Shocking Long-Term Analysis Reveals What The Market Will Do Next – Holiday Hiatus

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I have been sharing the analysis below, on and off, for over a year. Coincidentally, the Dow topped out exactly a year ago or on May 19th, 2015 at 18,351. Yet, to see a more exact long-term hit investor must look at the NYSE (largest index by capitalization). That index topped out in June of 2014. Right on schedule and 5.5 years into its bull cycle. That's right, most stocks have been in a "stealth bear market" of sorts for close to two years.

So, what happens next? 

Consider our analysis below. It is just as relevant today as it was 12-18 months ago.

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

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)
  • 2009-2014: 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, it 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. 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 2014/15-2017. 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 2014/15-2017 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. April 1st, 2016  InvestWithAlex.com

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

Why A Bear Market Of 2015-2017 Is Unavoidable Google

Demeter Research Daily Trade Update – AUD/USD

AUSUSDOn April 18th, we sold short the Aussie Dollar at 0.7733 AUD/USD.  Over the month, it has been the weakest major currency of the six we follow.  We covered the position at 0.7198 today, May 19, for a 7% gain (84% annualized).

To learn more about Demeter Research and Matt's trading/analytical framework please Click Here.

Investment Wisdom Of The Day

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Demeter Capital Weekly Report & COT

As you already know, Matt Demeter's (Demeter Capital) weekly coverage concentrates on some of the most popular worldwide indices, futures, bonds, stocks, commodities and currencies. Matt’s work is some of the most accurate I have ever seen and it shows. The table below represents just a small portion of work available from Demeter Research. To learn more and to see Matt's work in action, please Click Here.

Report Date: May 15th, 2016  (Including COT Reports). 

For up to the minute long-term and short-term analysis on all of the markets below, please Click Herematt cot

Bearish Dreams Do Come True….Well, Maybe

Daily Update May 19th5/19/2016 - A negative day with the Dow Jones down 92 points (-0.52%) and the Nasdaq down 27 points (-0.57%) 

Open any financial terminal today, without looking at where the market is, and you are surely to assume, on the sentiment basis alone, that we are getting close to a multi year low. An environment similar to what had happened at 2002/2003 and 2009 bottoms.

Consider the following news flow over the last few days.

WOW....and people think I am bearish.

And there lies the problem. Considering where the market is today, just a few % points away from all time highs, we are left with two possibilities. Well, maybe three.

  1. A major and violent drop on all indices. To allow the market to catch up to rotten fundamentals and to correct various overvaluation excesses.
  2. A powerful rally into some sort of a blow off top. To destroy most of the bears one more time, to shift sentiment reading and finally, well, why the hell not.
  3. A range bound market for many years to come.

Obviously, at the present moment both bulls and bears can make a nearly bulletproof case (fundamentally or technically), to support their points of view. But that doesn't necessarily answer the question.

To understand what the market will do next investors must dismiss traditional analytical tools for the benefit of the tools one of the best hedge fund managers of all time discusses here. Jim Simons Gives Away His Secret To Market Timing

And what do these mathematical and timing tools tell us about the market?

Quite a bit. First, they tell us exactly what the stock market will do next. Rally, breakdown or remain within a trading range. Most importantly, this work yields exact time frames associated with all of the above. So, if you would like to find out exactly what the market will do next, please Click Here. 

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. May 19th, 2016  InvestWithAlex.com

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

Investment Wisdom Of The Day

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Demeter Research Daily Trade Update – TLT

tnt tradeOn April 25, we bought 1500 shares of TLT at 128.34 and on May 16, we sold them for 131.83, a 2.7% gain in 15 trading days or 45% annualized.  Not bad for a short-term Treasuries trade.

To learn more about Demeter Research and Matt's trading/analytical framework please Click Here.

Why Things No Longer Make Sense

Daily Update May 18th5/18/2016 - A mixed day with the Dow Jones down 5 points (-0.03%) and the Nasdaq up 23 points (+0.50%) 

The Dow topped out on October 11th, 2007 at 14,280. By March 6th, 2009 it was sitting at 6,460 or with a 55% loss. But here is what's interesting. The imbalances we are witnessing today are exponentially greater than what we saw in 2007-2009. Consider the following......

2007 Imbalances: 

  • U.S. government debt (as narrowly defined) stood about $8 trillion.
  • The Federal Reserve's balance sheet was under $800 billion.
  • 10-year Treasuries yielded approximating 4.5%, giving the Fed had some leeway to cut interest rates if necessary to fight a crisis or business downturn.
  • The subprime-mortgage bubble peaked at about $1.3 trillion.
  • Aggregate government debt was under $10 trillion.
  • The derivatives market's notional value was $182 trillion.

As bad as all of that was, consider Today's Imbalances:

  • U.S. government debt totals about $19 trillion, or some $11 trillion more than it was in 2008.
  • The Fed's balance sheet is approaching $5 trillion vs. $800 billion in 2008.
  • Short-term interest rates are 0.25% compared to 4.5% back in the day.  With interest rates at near-record lows, there's little opportunity for the Fed to further expand its balance sheet.
  • The derivatives market is currently larger than $500 trillion vs. $182 trillion in 2008.
  • Central-bank capital has dropped to 0.8% of assets from 4.5%.
  • The size of the subprime bubble was $1.3 trillion, but the size of sovereign borrowing is $7 trillion today.
  • Our government has to borrow money to simply pay interest, and monetary policy is hamstrung by near-zero interest rates.
  • There are no more homeless people getting mortgages to buy homes, but there's a Danish sex therapist whose bank is paying her interest (instead of the other way around) on a loan that's financing her matchmaking Web site.

Not a big deal???

I would certainly disagree. The imbalances above will have to be addressed one way or another. They will not simply go away. We do not live in a magical world where the FED geniuses have created a perpetual money machine.

If anything, it is highly probable, especially if you consider today's general overvaluation levels, that the imbalances above will be addressed in a violent fashion. And I would say sooner rather than later.

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. May 18th, 2016  InvestWithAlex.com

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

Demeter Research Daily Trade Update – Euro

usdeuroOn May 3, we sold short 2 Euro futures contracts at 1.1576.  Five trading days later, we covered the first contract at 1.1400 for 1.5% gain (76% annualized) and covered the second contract another 4 trading days later at 1.1331 for a 2.1% gain (55% annualized).

To learn more about Demeter Research and Matt's trading/analytical framework please Click Here.

 

Investment Grin Of The Day

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Capital Outflows Accelerate, VIX Long Interest At An All Time High…..What Can Possibly Go Wrong?

moneyflowbafAccording to Bank of America investors are exiting the market in droves.

Bank of America: We are witnessing a stock market 'exodus'

Investors pulled a whopping $44 billion out of the stock market in the past five weeks. BAML's Michael Hartnett, who characterized this as an "equity exodus," noted that this was the largest redemption over a 5-week period since August 2011.

So where is that money going?

In the past week, $3.5 billion went into bond funds and $1.0 billion went into precious metals funds, which offer exposure to gold. There was also $10.9 billion poured into money market funds, the largest inflow in 13 weeks.

Here is another interesting fact. As of last week commercials (smart money) have increased their net long VIX exposure to an all time high. As per out weekly COT reports.

And that's just the start Goldman Sachs downgrades stocks

With stocks selling near historic high valuations levels and considering today's fundamental backdrop, it is a literal miracle that the stock market is trading where it is today.

As you can imagine, I can keep going with the bearish premise. And there lies the problem.

Everyone is too bearish. Or are they?

The setup above can fire off in one of two ways. We either get a major sell-off in capital markets or the market is able to rally higher, to climb the proverbial wall of worry.

If you would like to find out what it will actually do, based on our timing and mathematical work, please Click Here.

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