One Year To Nowhere

[X Factor 1,112]

Still no change in any of the above despite(and for the monthly S&P500 and NASDAQ, due to) the recent rally.

I do not recall seeing them this tight in the monthly in like...forever. While bands don't provide a direction of where price will go once they expand, the other indicators in the bottom I believe do. I'll give them 2-3 more months before they start expanding again.

However notice XFactor the really isn't very broad anymore. ad's today were negative. Many indexes(besides the main 3) are way below their last highs. hyg:iei is already diverging again, oil is back down, this is all telling me that in the very short term we are due for at the very least a 4-5% correction. When I say short term I mean this month. Beyond that if they decide to go higher is fine with me, but 1. I wouldn't count on it and 2. even if it happens, it won't change the longer term picture as evident in the chart above, as well as valuations which imply negative returns in the next 10-12 years. This is one big trap just like we called the one for the bears at 1820, this time for the bulls.

Yes the monthly is very powerful with lower highs and lower lows. Markets are at an inflection point. We will know in the next few weeks after a pull back where the direction will be. It it can't make a newer high (after a normal pull back) on the weekly then the down trend will resume.

[OriZ 3,157]

Yes the monthly is very powerful with lower highs and lower lows. Markets are at an inflection point. We will know in the next few weeks after a pull back where the direction will be. It it can't make a newer high (after a normal pull back) on the weekly then the down trend will resume.

I wouldn't mind newer highs and it ain't going to change the monthly picture with the indicators IMO. If anything it will strengthen the longer term bearish case via divergences - ie. new highs in S&P500 and DJIA would not be confirmed by new highs in the FTSE, DAX, NYSE Composite, Russell or the banking index to name a few(as those are still way under their previous highs, some more than 10% lower despite the blue chip US indexes being 2-3% from the top - on their own). It would be classic. Junk is not even close to the previous highs either. AND it would be new highs with the backdrop of declining earnings. Earnings have dropped by 18% yet US markets are close to all time highs. It all has to confirm and if it doesn't that's bad - brings me back to what I said during the Oct-Nov rally(pretty similar to what I wrote here), but in the end no new highs were made and the market dropped again in Jan before recovering yet again.

I continue to believe any new high even in the heaviest indexes will more than likely be marginal, and will complete an Elliott structure for me that while I did not consider the most probable, is definitely possible.

In addition, I came across this today:

http://www.otterwoodcapital.com/blog/are-buybacks-the-only-thing-holding-up-markets-anymore/

I've been saying for a while that fed enabled buybacks are mostly what's still keeping this market afloat. Because of the FED's loose monetary policy, companies are loading up on cheap debt and using it for stock buybacks. Debt levels for north American companies excluding financials have more than doubled since 2009. Here's an article from Zerohedge from last May, before some of the chickens temporarily came to roost.

http://www.zerohedge.com/news/2015-05-02/us-equity-bubble-depends-corporate-buybacks-heres-proof

It seems to me like a familiar cycle, you have phase A when it seems like what should happen finally happens, then you have phase B where things go in a completely different direction again and turn even the believers into disbelievers. Then comes phase C and destroys everybody. We've seen the same sequence in 2005(where early signs of trouble emerge but didn't turn real bad till later)-2008, and in 1997-2000. Needless to say that regardless of the short term, it is beyond obvious that this will too, end badly.

[OriZ 3,157]

Good read.

http://www.hussmanfunds.com/wmc/wmc160404.htm

[Rob L 3,811]

okay lets test this debt hangover theory "

Here are the highest debt ratio years according to S&P

I will invest 10,000 in 2003

and 10,000 in 2009

I think we agree there were above average buy backs during those years.

my 10,000 invested in 2003 is now worth 37,234.51
my 10,00 invested in 2009 is now worth 33,300.82

I haven't exactly lost money by picking the years where corporate debt ratios were high. Maybe there were extraordinary buy back and M&A activity during those years because it was a good investment for those corporations to incur the debt and recognize what the market did not.

I wouldn't mind newer highs and it ain't going to change the monthly picture with the indicators IMO. If anything it will strengthen the longer term bearish case via divergences - ie. new highs in S&P500 and DJIA would not be confirmed by new highs in the FTSE, DAX, NYSE Composite, Russell or the banking index to name a few(as those are still way under their previous highs, some more than 10% lower despite the blue chip US indexes being 2-3% from the top - on their own). It would be classic. Junk is not even close to the previous highs either. AND it would be new highs with the backdrop of declining earnings. Earnings have dropped by 18% yet US markets are close to all time highs. It all has to confirm and if it doesn't that's bad - brings me back to what I said during the Oct-Nov rally(pretty similar to what I wrote here), but in the end no new highs were made and the market dropped again in Jan before recovering yet again.

I continue to believe any new high even in the heaviest indexes will more than likely be marginal, and will complete an Elliott structure for me that while I did not consider the most probable, is definitely possible.

In addition, I came across this today:

http://www.otterwoodcapital.com/blog/are-buybacks-the-only-thing-holding-up-markets-anymore/

I've been saying for a while that fed enabled buybacks are mostly what's still keeping this market afloat. Because of the FED's loose monetary policy, companies are loading up on cheap debt and using it for stock buybacks. Debt levels for north American companies excluding financials have more than doubled since 2009. Here's an article from Zerohedge from last May, before some of the chickens temporarily came to roost.

http://www.zerohedge.com/news/2015-05-02/us-equity-bubble-depends-corporate-buybacks-heres-proof

It seems to me like a familiar cycle, you have phase A when it seems like what should happen finally happens, then you have phase B where things go in a completely different direction again and turn even the believers into disbelievers. Then comes phase C and destroys everybody. We've seen the same sequence in 2005(where early signs of trouble emerge but didn't turn real bad till later)-2008, and in 1997-2000. Needless to say that regardless of the short term, it is beyond obvious that this will too, end badly.

[OriZ 3,157]

The main difference? 2003 and 2009 were bottoms where valuations were less than half of what they are today and actually implied decent returns. Today they are not. I continue to believe that if you invest 10,000 today, in 12 years chances are you will have right around 10,000. Only you would have to suffer through enormous volatility inbetween.

[Jacque67 7,328]

So where is Hoover buried and who killed JFK?

[OriZ 3,157]

So where is Hoover buried and who killed JFK?

Ummm...who knows.

[Jacque67 7,328]

Ummm...who knows.

C'mon. There must be a hidden message in all of this;)

[OriZ 3,157]

Anticipating future market returns does not require one to be a prophet or psychic, all it requires is one to know their stuff.

[Jacque67 7,328]

Anticipating future market returns does not require one to be a prophet or psychic, all it requires is one to know their stuff.

Kudos... Great training .anat says hi;)

[Rob L 3,811]

The main difference? 2003 and 2009 were bottoms where valuations were less than half of what they are today and actually implied decent returns. Today they are not. I continue to believe that if you invest 10,000 today, in 12 years chances are you will have right around 10,000. Only you would have to suffer through enormous volatility inbetween.

again in hindsight they were the bottoms.

I just checked my returns since Jan 1 and I see as of Friday I am at 3.45% ROI ( not sure exactly how that is calculated as I continued contributions weekly) Granted some of that was invested in my company stock which has outstripped the market, but where else ( given the benefit of hindsight) should I have invested my money?

Edited April 4, 2016 by Rob L

[OriZ 3,157]

again in hindsight they were the bottoms.

I just checked my returns since Jan 1 and I see as of Friday I am at 3.45% ROI ( not sure exactly how that is calculated as I continued contributions weekly) Granted some of that was invested in my company stock which has outstripped the market, but where else ( given the benefit of hindsight) should I have invested my money?

Nope, again, not in hindsight, in real time. Now when I say real time I don't mean the exact price on the exact day, but normally with a decent amount of confidence it can be identified within 10%/several months. Your comments make it clear that you have not been following this thread(it put you to sleep, remember?) which I believe is truly a shame but that's your choice. Had you been following you would realize that;

1. Certain tools, especially market internals and technicals, help identify tops and bottoms. While I was not here in 2003 or 2009, rest assured that these bottoms were pretty obvious, as will be this next one which will be a huge buying opportunity. I will keep this thread open until that happens, and when it does there will be no one happier than me to announce that it is time to buy.

2. Regardless of whether or not calling an exact bottom is possible, it does not change the fact that valuations can always be understood in real time. The valuations in 2003 and 2009 implied 10-12 year returns of approx 8-10% annually, which meant it was a good time to buy. That would not have changed regardless of if the market dropped 20% more, just like today valuations implying zero return, and negative real return over the next 10-12 years mean it is a bad time to invest, regardless of if the market continues to push higher in the short term. As a matter of fact, today is the second worst time in history.

3. Your return for the last 3 months is completely irrelevant when we're talking about years. No need for the benefit of hindsight, I've been very clear for years on where to invest; I called the dollar run but it is now taking a break for the time being; Bonds were a good place to be, again, not in hindsight, but now have already gone too far. I'm a trader so I don't invest. Called the drop in commodities since 2011 and so shorting commodities would have been a good place to be, and; in this very thread, also called the recent rally(over 20% in gold and 60% in oil) in them. Going forward I believe cash is king. You might feel good right now about your 3.45% return YTD, but when that turns into -30% you might not feel so good about it. It's going to be about Return of investment, not Return on investment and in that situation cash only wins; Cash only sounds like a lousy "investment" if you compare it to other good returns you can get. However, when you compare preserving your money to losing it all of a sudden cash doesn't sound so bad. See this is part of the FED's recklessness in trying to encourage people to put more money into a dying bubble by convincing them they have to be at least invested in something in all times.

4. To summarize; There have been plenty of other opportunities for investment in the last couple years, or for trading, better than stocks. And, while an exact top or bottom can't be called, the lousy return over the next decade is already baked in the cake. This thread will serve as a testament that anticipating future returns is indeed possible. Once we are at a buying opportunity similar to that of 2003 or 2009, I will be the first to say it. However, today is the second WORST time ever to buy stocks. I don't care what those wacky pundits on tv say. I've been right alot more than they have.

[Jacque67 7,328]

[OriZ 3,157]

Kudos... Great training .anat says hi;)

drishat shalom le-anat...

[Jacque67 7,328]

Shhhh..