If you are anything like me, you think about the stock market a lot. You may muse over what kinds of events could occur to move the market higher or lower. You may, if you can get away from the fact that the market has been wildly bullish since March of 2009, posit the following question: “What is keeping this market in a raging Bull mode?” After all, we know the following:
|Quote worth Quoting Again|
|“In the first place, we should insist that if the immigrant who comes here in good faith becomes an American and assimilates himself to us, he shall be treated on an exact equality with everyone else, for it is an outrage to discriminate against any such man because of creed, or birthplace, or origin. But this is predicated upon the person’s becoming in every facet an American, and nothing but an American…There can be no divided allegiance here. Any man who says he is an American, but something else also, isn’t an American at all. We have room for but one flag, the American flag… We have room for but one language here, and that is the English language… and we have room for but one sole loyalty and that is a loyalty to the American people.”…Theodore Roosevelt|
- The GDP numbers from the last quarter of 2012 were negative.
- The GDP numbers for this first quarter of 2013 were well below forecast, at an anemic 2.5% growth rate.
- In February, the Congressional Budget Office estimated that the budget cuts would shrink economic growth from 2.0 percent to 1.4 percent this year and reduce overall employment by about 750,000 jobs by year-end.
- The government says the unemployment rate is 7.7%, but if you count those discouraged workers and involuntary part-timers as unemployed, the unemployment rate jumps to 14.3%, according to the Wall Street Journal.
- Plus, if you include the skyrocketing number of people who have gone onto disability and who are not actually disabled, the labor participation rate would be substantially higher.
- A lot of companies are reporting weak to very weak economic forecasts for their businesses in the current spate of earnings reports.
- A lot of small businesses are not hiring with one of the main reasons being the Obamacare mandate that occurs once you get above 50 employees according to the vice chairman, Blain Luetkemeyer, of the House Small Business Committee.
- There are states cutting part-time employees to 29 hours per week to avoid triggering Obamacare’s mandatory health insurance for any part-time employee working 30 hours or more per week.
- Companies are moving full-time employees to part-time employees and capping their time on the job at 29 hours per week, or only hiring part-time employees and keeping them below the 30-hour threshold to avoid the fines and health insurance mandates.
One would think that with all of the above occurring and/or about to occur, the typical stock market investor/trader would be looking for the exit or putting on short positions in a big way. But, that is not happening. The market continues to soar higher, week after week. Why do you suppose this is happening? I have mentioned why I believe this is happening in the past, but it bears (pardon the pun) repeating…
First of all, the reason that the market is moving higher could well be because the fundamentals of the market are solid. Economic growth is robust and growing. The market has moved well above an upper resistance level of 14,000 on the DJIA index and virtually every time it has done that over the last 112 years, the ensuing years (often well over 10-15 years) has been a raging bull market. We could be in that cycle right now. I wish I believed that…
The real reason, I am afraid, is that the market is in an artificial bubble created by Central Banks. In theory, which unfortunately is not working, economies can be encouraged to expand if expansion capital is readily available. The Central Banks can, in effect, create money by lending money at zero or near zero rates to big banks, which can in turn, loan that money out to businesses and charge a much higher rate, creating a windfall for the banks and lots of capital in motion through business small and large using that money to buy buildings, hire more employees and increase salaries, among a myriad of other economic activities.
But, the banks are not cooperating and are not lending to businesses. Plus, most small businesses no longer qualify for loans that would have been made in years gone by because the Fed has raised the bar for financial stability to the point that lenders are disincented to loan to anyone. They make more money by helping the Fed monetize our debt by buying US Treasuries and parking their funds in the Central Bank and draw a higher interest than the Fed is charging them to loan money to them. I know this does not make sense, but to a greater or lesser degree, this is what is happening.
The banks are completely back-stopped by the Fed. Big financial firms are completely back-stopped by the big banks. Big financial firms have lots of cash to buy stocks, which keep the share prices moving higher. The retail investor/trader (you/me) see the market moving higher, so we buy more shares of stocks, which in turn, pushes share prices higher. But, I am fearful that all of this is just a house of cards and one of these days when we least expect it, ‘something’ will happen that will topple the tower of this faux economy that drives a faux stock market.
So… Where is the market headed right now?
Three out of the four major indexes have an elevated probability that the market is toping. A sell-off is indicated, but not a crash. Indeed, with the Fed-induced faux market, it would not surprise me greatly if there was not a sell-off at all. But since I have a lot of faith in the forecast probabilities of our time-cycle probability forecast trends, I am beginning to put on some short-biased trades. Take a look at the probability analysis forecast of the DIA (right):
This probability forecast indicates a potential move lower of about 6% by July. That’s not enough to do much damage and could easily be replaced with only a kind word or two from Big Ben.
You can read more about my opinion on where the market is headed in my Bull/Bear/Oscillator reports below.
The Bull/Bear and Turner Oscillator Report…
Each week, our computer programs compile the total number of equities in our database (over 6,000) that are issuing new “Alerts” for this coming week. The Alerts can be any one of the following:
- BUY – This means the status of the equity last week was “OUT” and this week, the weekending closing price moved high enough above my 10-week, time-shifted, moving average to trigger a “BUY”. Click Here for this week’s STRONG BUYS, or Click Here for this week’s BUYS.
- OUT – This means the equity stopped out by triggering a long-position stop-loss where the equity was sold, or it triggered a short-position stop-loss where the short position was covered.
- SHORT – This means the status of the equity last week was “OUT” and this week, the weekending closing price moved low enough below my 10-week, time-shifted, moving average to trigger a “SELL SHORT”. Click Here for this week’s STRONG SELLS, or Click Here for this week’s SELLS.
A running total of these new conditions (BUY, OUT, SHORT) is kept on a weekly and monthly basis. We have found that an analysis of these data provide a reasonably consistent view of short term (upcoming week) and longer-term (next few weeks) of the market, as follows:
- First of all, the ratio of new Short Sell Signals (red line in the Turner CrossOver Oscillator, below) is an excellent indicator of overbought or oversold conditions. Oversold means the market will have a tendency to move from a downward trend to an upward trend.
- We have also found that the total number of Short Sell Signals compared to the total number of Buy Signals is a reasonably good indicator of investor sentiment. The more Short Sell Signals, the more bearish the sentiment. The more Buy Signals, the more bullish the sentiment. This investor sentiment analysis is generally more valid for the upcoming week.
- The Composite (black) line is produced by subtracting the total number of Buy Signals from the total number of Short Sell Signals. Charting this total over time and observing how the red line crosses the black line, often provides an excellent early warning of a market correction.
These data elements, along with charting the trend of the S&P 500 provide the basis for the brief forecast provided in these weekly Reports. It is important to understand that this analysis is based solely on a technical analysis and anecdotally-derived historical observations of these data. I write the weekly forecast based on my observation of the data and the Oscillator chart. Time-cycle data are NOT explicitly included in this analysis.
|The investor sentiment Bull-to-Bear ratio has bounced back up above the neutral point to become slightly Bullish with a 2-to-1 favoring of the Bulls.
The black line (Composite of Signals) continues to look Bearish, but the red line (New Short-Sell Signals) is certainly headed in the direction of oversold territory. It is not there yet though… both lines (red and black) are indicating a move lower in the market is more likely than not.
The time-cycle market forecasts are now showing a 3-to-1 probability of a move lower in the market in the near-term.
The forecast probabilities continue to be more Bearish than Bullish except the very fleeting week-over-week investor sentiment numbers which are quite a bit more Bullish than the prior week.
This market is extremely resilient, primarily because it is being artificially propped up by global central banks in general and the US Fed, in particular. Recent history supports the notion that you cannot ‘fight-the-fed’ and as such, taking more of a short than long strategy could be a losing proposition. A reasonable approach should include stronger downside protection with tighter stops and some dabbling in pure short plays. Smaller and shorter is the recommended mindset at this time.
|Turner Bull/Bear Forecast
For the Upcoming Week
This coming May 14, 15 and 16, CycleProphet and Sabinal Capital Investments are sponsoring our first “Wealth Building Symposium”. The symposium will be held in Las Vegas at Caesar’s Palace. There is no cost to attend the symposium, but we do need a head-count of those that plan to attend. Please send us an email at [email protected], to let us know if you plan to attend. I will be sending out a special invitation to everyone later this week with the schedule, as revised, and the room locations.
We hope to have the technology in place to video the sessions. We will try to get the sessions posted on the CycleProphet website as quickly as we can for those that cannot attend.
Below is the planned schedule of sessions:
Wealth Building Symposium for 2013
11:00a – Noon Wealth Building by the Numbers — This is an in-depth overview of the CycleProphet System and how we recommend that users get the most out of the rules, tools and strategies. This session is conducted by Mike Turner.
12:30p – 1:30p The Top 15 Portfolio — How to build and manage a portfolio using the stocks with the highest rated fundamentals and technicals. In this session, Will Turner, will teach attendees how he manages the Top 15 Portfolio and take questions regarding any aspect of this type of portfolio management. This session is conducted by Will Turner.
2:15p – 2:45p Wealth Building by the Numbers — This is Mike’s Money Show presentation where he provides an overview of CycleProphet and the Wealth Building Symposium.
3:15p – 4:00p Using CycleProphet to find the best trades — This is an in-depth review of stepping through all the CycleProphet tools to find the best trade. This session is conducted by Tom Meyer.
4:15p – 5:00p The CP Trades Portfolio — In this session, attendees will learn Mike Turner’s approach to trading the CP Trades Portfolio and how it is different from his Sabinal One Portfolio, This session is conducted by Mike Turner.
5:15p – 5:45p The Top 15 Portfolio — This stage presentation is a brief overview of how CycleProphet is used to select entry and exit strategies for positions in the Top 15 Portfolio. This session is conducted by Will Turner.
10:30a – 11:30a A Woman’s Guide to Wealth Building — This is a session primarily for women who may, for the first time, be faced with managing the investable funds as presented by a woman who has had to deal with just such a situation following the death of her spouse. This session is presented by Jan Rushing and assisted by Mike Turner.
Noon – 1:00p Building a Winning Portfolio — In this session, Mike discusses his approach to building a world-class portfolio. He describes how he maintains his Sabinal One Portfolio, including how he selects equities for long positions and how he uses inverse ETFs for bear trends in those same positions. This session is presented by Mike Turner.
1:30p – 2:15p Using Fundamentals and Technicals to Trade Profitably — In this session, Will reviews and demonstrates the power of Equity Analyzer and how a simple approach that uses scores and changes in scores can produce very favorable results and many winning trades. This session is presented by Will Turner.
2:30p – 3:15p What’s the Probability of Trading Success? — This is an in-depth review of the math and science behind the probability forecasting algorithms used in Equity Forecaster and Market Forecaster. If you like math and cyclical thinking, you do not want to miss this session. This session is presented by Mike Turner.
3:30p – 4:15p Using CycleProphet to find the best trades — This is an in-depth review of stepping through all the CycleProphet tools to find the best trade. This session is conducted by Tom Meyer.
4:30p – 5:30p Wealth Building by the Numbers — This is an in-depth overview of the CycleProphet System and how we recommend that users get the most out of the rules, tools and strategies. This session is conducted by Mike Turner.
10:00a – 11:30; The Sabinal One Portfolio Reserved for Sabinal clients and those interested in becoming a Sabinal money management client. In this session, Mike reviews each of the positions in the Sabinal One Portfolio and whether he is playing a long trade or a short trade and why or why not. Intensive Q/A is expected.
Noon – 1:00p Open Q/A with Mike Turner — Reserved for Sabinal clients and those interested in becoming a Sabinal money management client. In this session, Mike will open the floor to any/all questions concerning his money management strategies and the Sabinal One Portfolio.
One more thing…
We are working on a series of ‘Best Practices’ and ‘How To’ videos that will be website page specific. On every page of the website, there will be a short video that covers the best way to use the information on that page. We are also working on some training videos that we hope will help everyone get the most out of our great tools and services. I have asked our support staff to come up with a list of ‘most asked’ questions to make sure we cover most of the questions that a new subscriber would have, as well as, questions that long-time users of the tools might have. In that regard, if you would like to contribute either some questions or even some questions with answers that you have found helpful to you making more money with the CycleProphet tools, rules and/or strategies, please take a few minutes to write up your suggestions and send them to [email protected]. Your idea may help the next investor/trader get up to speed a little quicker or achieve success in their trading a bit quicker. Your comments will be kept anonymous. I do appreciate any input you can provide.