scottvanv on February 8th, 2018

I know that all 2 of you that read this blog are cursing me for not getting you out of the market prior to this precipitous decline.  But, I’m not actively trading at the moment, so the market only really piques my interest when something crazy like these big drops occur, so this happened too fast for me to research and post something.  For various reasons, we were absolutely due for a correction, so this wasn’t too surprising to me (perhaps the speed of the decline was).  My best guess is that we’re either going to crazily go sideways for around a year, or we’ll quickly drop to around Dow 23,000.  From either option, we’ll likely head up to around  35,000 to 37,000, and then we’ll be due for a more substantial correction and a recession.  If we shortly drop significantly below 23,000, watch out below.

Here’s an interesting read on the value of the market relative to interest rates, written at the beginning of the year.

This tax bill is rather Bigly.  It drops the Fed corporate tax rate by 40%(!), which brings the S&P 500 PE Ratio to around 18.6 (including an average of tacked-on local taxes), not far above the long term average (gee, it’s almost like the market knew this was going to happen).  However, the Shiller PE (which is more in line with our economic cycles) drops only to around 23, still a bit high according to historical averages, but probably not too high when one considers our current extremely low interest rates that are around only 60% of their long term average.  So a back of the napkin calc would bring the Shiller PE down to around 14, right in line with its long term average.  The same back of the napkin analysis brings the plain PE to ~11, pretty undervalued according to long term averages.  And none of this includes what could be some tremendous growth in the economy due to these changes …

Bigly.  🙂

scottvanv on September 12th, 2017

Just based on the charts, as we come to new highs, looks like it’s safer to be in stocks right now than my last post suggested …

Please note that we’re at a pretty high valuation, so I’m pretty quick to pull the trigger on a go-to-cash recommendation.  Having said that, this bull market could continue for years.

I just try to keep my money safe, and trading in and out of cash every few months shouldn’t be too hard for someone who has even zero interest in trading.  It’s truly a big huge lie that you can’t time the market, brought to you by an industry that’s found out it can make more money on flat fees versus actually getting paid for performance.  They’ve chosen instead to take your fees, recommend buy-and-hold strategies, then hire an army of traders to trade against you to take more of your money …

scottvanv on August 10th, 2017

Just a short note to keep up my documented streak of calling market turns.  Today’s drop could portend a much larger drop.  There’s no harm in going to cash at the moment.

scottvanv on December 7th, 2016

A little over one year and three months ago, in my last post, I said, “…best case we’re probably just going to sideways for a couple years.”  Well, we’ve certainly hit my best case.  I’m posting now because my predicted upturn is coming a bit sooner than my prediction.  See chart just below … the blue lines are the same prediction, as still also seen in my last post, now overlaid with reality.  Also note that the market bottomed at 15,370 just after my last post, and I had said, “Short term, I expect the market to drop precipitously to around 15,225 (Green Arrow).”  To everyone who says you can’t predict the market, I say, “Pllhhhllllppppplll.”

If anyone who reads this post happens to know a hedge fund manager, I’d be happy to sell my services for, say, a million bucks a year.  Seriously.  And again, seriously.  If I had full time to do this … and enough money to make it worth my time to do this for real …

But I digress.

It’s time to start investing, time to get aggressive.  Invest in the market in general.  Invest in infrastructure (yay, Trump!).  Invest in tech.  Invest, invest, invest.  Hope has returned to the land …

 

 

So … this precipitous drop got me interested in the market again.  I’m still 100% cash, so I’ve only been monitoring in terms of what the economy is doing. But, I’m pretty confident in this post, so I may just start trading the general market next week. I’ll let you know if I get in, and what happens.

First, let me start with a picture, then I’ll explain it.

Weekly Dow Since the '08 Top

Weekly Dow Since the ’08 Top

 

This is a weekly picture of the Dow, annotated with Elliot Wave mark-ups.   As a refresher, since I haven’t posted in so long, Elliot Waves generally travel Up in 5 waves and Down in 3 waves, with Up being represented by numbers (12345), and Down represented by letters (ABC). The basic theory behind this is that the entire Universe is ruled by these types of efficient fractal type ratios, so there’s no reason why our own societal behavior shouldn’t follow the same rules. It’s far more complex than this, but I won’t go into that here, as I’ve posted plenty of links to books on the subject in the past.

On to the chart:  First, don’t panic. I really don’t think we’re going to go into a deflationary spiral depression.  I’ve also looked at the Nasdaq and the S&P, and they all seem to be showing that we entered what is a Wave 4 of a rather short-term sideways correction, not a huge downward Wave e of the very large abc correctional pattern that we began in 2000. In light blue on the chart, I’ve shown where I expect the market to go, short and long term. Short term, I expect the market to drop precipitously to around 15225 (Green Arrow), with maybe a relief rally on Monday or early next week, rather then the initial 14,400 I posted yesterday (which was a very quick back-of-napkin estimate). From there, we’ll likely go sideways along something like the pattern I’m showing through Mid 2017.  From there, we’ll be off to the races through 2022/3 to around Dow 22,000.

Why do I think this?  Because these patterns show up time and time and time again at different levels of Degree.  If you stare at charts long enough, like I have, you begin to recognize the beginning of each of these different types of patterns. What we’re living through longer term, right now, looks like a 13 year bullish wave beginning with the ’09 bottom.  Shorter term, it looks like we’re beginning a pattern called an “Expanding Flat” for Wave 4 which will end when it hits the bottom channel, labeled with the number 4.

Now, if the market drops though 15,225, we have a major problem, and this analysis is likely very wrong.  But I don’t expect that … it’s likely that the China panic will continue for a bit, but the central banks will step in and start printing more money to make sure that we don’t enter said spiral. There is no limit to how much money they can print so long as deflation is the dominate force, which it clearly is right now. This Wave 4 correction likely won’t even lead to a recession, as it’s just not at a Degree high enough to ’cause’ one as in ’01 or ’08.  A China slowdown might cause our economy to slow a bit, but probably not too much … I think we (primarily Silicon Valley and the Fed) will lead the world out of this very long period of uncertainty. All bets are off in 2022/3.

I still don’t think there’s ANY reason to have any money in equities right now … the risk is still there that we’ll drop through 15,225 to some god-awful lows and best case we’re probably just going to sideways for a couple years.

It’ll be interesting to see if I’m right.

 

 

 

 

scottvanv on August 20th, 2015

Overall, the chart patterns look ominous.  Absolutely no reason to be in equities right now. My best guess is that the Nasdaq will drop to around 3,900 before bottoming, and it will likely be a sharp drop. Dow somewhere around 14,400.  Let’s see if I’m right …

scottvanv on October 28th, 2014

The market is back to about where I said to get out … we’re not quite out of this pattern, and the odds of a precipitous drop are higher than normal, but are far less than a couple of weeks ago.  If we go above $17,500 on the Dow, I think we’ll go quite a bit higher for some time …

scottvanv on October 9th, 2014

While I have no positions currently (even in my 401K), and haven’t for some time, I have still been watching the market, if just not as closely as when I’m active.  At the moment, I see no reason to be in the market, even for the longest term investors.  You can simply go to cash, and when the risk of a serious drop diminishes, you can buy back in.  I’m not suggesting here that the market definitely WILL drop precipitously, it’s just that, right now, the way it’s behaving, the risk is higher than normal that it will.  There’s an old adage in poker, “There’s always another hand.”  As I’ve done in the past, and documented here (but this time without the extreme fear I was experiencing prior to that post), I can tell you when to get back in.

By the way, this is not a ‘panic’ recommendation, it’s a strategic method to keep recently made gains.  I haven’t posted for a long time because I wasn’t active, and there was no reason to post … the market hit my target almost to the day (I’ll show charts to that effect in a future post) so there was little danger for anyone with market investments.  I thought I owed y’all at least a heads-up on my thinking.

scottvanv on November 25th, 2013

“Keep stops tight on your stocks as when this market pulls back even 1-2%, the better names often sell off much harder, giving back in one or two days what it took one or two weeks to achieve. QE forgives the general averages while higher octane stocks can get pummeled.”  — MLR, Premarket Pulse 11/25/13, virtueofselfishinvesting.com  (a trading newsletter I follow)

It’s been a while since I’ve posted, so a little pre-amble / refresher:  I stopped trading because I wasn’t doing very well relative to the market (I was flat, market up nicely), and I realized something was wrong.  I had studied this too much to not be be able to get a better return than just “holding and forgetting”.  And since I cannot and will not buy and hold — an extremely dangerous investment strategy — I had no alternative but to just take a break and re-evaluate.  A lot of other famous traders have been doing quite poorly in this market, all with a somewhat similar system based in trend following and / or technical analysis of leading growth stocks.  And they’re the ones I had latched on to as the best strategy (they’re all quite rich) that best fit my trading / investing mentality.  Unfortunately, in an environment where the Fed is pumping bazillions (sic) into the economy to provide us with “nose above the water” growth, this strategy does not work.  This is not a ‘normal’ economy, and the market reflects this.

I believe that we are at the dawn of a new historical era…either on the cusp of a massive crash, or a massively robust decades-to-centuries long…what shall I call this…”Savvy Economy.”   (If this happens and the name sticks, remember you heard it here first.  🙂 )  I give the edge to the latter, and I’ll make the case for this in a subsequent post.