Friday, December 9, 2016

Fed Rate Hike on Wednesday

Hi Folks,

The Trump rally rolls on.  Today, we hit my 1st target of 226.50 in SPY from my last post.  So what now?  Well, we have gone up almost 9% in a month so a breather seems likely.  On Wednesday, the FED announces their decision on rates.  While it seems everyone assumes the FED will raise rates, I don't hear much talk about how much they will raise.  Currently, the FED Funds Futures are implying a 97% chance of a 50 - 75 BPS hike.  I really haven't heard the mainstream talking about this at all.  That is a pretty dramatic change from recent history.  Last year at this time the FED raised 25 BPS, that was the first time rates were raised since 2006.  Think about that....a decade without an interest rate hike and people wonder why we have no real growth in GDP.  That may seem counter intuitive but it's factual.  We have not paid the piper for the sins of our fathers but that is what is needed.  Our current situation is nothing like anything we may have been taught in economics classes in college but the principles are still the same.  The current economy can not afford to spend it's way out this situation.  We need higher rates.  Higher rates encourage saving not spending and ultimately lead to investment.  So the concern for Wednesday, in my opinion, is what if they only raise by 25 BPS?

As for the market, I think a minor pullback is needed first but the 2nd target in SPY in my prior post of 237.75(unless we have some real surprise on Wednesday) seems likely over the next few months.

Thanks and Good Trading,

Tim




Thursday, November 17, 2016

I Was Wrong. The Bull Market Is On

Hi Folks,

It's been a while and I've waiting to post about my feelings on the market until after the election.  As you know, I've been pounding the table as a bear since the end of 2014.  My thoughts changed back in June of 2016 but I wanted to wait until the election for confirmation.  Below I will show a weekly chart of SPY to explain my extreme bearishness and then why I've changed my tune.  First the chart.





So I would like you to follow the green arrows from left to right.  The first arrow shows when I first became bearish when my MACD(bottom of chart became inverted).  When this MACD becomes inverted it is the first sign of a selloff.  The data goes back over 100 years and is always accurate.  I became bearish but if you recall, I said the Moving Averages(MA's) had to flatten first.  The 2nd arrow on the top of the chart, is when the MA's flattened and I believed we would begin the big selloff.  We did as you can see but were stopped out by the longer term MA(brown line on chart).  We held that level and then the MACD became non-inverted in about June of 2016 as you can see by the 3rd arrow at the bottom of the chart.  That is when the picture changed.  The final arrow just occurred right as the election ended at the bottom of the chart.  The MACD is non-inverted and we are bouncing off this level.  Going forward my targets in SPY are 226.50 then 237.75 over the next several months.

Thanks and Good Trading,

Tim


Tuesday, September 13, 2016

Is October 1st D Day for the US Dollar?

Hi Folks,

Are the days of King Dollar coming to an end?  On October 1st, the IMF is adding the Chinese renminbi to the SDR Basket.  So what right?  Well with the recent talks at the G20 summit about the need for a replacement of the dollar as the world's reserve currency, it seems likely that the stage is being set for the SDR to take it's place.

The US has enjoyed huge perks for decades while having the power of the world's reserve currency.  When that goes away it will have huge impacts on our multinational companies as well as the dollar itself.  If the SDR does replace the Dollar, who will buy our debt?

I'm not ringing the alarm bell yet but we could be seeing the beginning of the end for the dollar.

Thanks and Good Trading,

Tim

Tuesday, May 3, 2016

Here Comes The Boom

Hi Folks,

I believe in the next few weeks we are about to take the next BIG LEG down in the market.  The way I see it unfolding in terms of SPY is that we trade down to around the $200 level, then rally back up to the $208 - $209 range and then the bigger selloff begins.  I have also lowered my forecast for the potential market bottom from $88 to $84 based on this last leg of the market.  Again that number will take time to get there.  I am not suggesting that we go right to that number.  This market is unfolding as expected and the eventual bottom takes a few years.

Thanks and Good Trading,

Tim

Saturday, April 16, 2016

Is this a Bubble?

HI Folks,

The market keeps holding on to these levels and people are asking me if I believe this is a stock market bubble.  My simple answer is yes.  As I have mentioned in many posts, I get my information directly from the sources rather than letting someone in the media spin the information.  I go to the Federal Reserve, The Department of Labor, or the IMF websites for example.  To answer this question today I will leave you with 1 chart from the Federal Reserve website and let you decide.  It shows the ratio of the Market Cap of the Wilshire 5000(one of the broadest stock market indexes) compared to GDP.  Currently running at over 130% of GDP.



Thanks and Good Trading,

Tim

Sunday, April 10, 2016

Chicken Little

Hi Folks,

I know some of you are probably thinking I sound like chicken little.  My posts are all about how bearish I am and yet the market is not significantly lower.  This bear trend is unfolding pretty much as I expected.  This is a long term change and takes time to develop.  When I first turned bearish in December of 2014, I wrote that it would take time because the moving averages needed to flatten.  I also said that market would selloff and have a series of lower lows and lower highs.  That is exactly what is happening.  I also wrote about how the economic data looks horrible and I could see the economy slowing even though the published data did not yet show it.  You have to know how to read the actual data and not look at the "headline" numbers.  I still don't understand how Wall Street has ignored the writing that is on the wall.

In February, the Atlanta Fed had Q1 2016 GDP estimates at 2.7%.  Just last week they had 2 revisions to their estimate.  On Monday they lowered their Q1 GDP forecast to 0.7% and then on Friday they revised lower again to just 0.1%.  That is a significant drop from the 2.7% forecast just 2 months ago.  The GDP for Q1 will be announced on April 28th.

I decided to show you a couple of charts.  The first one is the current market.  You can see the market top in 2015 and how prices flattened and now the moving averages are as well.



As you might be able to see, we are  very close to the next major move down.  Below is a chart show
ing the chart action for the 2001, 2007, and 2015 tops all on 1 chart.  As you can see we are headed in the same direction.  DOWN.



Thanks and Good Trading,

Tim

Tuesday, March 15, 2016

Will The Fed Raise Rates?

Hi Folks,

Here we are again awaiting the FED rate decision.  Do they raise again?  The Fed Funds Futures give a 0% probability of the FED raising rates on Wednesday.  http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html.  In her most most recent banter, Janet Yellen has expressed that rate hikes will come but more slowly than previously expected.  I think the FED is exercising extreme caution here.  They have 2 mandates for their decisions, unemployment 5% and 2% inflation.  They have achieved the 2 targets for unemployment and inflation according to the most recent data so why not continue to raise?

They are looking at the weak global economic picture and the probability that it will infect the US economy.  As I have mentioned before, I believe it already has and will continue.  If they stick to what they have been preaching about economic recovery and hitting the 2 targets for unemployment and inflation, they should raise.  The problem is the FED doesn't really have those 2 mandates as their barometer, they care more about the impact of their decisions on the markets.  So I believe they will not raise tomorrow because it is not what is expected.  If they do raise, the market is going to rollover again sooner than later.  Either way, I think we rollover soon.  We hit my target for this upside move from the February 11th low on the button yesterday.  However the technical's say there could be more upside.  It will be interesting to see what happens tomorrow.


Thanks and Good Trading,

Tim