Experts Are Not Smart Enough to Spot Stock Market Crash 2017

Stock Market Crash 2017

Stock Market Crash 2017 boils down to all bark and no bite 

For the past few years much the angst of many experts we have consistently stated that the markets were not ready to crash. Moreover, we believe that Experts are not Smart Enough to Spot Stock Market Crash 2017. If they were they would not have made the same predictions in 2014, 2015 and 2016. All these predictions of disasters proved to be nothing but idle chatter.
From late 2016 to early 2017, many former Bulls who predicted the direction of this market quite well, suddenly decided that the stock market was ready to crash. We, however, begged to differ, and we provided two very simple reasons for our stance.

Experts Fail To Realise that Emotions drive the markets:

The masses have remained nervous throughout this bull run; no bull market has ever ended when the masses are nervous.  History indicates that stock market crashes begin on a euphoric note and end on a note of hysteria.

The trend clearly states that the Experts are on the wrong side of the Stock Market Crash 2017 argument 

We focus more on the psychology of the masses than on any other single factor. However, the 2nd most important factor is the trend. The trend has remained positive throughout this bull run; occasionally it has moved into the neutral zone, but it has never turned negative.  We are not talking about the trend based on the drawing of simple trend lines but one that is calculated utilizing several factors one of which happens to price action.

So when the experts started to scream over and over again about the impending stock market crash of 2017; these are some of the comments we recently made to our readers and or subscribers

Let the experts sing their songs of doom and con the masses; it takes two to tango, one to cry and three to have a party. We have experts from the technical analysis side and experts employing fundamentals trying to use to back their faulty assertions. Unfortunately for these penguins both of them are wrong. They have failed to pay attention to the psychological factor. There is no factor more important when it comes to playing the markets then market psychology.  Market Update April 30, 2017

The market marches to its beat and those that resist are drained; financially speaking that is.  We are not fortune tellers; we reserve that noteworthy task for the experts who seem to take delight on spewing rubbish week after week. The media then regurgitates this rubbish, and a jackass is suddenly made to look like a movie star. What a wonderful world we live in and people wonder why they lose money after listening to these wise men.

We, on the other hand, prefer to listen to what the market is saying and that is why we never listen to our gut instinct or let our emotions into the equation.  We look for trends. Market Update May 19, 2017

Stock market crash anxiety index

 What’s The most nonplussing factor in this bull market?

The emotional state of the masses; the herd, for the most part, has been oscillating back and forth from the neutral to the Bearish camps; very few have dared to venture into the bullish camp. This probably explains why the bullish readings never even came close to testing the 60% ranges for the past 15 weeks and counting. During that time the market has been trending higher and higher. This has caught many an expert with his pants down. But there is no surprise here; the reason as we have stated so many times over and over again is that the Crowd is not euphoric and the trend is still bullish.

 

The same pattern holds true for most of 2015 and 2016; the number individuals in the Bearish and neutral camps outnumbered those in the bullish camp. If you are in the Neutral camp one of two things one of two things apply; you are either are a bear that got burned or Bull with no courage to take a position.

Our proprietary sentiment indicator also confirms that the masses are still antsy.

 

Market Structure

If the markets were extremely overbought, then it should be almost impossible to find stocks that are trading in the oversold ranges on the monthly charts. On a monthly chart, each bar represents one month’s worth of data on; these charts provide great clues of what to expect from the markets.

In the Dow, we spotted several stocks that were trading in the extremely oversold ranges to oversold ranges on the monthly charts.  AAPL, HD, DIS and NKE are examples of such stocks.

We also examined roughly 150 random Midcap to large cap stocks (ETF’s were included in this analysis) from various sectors; we found that almost 60% of the stocks examined were trading in the oversold ranges; one ETF that caught our eye was IBB; it is trading in the extremely oversold ranges.

We also noted that the net number of new 52 week highs continuously exceeded the net number of new 52 week lows. Why is this important? It indicates that the internal structure of the market is healthy.

 

Tactical investors Alternative Dow theory states that the experts have it wrong

Our stance for the past 11 years has been that the Dow Theory is dead; we provided an alternative Dow Theory that has proven to be far more accurate than the original.  This theory states that it is the utilities that should be followed and not the transports. We will cover this in more detail in a follow-up article next week. In essence, it is the Utilities that lead the way and not the transports.

Tactical investors Alternative Dow theory states that the experts have it wrong

The utilities started to consolidate roughly from Aug of 2016 and bottomed out in Nov 2016 and had consolidated for roughly three months before they started to trend upwards. The utilities are now surging to new highs, and this bodes well for the overall market. The alternative theory states that the Dow should follow suit.

This is a mature bull market so one should not expect it to trend in one direction only; it will experience several corrections ranging from mild to severe. Unfortunately, the Dr’s of doom will confuse this correction for a crash as they have mistakenly done so for the past eight years and counting. When the masses embrace this market, the end will be close at hand; until then strong corrections should be embraced.

Dow theory states experts wrong

There is a lag period between the utilities and the Dow; sometimes it comes down to just a few weeks, but usually, it ranges from 3-5 months.  The Dow has been consolidating since March; it has essentially been trading in a tight range. Even though the Dow did not pull back strongly, the sideways action helped it blow out a large dose of steam as envisioned by the MACD’s and several other technical indicators that are trading in the oversold ranges. The lag period was roughly three months as the utility bottomed out in Nov and the Dow started to consolidate in March of 2017.

 

The stock market crash theme makes for great headlines as fear sells well, but that is all it has been good for so far.  The market will experience a much stronger correction over the course of the next 6-15 months, but until the masses embrace this bull market, those corrections will prove to be buying opportunities.

The overall Market sentiment illustrates that the masses are not jumping with joy.  The trend is positive, and the Dow Utilities have surged to new highs.  Therefore under such conditions, it is hard to envision a crash like a scenario.

Every bull market experiences one back breaking correction that is mistakenly labelled as the beginning of a new bear market. When that occurs, it will be a sign that the end is close at hand. That strong correction will subsequently trigger an even stronger rally and fuel a feeding frenzy. Sentiment will turn bullish, and the masses will dance with Joy, then the bottom will drop. However, we are not at this stage, so there is no point in further developing this story line.

Our ideal setup would call for the Dow to shed 600-1000 points over a very short period; this would drive the masses into the hysteria zone. A small push is all it would take to drive the fear factor through the roof. We all know what happens next; the masses stampede, the smart money swoops in, and history repeats itself once again. For the masses, it is groundhogs day every single day.

 

A genius can’t be forced; nor can you make an ape an alderman.

Thomas Somerville

 

Published courtesy of the Tactical Investor

Originally posted 2017-07-31 14:20:27.

Bear Market nonsense: Experts want you to think Markets are Going to Crash 

Bear Market

Are We headed for A Bear Market

The stock market crash story is getting boring and annoying to a large degree. Since 2009, there has been a constant drumbeat of the market is going to crash stories. In 2009, many experts felt that the market had rallied too strongly and that it needed to pull back strongly before moving higher up.  They were calling for 15%-20% correction.

Ten years later and most of them are still waiting for this so-called strong correction or crash. A stock market crash is a possibility but the possibility is not the same thing as certainty, and this is what seems to elude most of the naysayers. One day they will get it right as even a broken clock is correct twice a day.  In the interim waiting for this stock market crash has cost these experts a fortune, both in lost capital gains and actual booked losses if they shorted this market.

Bear Market nonsense: Experts want you to think Markets are Going to Crash

It’s 2017, and the markets are overbought, and we agree that they need to let out some steam, but as for a crash that will only occur when sentiment turns bullish. The crowd has not embraced this market and until they do corrections but not crashes is what we should expect.  In fact, we penned an article titled “Dow Could Trade to 30K But not before This Happens”, where we discussed the possibility of the Dow trading to 30k before it crashes.  The one factor that could alter this outlook would be for the masses to turn bullish suddenly.

This market will experience a spectacular crash one day; nothing can trend upwards forever and eventually the market has to revert to the mean.  Markets never crash on a sour note; the crowd is chanting in joy when the markets suddenly change direction.  A simple look at previous bubbles will prove this; the housing bubble, for example, did not end on a note of fear; the crowd was ecstatic.  Even the Tulip bubble that lasted from 1634-1637 ended on a note of extreme joy.

Jim Rogers states that the next crash will be the worst one we have seen in our lifetimes.

We’ve had financial problems in America — let’s use America — every four to seven years, since the beginning of the republic. Well, it’s been over eight since the last one. This is the longest or second-longest in recorded history, so it’s coming. And the next time it comes — you know, in 2008, we had a problem because of debt. Henry, the debt now, that debt is nothing compared to what’s happening now.

In 2008, the Chinese had a lot of money saved for a rainy day. It started raining. They started spending the money. Now even the Chinese have debt, and the debt is much higher. The federal reserves, the central bank in America, the balance sheet is up over five times since 2008. It’s going to be the worst in your lifetime — my lifetime too. Be worried Business Insider  

In a broad manner of speaking, he is right, but the proverbial question as always is “when”; so far the naysayers have missed the mark by 1000 miles. This entire rally has been based on the fact that the Fed artificially propped the markets by keeping rates low for an insanely long period and infusing billions of dollars into the markets. One day the pied piper is going to collect but as we have stated over and over again over the years, that until the masses embrace this market, a crash is unlikely. A strong correction is, however, a certainty; it’s just a matter of time.

This stock market bull has defied every Bear market call

The market has defied every call, and even some of the most ardent of bulls are now nervous; we stated this would occur over two years ago.   The Market has put in over 36 new highs this year and is living up to the new name we gave it late in 2016.  Up to that point, we referred to this market as the most hated bull market of all time; after that, we started to refer to this market as the most Insane Stock Market Bull of all time. Insanity by definition has no pattern so expect this market to do things no other market has ever done before.

A Bear Market is a certainty but the question is when 

We are using the word correction and not crash for until we start seeing non-stop headlines for Dow 35K,  and the overall sentiment turns bullish, the markets are unlikely to crash.  Sentiment analysis reveals that the crowd is still either uncertain or bearish when it comes to the stock market.

Investor sentiment negative

The article of interest: What every investor should know about the Dow theory?

From a technical basis, the markets are extremely overbought. However, markets can remain irrational for a lot longer than most players can remain solvent. An overbought market does not mean that the market is ready to crash. Take a look at the stock NVDA; the stock has been trading in the overbought ranges for over two years, and instead of crashing, it has continued to trend higher.

 

Bear Market and stock market crash outlook

The market will crash one day, and it will probably be quite a spectacular crash as this market has soared to stunning heights. The main driving force behind this massive move has been and still is hot money. However, we have continuously stated that this bull market would not crash until the masses embraced it. In 2016 we informed our subscribers that the Dow was getting ready to trade to 21K; this target was hit within three months.  The Dow went on to trade to 22K and sentiment is far from bullish.  History indicates that markets always crash on a note of euphoria. Instead of worrying about a future crash, why not put in a few common sense measures that could reduce your risk but also allow you to profit from this bull market

  • Take some money off the table when you position is showing healthy gains
  • Implement trailing stops
  • Put some money into safe haven investments like Gold
  • Monitor the masses; bull markets have never ended on a sour note

On a separate note, Gold is holding up fairly well, and as long as it does not trade below 1250 on a weekly basis, it has a good chance of testing the 1360-1380 ranges with a possible overshoot to 1400.

Don’t fixate on the crash factor; instead look for great stocks you would like to own. When the market eventually corrects, you will be in a position to pick up top players at a great price.

Is a Bear Market a possibility?

Yes it is but so is death; nobody sits around worrying about that event every single day, do they?

Posted courtesy of the Tactical Investor

Originally posted 2017-08-26 08:26:21.

Identifying Market Trends

Market Trends

Identifying Market Trends: Jump in Before the Masses do 

A new trend can begin that is based on fake news or false data to create the illusion all is well. Remember that the truth or lies are just a matter of perception. One person will swear that he is telling the truth, while another will swear that he is lying. From an observer’s perspective, both are correct.

They are convinced of their position, so all you will do is waste your time and energy trying to sway them. Instead, you are better of letting them battle it out, while you sit down and take a look at the real events that are unfolding, most of which the masses are oblivious too. The main principle of trend investing is not to focus on the noise factor but to pay attention to the “reality factor”. In other words, trend investing focuses on what is going on minus the morality or judgemental angle.

 The  observer’s perspective to Identifying Market Trends 

Personal views are on par with toilet paper regarding their relevance in determining trends. Oh, by the way, we also include ourselves into the equation. This is why we do not voice our personal opinions as nothing will change, and if we let our personal opinions cloud our judgement, then the ability to look at the situation objectively is lost.

Over time it gets easier and easier to do this, and then one day you wake up, and it is almost like breathing. Practice makes perfect, and there is no better time to start than today for tomorrow never comes. Today is the tomorrow you dreamed of starting something new yesterday but never did and most likely never will.   If you want to spot new trends you can’t allow your emotions to do the talking; once you emotions talk, logic goes out the window and stupidity

Keep Your Emotion in Check when Identifying Market Trends

In order to spot new trends one should not allow one’s  emotions to do the talking; once your emotions take over, your logic goes out the window and stupidity is in charge of the situation.  This is the first principle you need to muster before you can develop the ability to spot new trends.

A Trend in Motion Is unstoppable 

Whether you and I agree with it or whether it is morally right or wrong is irrelevant. Nothing can stop a trend in motion. This bull market is a perfect example of fake news driving a new trend; all the data imaginable has been manipulated to create the illusion that the economy is doing well. If we had allowed our personal opinions to dictate the way we trade, then like all the fools out there we would have missed the biggest bull run of all time.

Trend investing provides you with the opportunity to see the real picture as opposed to the one the mass media forces you to focus on. The idea is to sell when the masses are dancing and buy when they are nervous.

The trend is your Friend

Trend investing states that the trend is your friend, everything else is your foe. Mass Psychology clearly states that the crowds always oppose the trend and as a result, they are always on the losing end of a trade.

Posted courtesy of the Tactical Investor

Originally posted 2017-08-26 08:05:55.

Despised Bull Market Will Continue to Trend Higher

Despised Bull Market Will Continue to Trend Higher

The Most hated bull Market is not ready to drop dead 

Throughout this bull-run, a plethora of reasons has been laid out to indicate why this bull should have ended years ago. Mind you most of those reasons are valid, but that is where the bucket stops. Being right does not equate to making money on Wall Street. In fact, the opposite usually applies.  The Fed recreated all the rules by flooding the markets with money and creating and maintaining an environment that fosters speculation.

So why is this the most hated Bull Market

The reason this is the most hated bull market in history is because there is nothing logical reason to justify it.  In the 2008-2009 volume on the NYSE was in the 8-11 billion ranges and sometimes it surged to 12 billion. Before that, every year, the volume continued to rise, this indicates market participation. From early 2010 volume just vanished, it dropped to the 2-3 billion ranges and even lower on some days.   Hence, all market technicians and students of the markets assumed that the markets would tank as markets cannot trend higher on low volume and that is where they erred.

Share buybacks  are pushing this bull Market higher

We were and still are in a new paradigm, just as the US uses shell companies or brokerages to mask their trades in the US, they employ the same trick in overseas markets.   The US government stepped in and started to support the market directly that is why volume dropped so dramatically. However as there were no sellers, the markets drifted upwards. Later on, they got the corporate world in on the scam.   They set up the environment that propelled corporations to buy back their shares by borrowing money for next to nothing and then using this trick to inflate their EPS, without doing any work or even increasing the profitability of the company. Mass Psychology states that the masses are destined to lose; do not follow the crowd for they will always lead you

Mass Psychology states that the masses are destined to lose; do not follow the crowd for they will always lead you astray.In between a few minor corrections were allowed to transpire almost all of which took place on ever lower volume, to create the illusion that there was some semblance of free market forces at play.

Dark Pools could be contributing to Hated bull Market Run

We also have something known as Dark Pools, this, in essence, allows big companies to purchase large blocks of shares without the trade showing up on the NYSE or any other major exchanges. In essence, it gives the government an avenue to manipulate the markets without actually leaving a footprint.  As the US can print as much money as it wants, this is a perfect backdrop to do whatever it wants.  By the way, don’t believe the hogwash that our debt is only 18.9 trillion.  There is no real mechanism in place to check how much money the US creates.  Nobody is allowed to audit the Feds books.

How to handle this Hated bull Market

The Fed is hell bent on forcing everyone to speculate, and that is why we have moved into the next stage of the currency war games and the era of negative interest rates.  Negative rates will eventually force the most conservative of players to take their money out of the banks and speculate.  This process will be akin to another massive stimulus and will provide the bedrock for another huge rally.

Make a list of stocks that you would like to own and use strong pullbacks to add to or open new positions in.  Some examples are OA, AMZN, BABA, GOOG, CALM, CHL, etc.

Published courtesy of the Tactical Investor

Originally posted 2017-08-25 17:02:56.