 1932 bottom): The previous bear market terminated in July of 1914. At that time the US stock market shut down for World War 1. The stock market remained closed between August of 1914 and December of 1914 (a very rare occurrence). When the market finally reopened in December of 1914 it immediately began a rally that would not terminate until October of 1929. Followed by a now famous 1929 stock market crash and a massive 90% 3 year decline. The cycle terminated at the bottom in 1932, completing the 17.5 year bull market cycle at that time.

*Note: It is important to address the 1929-1932 bear market and its impact on the overall 1914-1932 Bull Market cycle. It is a complex matter to discuss without sufficient background or understanding, but the final (short-term) structural composition of this Bull Cycle inverted over the last 3 years (1929-1932). Mostly due to a massive rally between 1924-1929 and a number of down cycles converging on this time period at the same time.  Regardless, the overall cycle lasted 17.5 years.

  • 17 Year BEAR Market (1932 bottom to 1949 bottom): The cycle originated at the bottom in July of 1932 and lasted until June of 1949. During this period of time we had a post great depression bounce, 1937 crash and World War 2. Yet, despite the overall upward trajectory, this clearly defined 1949 bottom remained 60% below its 1929 top and well below both its 1937 and 1942 tops.
  • 17 Year BULL Market (1949 bottom to 1966 top): The market surged higher between 1949 bottom and 1966 top. This was the so called "Golden Age" of post war reconstruction and the American industrial boom. During this time the Dow appreciated over 500% in a clearly defined bull market cycle.
  • 16.5 Year BEAR Market (1966 top to 1982 bottom): The market stayed relatively flat during this period of time with a few notable declines of 30-50%. With the 1972-1974 mid cycle decline of 54% being the largest one.  This clearly defined bear market completed in August of 1982. Approximately 25% below its 1966 top.
  • 17.5 Year BULL Market (1982 bottom to 2000 top): A very well known period and a clearly defined bull market. The market surged higher from its August of 1982 bottom to reach its historic top in January of 2000. During this time the Dow appreciated over 1,400% in one of the strongest bull markets in history.
  • 17 Year BEAR Market (2000 top to 2017 bottom): Even though the market is sitting near all time highs (as of this writing in January of 2014) and even though most people have assumed that the new bull market has started, in relative terms the market hasn't appreciated very much since its top in 2000. The Nasdaq is still down. Plus, with the final down leg of this bear market being ahead of us (based on my mathematical and timing work), the BEAR market of 2000-2017 should complete itself in a negative territory or below its 2000 top.

It is important to note that the small variation (of +/- 1 year) in duration of these cycles is caused by smaller or larger cycles arriving at the same time. As such and based on the cycles above, we are no longer working in an arbitrary fashion when it comes to predicting the stock market.  In other words, if the stock market repeats a clearly defined 17-18 year Bull/Bear cycle over a 220 year period of time (since 1790) and does so without interruption,  it is safe to assume that the future is predictable and not random.

THE 5 YEAR CYCLE IN THE STOCK MARKET

One other easily identifiable cycle within the stock market is the 5 year cycle. These 5 year cycles represent one completed growth pattern or one completed Bull or Bear cycle. Typically, they tend to appear for 5 years, disappear and then reappear at a certain point in the future. While they are not sequential as the 17-18 year cycle above, once their place within the overall stock market is understood, they show up at exactly the right time.  For instance,

  • 1914 -1920: Bull Market
  • 1924-1929: Bull Market (followed by a 1929 crash)
  • 1932-1937: Bull Market (followed by a 1937 crash)
  • 1937-1942: Bear Market
  • 1966-1971: Bear Market
  • 1982-1987: Bull Market (followed by a 1987 crash)
  • 1994-2000: Bull Market (followed by a 2000 crash)
  • 2002-2007: Bull Market (followed by a 2007 crash)
  • 2009- July of 2014: Bull Market

One thing to understand about these 5 Year cycles is that they are exact. They have much lower level variance as compared to their longer counterparts. Essentially, we are NOT talking about 5 years +/- 6 months. We are talking about 5 years +/- a few days. For instance, the 2002-2007cycle started on October 10th, 2002 (at 2002 bottom) and terminated on October 11th, 2007. If you are counting, that is exactly 5 Years and 1 day or scary accurate. I encourage you to study the other cycles outlined above in order to prove to yourself how shockingly accurate they all are.

 CONCLUSION: 

In summary, predicting a bear market of 2015-2017 is rather simple.  All 17-18 year bear cycles end with a 2-3 year bear market. For instance, 1912-1914, 1946-1949 and 1979-1982. And while most believe that the secular bear market ended at 2009 bottom, that is not the case. The secular bear market of 2000-2017 is still in effect and will terminate only when the year 2017 is reached. Although the final price bottom will be higher than the mid-cycle bottom reached in March of 2009.

Further, the 5-Year cycle that started on March 6th, 2009 bottom terminated on July 16th, 2014 (Look at NYSE for confirmation). Suggesting that the stock market is now ready to initiate its bear leg (despite recent higher highs). When I combine this cyclical analysis with the rest of my mathematical and timing work, the outcome is crystal clear. A severe bear market of 2015-2017 is just around the corner.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please NoteA bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 7th, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Shocking: The Real Reason Behind Stock Market's Decline & What's Next Google

COT Reports & Weekly Market Calendar – August 21th, 2015

COT Reports: If you are not familiar, the Commitments of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions. In other words, it gives us a preview of what commercial interests are buying or selling. As the theory goes, we want to be on the same side of the trade as the big guys.

While not a good timing tool, currencies, commodities and the stock market (to a lesser extent) tend to move in the direction of the bets made by the commercial players. Not always, but often enough.

Latest data, as of August 18th, 2015

Currencies: 

  • USD:  3K Long Vs. 83K Short - Significant short interest remains. No major changes.
  • Canadian Dollar: 88K Long Vs. 3K Short - Slight net decrease in commercials net long position. Significant long interest remains.
  • British Pound: 46K Long Vs. 34K Short - Slight increase in net short interest, but remains neutral.
  • Japanese Yen: 134K Long Vs. 8K Short - Slight decrease in net long exposure. Quite a large long position in Yen remains.
  • Euro: 117K Long Vs. 40K Short - Slight decrease in net long exposure. Significant long position remains. No changes.
  • Australian Dollar: 131K Long Vs. 1K Short- Significant long position remains.

Conclusion: Based on the information above, commercial interests expect the US Dollar to decline while Canadian Dollar, Euro, Yen and Australian Dollar rally. British pound is neutral. 

Markets/Commodities/Volatility: 

  • E-Mini S&P 500: 309K Long Vs. 586K Short - Few changes. A substantial short position remains.
  • VIX: 85K Long Vs. 16K Short - No changes. A substantial long position suggests market turbulence ahead.
  • Gold: 83K Long Vs. 65K Short - Slight increase in net long exposure. Still neutral.

Conclusion: Based on the information above, commercial interests expect the stock market to decline as volatility surges higher. Gold is likely to remain within its trading range. 

Next Week's Market Calendar: 

  • Wednesday - US Durable Goods
  • Thursday - GDP Data.
  • Wed.-Friday - Jackson Hole Symposium

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COT Reports & Weekly Market Calendar - August 14th, 2015 Google

Jim Rogers Explains Why Central Bankers Are About To Panic

There is only a handful of people worth listening to when it comes to investing. Jim Rogers is one of them. Below is the podcast he did a few weeks ago and it is definitely worth a few minutes of your time.

Jim talks about equity markets, Russia, China, Greece, oil and gold. Plus, bureaucratic idiots in Washington. I'll tell you one thing, it is nice when Jim's views match my own.

In short, Jim anticipates major....major problems in the US Equity markets. Should you?

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Jim Rogers Explains Why Central Bankers Are About To Panic Google

Where Have All The Bulls Gone?

Daily Chart August 20 2015

8/20/2015 -  A big down day with the Dow Jones down 358 points (-2.06%) and the Nasdaq down 141 points (-2.82%).  

The Dow is down 550 points off of its Tuesday's top. And after scanning though most of the financial media outlets, I was hard pressed to find a single bullish article. That is unusual. So, is it possible the market is oversold and is about to stage a big bounce? Or, are we breaking down and this sell-off is about to accelerate. Click Here to find out.

I couldn't agree more with Mr. El-Erian. Watch the video below, it is definitely worth a few minutes of your time. Here are some of my notes.

  • Emerging markets tend to get the ball rolling. That has certainly been the case here.
  • Markets might overshoot to the downside.
  • Emerging markets are now oversold.
  • Lot's of opportunities are coming your way.
  • The FED screwed. - I agree.
  • As soon as investors realize the FED is not in control, markets will tank. - I have held this same few for quite a while now.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 19th, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Where Have All The Bulls Gone?  Google

How Meditation Can Improve Your Investment Returns

meditation investwithalexA great article on the subject matter from Bloomberg and I highly recommend that everyone reads it. To Make a Killing on Wall Street, Start Meditating

I have been seriously meditating for over 7 years now and I swear by it. Most people don't have the slightest idea of how stressful it is to be involved in the money management/trading business. In fact, I continue to maintain that it is one of the most challenging professions out there. And while some people turn to drugs, alcohol, partying, hookers, gambling and other destructive/compulsive behaviors, for me meditation is the only healthy (and free) option.

Listen, most people will gain a competitive advantage on Wall Street NOT through superior knowledge.....you can teach a monkey to read a balance sheet or a chart.....but through their psychological make up and patience. In other words, your brain can either be your best friend or your worst enemy. Simply put, meditation, over time, turns your brain/being into a powerful weapon when it comes to trading and/or investing.

Plus, there is a number of additional benefits. Wisdom and a potential enlightenment immediately come to mind. As a quick note, don't follow anyone or get a "Guru". Just close your eyes and destroy your mind. It's the best drug out there. I highly recommend it.

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Can Meditation Improve Your Trading? Google

Investment Wisdom Of The Day

investment wisdom of the day7 investwithalex

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Investment Wisdom Of The Day Google

Marc Faber Explains Why The Stock Market Is Going Down

Why are stocks going down? Marc Faber explains. Overvaluation, devaluation, slowing economies, deflation, etc..... No recovery in sight. I tend to agree.

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Marc Faber Explains Why The Stock Market Is Going Down  Google

Why The FED Will Not Raise Interest Rates

Daily Chart August 19 2015

8/13/2015 - Another negative day with the Dow Jones down 160 points (-0.91%) and the Nasdaq down 40 points (-0.80%)

Let's talk about today's FOMC Minutes.

As the FED continues to beat around the bush, futures now suggest that the FED will forgo raising interest rates in September. This joyous realization was followed by "Let's Party 150 Dow Point Spike" followed by a "Oh S#*$, the Economy Ain't Alright" 150 point sell-off.

I will simply repeat what I have said here last week. No further commentary is necessary.

I am 75% confident that the FED will not raise interest rates at all and 100% confident that they will not raise it in any meaningful way. What is meaningful? Even 8 separate hikes at 25 bps each would be laughable here.  And while anything above that will matter, I am extremely confident that we will not even get close to that over the next 2-5 years.

Here is why.......

  • Last week China has launched an official currency war by devaluing the Yuan 3 times in a row (thus far). Japan is trying to do the same and the EU is threatening further easing and/or QE. In this ocean of devaluation, the US cannot afford to have a strong currency.
  • Plus, the US Economy is rolling over into a recession. Some of today's official numbers are starting to reflect that.
  • We are on the verge of a massive down leg in our equity markets. At least based on my mathematical and timing work.
  • Commodities have collapsed.
  • Deflationary forces are reappearing throughout the economy.
  • Etc....

As I have mentioned before, this is the worst case scenario for the FED. They are already TOO LATE. Now they are stuck in a situation where our economy and capital markets collapse while they are rendered powerless. As soon as other investors realize that......well.......watch out below.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 19th, 2015  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

Why The FED Will Not Raise Interest Rates  Google

IBM Scientists Replicate Brain On The Chip

brain-on-chip-main-investwithalex

Does Sarah Connor know about this? On a more serious note, I find this fascinating....

Scientists have developed a brain inspired computer chip which mimics the neurons inside your brain.

The chip consumes just 70 milliwatts of power and can perform 46 billion synaptic operations per second.

Since 2008, scientists from IBM have been working with DARPA's Systems of Neuromorphic Adaptive Plastic Scalable Electronics (SyNAPSE) programme.

They have developed the chip, or processor called TrueNorth, which is claimed to be efficient, scalable, and flexible non-von Neumann architecture using contemporary silicon technology.

TrueNorth has 5.4-billion-transistors with 4096 neurosynaptic cores interconnected via an intrachip network that integrates 1 million programmable spiking neurons and 256 million configurable synapses.

It can be tiled in two dimensions through an interchip communication interface and can be scaled up to a cortexlikesheet of arbitrary size.

The chip has been fabricated on Samsung's 28nm process and claimed to be IBM's largest chip in terms of transistor count.

During the simulation of complex recurrent neural networks, the chip consumes less than 100mW of power and has a power density of 20mW / cm2.

IBM fellow Dharmendra Modha said: "Unlike the prevailing von Neumann architecture -- but like the brain -- TrueNorth has a parallel, distributed, modular, scalable, fault-tolerant, flexible architecture that integrates computation, communication, and memory and has no clock.

"It is fair to say that TrueNorth completely redefines what is now possible in the field of brain-inspired computers, in terms of size, architecture, efficiency, scalability, and chip design techniques."

The chip can be used in many applications that use complex neural networks in real time including multi-object detection and classification.

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IBM Scientist Replicate Brain On The Chip  Google

Investment Grin Of The Day

investment grin of the day 45

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Investment Grin Of The Day Google

Is Everyone Too Bearish?

Bearish investors investwithalex

Open up any financial media outlet and you will see it full of bearish articles or forecasts. For instance, Investors haven't hated the US stock market this much since 2007

This marked the sixth-straight month that fund managers were net underweight the US stock market, the longest stretch since 2007 in the run-up to the financial crisis.

Yet, most indices are sitting one quick rally away from setting new all time highs. What gives or how will this "net bearish sentiment" play out?

I believe there are two distinct possibilities.

  1. A fairly substantial stock market rally. To dispel today's bearish sentiment.
  2. A substantial decline and/or an outright crash. To allow the market to catch up to today's sentiment and other structural/technical divergences we are witnessing.

If you would like to find out which scenario will play out, please Click Here.

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Is Everyone Too Bearish?  Google