"Kip's VRA financial newsletter is a MUST read for every saavy investor in this country. Disregard it at your own peril. His mantra is my mantra: Buy Gold and China. Sell short on pretty much everything else. Kip Herriage's newsletter is my financial Bible."

--Wayne Allyn Root
2008 Libertarian Vice Presidential candidate
Author, "The Conscience of a Libertarian"

Twitter: @kherriage

Karl Bessey

Mary Dee

Mike Budny 
Twitter: @kherriage

Friday
Dec152017

VRA Update: Tax Bill Volatility. FED Rate Hike. Fresh All Time Highs fro 2018. Gold v Bitcoin 

Good Friday morning all.
Busy week with Tax Reform and the FED Rate Hike, I will get right to it.
The FED acted just as we expected, hiking rates by .25%, the 5th rate hike since December 2015. Yellen had a number of interesting comments at her presser as well.
 
1) We remain perplexed about what's happening with inflation (not me...its everywhere we look).
 
2) Bitcoin/cryptos are not under our purview. We cannot regulate it. It's also not large enough to be a systemic risk (as I've predicted, I see no harmful regulation here until the combined market cap of all cryptos reaches $1 trillion...we're about 34% of the way there).
 
3) The economy is picking up steam (duh), but they only raise their growth forecasts modestly (they're wrong again...its now likely that we will have 3.5% GDP...or higher...in 2018).
Tax Reform

Mid-day yesterday the rumor began to float that Florida Senator Marco Rubio "may not" support the tax bill. The 125 point reversal in the DJ and the 1.1% decline in the Russell 2000 gives us an idea of what might happen should tax reform fail...we could easily see a drop of 1000 points in the DJ...maybe more. This morning, a reversal from Rubio...he says he's voting yes...but its a paper thin margin headed in to next week. 
US futures are sharply higher this morning, pointing to a +100 point open on the DJ. I put the odds at 90% that tax reform passes. The markets have been telling us that it will. But in 2017 politics, we know that anything can happen. Hedging with some deep out of the money index puts or VIX calls might not be such a bad idea. You'll most likely lose your entire investment...but should the bill fail, you'd make 5-10 x your money (again, I see the bill passing).
Yesterdays internals were not good. Weakest in 3 weeks. Should we have 3 straight days of readings like this, the VRA System would flip to "short term neutral" from "ST bullish". Watching closely...but as we've seen throughout this entire move higher for 2017, these negative readings do not tend to last long. 

 

 

Weekly AAII Investor Sentiment Survey

Here are the weekly AAII Investor Sentiment Survey readings from late yesterday. Bulls now sit at 45%, bears at 28.1% and neutral investors at 26.9%. This weeks bullish readings match the 2017 highs from last month. Yes, investors are beginning to get excitedly positive about the stock market...but still nowhere near the 60% levels that will force us to think like a contrarian (and become concerned about being part of the majority). 

 

Going forward you'll hear me discuss this concept more, but I see the move in cryptos as LT bullish for growth stocks...just like the ones that we own. 

Gold and Miners

With a couple of weeks left in the year, gold has gains of 9% and silver is down slightly. Not the worst year ever...but you wouldn't know it from the sentiment surrounding precious metals and miners. The crypto currency action has drained the excitement from PM's...theres little doubt about this...while price suppression from bankers has continued. Gold, silver and the miners continue to trade below their most important moving averages, but as we've covered here, based on the last 4 FED rate hikes we should have a powerful move higher directly in front of us. 
Take a look at my Twitter Pole from earlier this week
Which asset will perform better in 2018....gold or Bitcoin? 

 

You know I'm a contrarian. Hence, you know how I believe 2018 will turn out (Gold wins).

VRA Portfolio 

Lastly, a quick recap of 2017, the VRA Portfolio has a net gain of 411% on all Buy Recommended stocks (including the '17 profits we've already locked in). This puts us at an average return per stock of right at 30%. 
To our new Members, please make sure to log to your VRA Members Site at least 1-2 x each week. Make sure you are positioned correctly...we're going to have some fresh trades here by year end. 
To become a new member sign up today at VRAinsider.com to receive 2 Free Weeks!
 
Until next time, thanks again for reading..
 
Kip  

 

 

Friday
Dec082017

VRA Weekly Recap 12/8/17: Market internals and the Fed Rate Hike

Good Friday Morning All,

After running VRA System scans I can report that last weeks wild trading (from last Fridays flash crash, the market has been volatile) has significantly reduced the overbought status of each US major equity index. Again, we are in the most seasonally bullish time of the year and the (likely) passage of the tax bill is not priced into the market yet. In addition, the mega deal between CVS and Aetna Insurance…$69 billion in size…is almost certainly a sign of things to come.

 

 

Remember, the tax bill will bring $2 trillion + back into the US. Repatriation makes a great deal of sense to US multinationals when its taxed at 20% compared to 35%. While I expect most of the incoming cash to be spent on mergers and acquisitions…plus share repurchase programs…without question, a good chunk will also go towards hiring and wage increases.

But there’s also a larger macro point that gets lost in the weeds. Since 1995, the US has lost 55% of all public companies to M&A activity…buyouts and taking companies private. The other culprit of late has been the Dodd-Frank act of 2010. It’s design may have been to minimize future risks from the 2008–2009 financial crisis, but its overly burdensome regulatory effect destroyed the IPO market in the US.

Take a look at the chart below. IPO’s topped out in 1999 at 486. Last year, the number of IPO’s fell to just 105. Going forward, we can expect a sharp increase in IPO’s…its another of Trumps goals.

The larger point here is that the 55% drop in publicly traded US co’s has resulted in a supply/demand imbalance. The investment markets are approaching $100 trillion in total size (globally), meaning that we have far more money chasing far fewer public co’s. HIGHLY bullish for stock prices going forward…it also helps to make sense of todays higher P/E multiples.

You know my thoughts. DJ 25,000 by year end. DJ 35,000 by end of 2020.

Market Internals

The rotation out of tech and into value continues. The tech heavy Nasdaq has been weak, but no, I do not expect the weakness to turn into a sharp sell-off. The markets internals are holding up just fine. Take a look at yesterdays closing numbers. While New Highs & Lows volume were mixed, the number of Advance/ Declines was very bullish.

For this market hiccup to evolve into a more serious pullback (even in stocks being rotated out of), these kinds of powerful market internals will have to begin weakening…quickly…I simply do not see this in the cards.

Markets that refuse to demonstrate weak internals, even during negative news like both of this past weeks “fake news driven declines”, are telling us that they want to continue moving higher still. Here are yesterdays closing internals, on what was a flattish day.

2–1 positives across the board. I’ll be as clear as I can; these are not the internals that we would expect to see in a market that wants to go lower. Add in the fact that we are in a highly bullish seasonal period…in fact the most bullish of all…and its highly likely that last Fridays flash crash lows will be the lows for some time.

We’re also seeing new all-time highs in housing, financials and the transports. Just not at all the kinds of market action that we would expect to see in a market (or economy) that is about to change direction.

AAII Investor Sentiment Survey

Below is Wednesday’s weekly AAII update. Bulls at 36.9%, bears at 34.2% and neutral investors at 28.9%. Bull markets end when bulls are hitting 60% and for weeks on end. Until we have the final ‘lift-off” stage in the stock market…the same one that I believe will take the DJ to 35,000 or more…I see no significant top in the stock market.

FED Meeting and Rate Hike

The FED meets next Tuesday and Wednesday…they’ll then announce their rate hike on Wednesday at 2PM EST. And yes, the FED is going to raise rates, barring a major surprise. In fact, if the FED does not raise rates, I would expect the market to sell-off a good deal. The markets do not like surprises…as we’ve seen in the last weeks trading sessions with TWO fake news stories about the Trump administration (ABC news fake news on Friday and the fake news that Mueller has subpoenaed Tumps bank records…also fake news).

IMPORTANT: the action we are seeing in the markets…which features what I can only call bizarre trading anomalies…is taking place in front of the FED’s expected rate hike next Wednesday. Emerging markets, like China, are being taken to the woodshed. We’re seeing the same in precious metals, miners, industrial metals, energy, etc….the global relation/inflation themed names.

Because we have seen this exact action take place before the last 4 rate hikes, we also know what the outcome will almost certainly be resolved higher. IF NOT, then this would represent a pattern change…I see a 90% probability that there will be NO pattern change (because at this point the markets, especially rates and bonds, are hinting at a slowing global economy…possibly even a recession). I see the odds of this as tine, meaning that the current correction in global relation themed names is giving us a gift here

I also expect the current sell-off in PM’s and miners to end within the next 48–72 hours or so….in the next 2–3 trading sessions.

Final point on precious metals and miners; increasingly I am increasingly hearing from clients and traders that they have been selling their gold and buying Bitcoin. Frankly, who can blame them? Bitcoin is trading at $15,896 as I write this morning. The manipulators have yet to find a way to manipulate cryptos…of course they’ve been doing this to gold/silver for decades. GOLD SHOULD BE DOING WHAT BITCOIN IS DOING…and it should be over $5000/oz today.

For my subscribers(click here to receive 2 free weeks), in our next update, as we get closer to the FED’s hike, I will show you exactly what I am talking about. The price suppression in PM’s is criminal. It’s robbed us of bitcoin-like gains…of this I am beyond certain. But this suppression is about to end. 2018 will tell the tale…and its this final pre-rate hike selloff that will remove the final weak hands in precious metals and miners.

As to Bitcoin, its in parabolic mode right now. This is when huge moves higher take place, almost universally followed by sharp selloffs. But bubbles can take on a life of their own…this one could take bitcoin higher still. Also know this; the public is now rushing in to buy Bitcoin…this typically marks the beginning of the end of the current move. I have no idea where that top may be…as long as investors are properly diversified, Bitcoin still has a place in a portfolio. But gold is a far smarter investment today…especially with the post rate hike recovery move higher that I see happening.

Until next time, thanks for reading… have a good weekend

Kip

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Friday
Dec012017

VRA Weekly Recap: VRA System/Market Update, Important Mega-Bull Market Rotation. Energy, Biotechs, Retailers, Precious Metals/Miners and Bitcoin

Good Friday morning all. November went out like a lion….big 331 point move higher in the Dow Jones (DJ), with a solid recovery move higher in the nasdaq, which was destroyed on Wednesday. Exactly what we want to see….as stock market bulls.

If you’re watching the news of the Flynn guilty plea, you know that this is why the Dow dropped 300 points. If this was not a Friday (I don’t buy on Fridays typically) I would probably be recommending that we take action….

We’ll wait til Monday and see whats what.

But I see this as an absolute nothingburger. The bigger risk is that this delays or derails the tax deal. I’ll be surprised if this amounts to anything more than a 1/2 day sell-off.

For our newer VRA Readers, know that in January of 2013 the VRA went bullish on the markets (after buying the exact lows in March 2009…turning bearish in mid 2012…then back to fully invested 1/13.

For those that follow me on Twitter, you’ve seen me make this statement many times over the last (nearly) 5 years; “if you’re not long, you’re wrong”. Yesterdays melt-up like move higher is just the beginning…rather than the end of this mega bull market move higher. When/if the VRA flips back to bearish, you’ll be the first to know. We’ll get an advance heads up from the internals…but today, there are just no signs of worry.

Having said that, also know this; in the short term, each US equity index is trading at Extreme Overbought Levels on the VRA System. Does not mean a correction is imminent…but we should not be surprised if we have a few down days….but candidly, this bull market looks like its ready to go parabolic. I will touch on this again at the end of this post.

VRA Market and Portfolio Comments/Charts

We finally got the breakout I have been looking for in the biotech’s. Check out this BEAUTIFUL chart of XBI.

The VRA System nailed the lows in this group in Q1 2016. Since then, check out this bullish channel! It looks certain to me that the lows are in place. This bullish channel is incredibly well defined…

 

OIL.

The VRA was bearish oil at $100 + and then flipped to bullish at $32/barrel in February 2016. Again, check out this gorgeous chart as well. With the high volume breakout we’re seeing, we could have a monster move for oil in 2018 as well. I expect just that. Next up we want to see a strong move higher through $59….then its $62 pretty quickly.

Even as oil was soft earlier this week, we saw XLE and OIH (energy ETF’s) move higher pretty powerfully. This is exactly the divergence we want to see…it is telling us that oil will likely follow.

It’s time for us to get paid

GOLD

Here’s another chart that is telling us higher prices are in our near future. Check out the volume expansion and rising RSI and MFI over the last 6 months or so. Yes, gold has been weak of late….we expected this going into the FED meeting and rate hike in less than 2 weeks.

But, while gold was down .80% yesterday, the miners were down just .20%. Again, this is the positive divergence we want to see. Beginning next week I will walk you through our exact strategy for PM’s and the miners, into year end. Let me repeat; we are going to have a YUGE move higher in PMs and the miners in 2018. My gold target remains $2000/oz. This will produce the biggest mining stock gains in more than a decade. Let me tell you, now is the time to become a VRA Member!

What could change my mind, in the near term? A big move lower in gold….through the 200 dma, on heavy volume. I’ll be shocked if this happens. We will soon be rewarded.

In all modesty, I know of no one who has produced more profits in this space than I have…going back to 2003 when I issued my buy rec on gold/silver/miners in my second ever VRA Update. Now its time for the most explosive bull market in the history of precious metals. Think “bitcoin-like”….for the highly leveraged miners.

 

Speaking of Bitcoin

As I write this, Bitcoin is back above it’s $10,000 level. I’ve written about Bitcoin on a handful of occasions and have owned it personally since $600, but trust me, I did not buy enough…you never own enough of something that goes parabolically parabolic.

The chart below is of 2017 Bitcoin trading, featuring important market cap milestones, including the incredible move from $1000 to near $10,000…again, in just this year. Remarkably, since just October, Bitcoin has soared from “just” 4k.

Check out this chart of the ride Bitcoin has taken us on.

My Thoughts on Bitcoin:

1) In my last Bitcoin note I said that it’s likely the entire market cap for all “cryptos” would ultimately reach $1 trillion (again, for all cryptos…Ethereum, Litecoin and the near 1000 others). Today, the total market cap for all cryptos sits at approx. $300 billion. Based on this, I would not be surprised to see Bitcoin hit $30,000 (or 3 x higher than today)

2) Once Bitcoin hit $9000, it was almost certain it would hit $10,000. The same track record exists for stocks that hit $90…or $900…its a high probability trade that it will hit the “10” mark.

3) We have a number of VRA Members that are actively invested in this space. First, congratulations! Your feedback and research has been most helpful and appreciated. Second, just based on feedback and sentiment, I would say that there are very few among us that have “large” exposure to cryptos. As we know with investor sentiment, bubbles do not tend to burst until the public is “all in”…and I do not get that sense at all, from my research.

4) The biggest risk in cryptos today? Its the same as its been for a long while…government/central bank intervention. In my view, until the combined market cap hits $1 trillion for all cryptos, it is likely that they will not be viewed as a “systemic risk” by our global powers that be. In other words, smooth sailing on the intervention front for at least a while longer.

5) Finally, now that futures have been approved for crypto trading, institutional investors now have the ability to get involved…from a legalistic framework. In the short term, this adds new buyers and fresh liquidity. In the longer term, it could also bring about new hedging and shorting strategies. AKA, price suppression/manipulation.

6) Finally, in early 2018 I continue to hear that there will be 2–3 IPO’s that we will take a close look at. Companies like Coinbase (wallets that hold cryptos) rushing to capitalize on the frenzy. I will be watching these closely. This is where the first official VRA Buy Rec in this space will come from. Please continue to send me your research.

2018 Bitcoin-Like Moves

Should Bitcoin hit $30,000 next year, thats another 300% move higher…but again, Bitcoin has gained 1000% in 2017. To duplicate that move in ’18, Bitcoin would have to hit $100,000. Anything is possible…but the odds of back to back 1000% years would be remarkable…also highly unlikely in my view.

Instead of “buying high” we want to “buy low”. The VRA Portfolio has 4 holdings that have the potential to have their own 1000% moves…over the next 12–24 months.

BIG Market Rotation

As we move into December, I see nothing that says our global bull market will slow down. In fact, I see far more signs that it is about to speed up. My favorite sectors, based on both fundamentals and technicals, continue to be energy, precious metals/miners, biotechs, retailers and small cap, special situation growth stocks.

Here’s my tweet on the major market rotation from Wednesday It sent the DJ up another 103 points while sending the tech heavy Nasdaq a big 1.3%.

VRA Members are positioned perfectly for this rotation….and next up, coming out of the FED rate hike in 2 weeks, we’ll see big moves higher in PM’s and miners as well. I’ll get into all of this in more detail in coming updates. I love energy, biotechs, retail here…value stocks are now being rotated into.

AAII investor Sentiment Survey

Bulls at 35.9%, bears at 31.6%…again, in no way do these readings indicate a market top is close. My targets remains DJ 25,000 by year end and 35,000 by year end 2020. Both could be low….

Until next time, thanks again for reading….have a great weekend.

Kip

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Wednesday
Nov222017

VRA Market Update: Happy Thanksgiving. Exciting Year End. BIG Breakout in Oil. Dow Jones 35,000. Silver and Gold. Housing Market

Good Wednesday Afternoon all. I'd like to wish everyone in the US a very happy Thanksgiving. Markets are closed tomorrow and open for just a 1/2 day on Friday. Yours truly will be back with you first thing Friday morning (at the latest).

VRA Market Update: First, the fundamentals.

As you know, I am hyper-bullish on both the economy (US and global) and the stock market. My LT target for the Dow Jones is 35,000. Of course no one knows for sure...but as I've written for a very long time, until a euphoria filled move higher takes place that gets everyone uber bullish, we will not see a market top.

Watching Bloomberg this morning I found the rare Wall Street portfolio manager that agrees with me.
 
Here's my tweet and link to the video: https://twitter.com/KHerriage/status/933305105662840832



He makes an excellent point. I see FAR too many that continue to fear monger investors that stocks are overvalued. They are not. By my estimates, today the DJ should be trading at 28,000...we're headed there at a minimum...likely far faster than most believe could take place. This is the beginning of the melt-up.

OIL IS FLYING

This morning, the breakout in oil is continuing, with near $58/barrel prices, levels not seen in more than 2.5 years. Take a look at this beautiful chart.

Once we broke through $56, there was little doubt that the next big move would be higher. Again, "volume precedes price movement"...see the massive volume increase in oil over the last year? This chart looks similar to what we're seeing in every major industrial metal...long term, large volume moves higher. This tells us that the smart money is coming in hard and that this move will be more than just a minor breakout higher. BTW, we also see very similar looking charts in gold and silver...as I'll show you next.


Silver

Here's the 2 year chart of silver I referenced. Again, check out the explosion in volume. Combined with the fundamental story of a big global economic recovery (silver is as much an industrial metal as it is a precious metal), plus the fact that inflation will be one of the biggest macro themes going forward, precious metals must be owned. Of course this is even more bullish for the miners. Watch what's about to happen with this sector...coming out of the FED rate hike...we've seen moves of 10% to 127% in GDX (mining ETF) over the last 4 rate hikes. We're going to make SILLY money here....and we're certainly due. Patience will soon be rewarded. 


GOLD

Gold is being bounced around like its on a pinball machine. Watching the day to day drip. drip drip in gold/silver/miners, with continued price suppression schemes of the manipulators has reached absurdity, as you'll see in an article from GATA in just a moment. 

First, take a look at this LT 4 year chart of gold.The 200 day moving average sits at $1265/oz, meaning that gold is just $10/oz above. Still, everything about the chart below says that it must be owned here...same with silver...and of course the miners. 

For one, check out the huge volume increase in just the past year. My mentors taught me that "volume precedes price movement" and based on this single fact alone, the next major move in gold should be higher...much higher. 


The FED is set to raise rates again in December. It's my continued belief that while precious metals may be "soft" heading into the rate hike, just as we've seen with the last 4 rate hikes, once it is completed we can expect a big spike higher. Yes, that means we have a couple of weeks to sweat it out...not much we can do about that... gold, silver and the miners will rally hard into year end then into 2018. Inflation is back...we see it everywhere we look...inflation is golds best friend. 

The article below, from GATA (gold anti-trust action committee) spells out the atrocity that is the price suppression scheme of central banks and their favorite global mega banks. 
This quote sums it up best...92-1 ratio of paper gold to physical gold. This is the criminal amount of dilution that we are hit with daily....

Zero Hedge writes: "According to the Reserve Bank of India's estimate, the ratio of 'paper gold' trading to physical gold trading is 92 to 1, meaning that the price of gold on the screens has almost nothing to do with the buying and selling of physical gold.

Dear Friend of GATA and Gold:

 Zero Hedge called attention to Friday's column by Gillian Tett of the Financial Times, to which GATA also had called attention --


in which Tett speculated, as many in the gold sector have done, that the futures market being planned in bitcoin by CME Group would tend to suppress the cryptocurrency's price. 

Of course the use of futures markets to suppress gold and commodity prices has been one of GATA's themes for a long time, and a theme of the British economist Peter Warburton for even longer:

So Zero Hedge concluded its post by suggesting that Tett now pursue the gold price suppression angle, noting that GATA has been urging just that on the FT for quite a while. 

"This makes the gold market and, therefore, the gold price something of a mockery." As Zero Hedge has highlighted time after time, the gold price has frequently been subject to waterfall declines, as huge volumes of gold futures are dumped on the market with no regard for price. ...

"Perhaps the FT journalist, Gillian Tett, could write an article on gold, instead of bitcoin, explaining how the price of the former -- a widely viewed indicator of financial risk -- is being suppressed by derivative trading. Indeed, Tett was present at a private dinner in Scott's of Mayfair several years ago when the Gold Anti-Trust Action Committee gave a presentation on exactly the same process she expects to lower the bitcoin price."
Zero Hedge's commentary is headlined "Financial Times: Sell Bitcoin Because the Market Is about to Become 'Civilized'" and it's posted here:


Housing Market Rally 

As you know, I'm "all-in" on the Trump bull market and ongoing US economic recovery. That's no secret to anyone that's been reading the VRA, since the election. 
 
From a quick return to 3% GDP to the remarkable recovery in consumer confidence and spending, one thing is crystal clear; this economic recovery (both in the US and globally) has at least 2-3 years to run. The good news for us, as we witnessed again this past week, is that investors continue to be more bearish than bullish (as we saw in the AAII Investor Sentiment Survey). As a contrarian, bearish investor sentiment is exactly what we want to see. Bearish sentiment confirms for us that we are nowhere near the highs for this bull market. Those highs will come when the AAII survey is 60% + bullish...and for weeks/months on end. Those highs will come when everyone is adamantly bullish and (like me) and predicting Dow Jones 35,000 by 2020. 
 
And of course one of the biggest reasons to be bullish today...seasonality. 90% + of all market gains come during the November to May time frames. 
 
But for those looking for clear proof that the US economic recovery is not only real but still in its infancy, the chart below should provide that proof.
 
Below is a 15 year chart of HGX, or the US Housing Index. 
 
In 2005, housing topped out. In 2006, housing began to plummet. It was at this time that the VRA began to recommend caution on both the economy and in stocks. I may have been about 6 months early, but I know that my warnings helped many to either sell their real estate or simply put off buying more of it. 



In 2008, the crash was on. And what a crash it was. Most Americans are still digging out from the Great Financial Crisis. At least that was the official title our financial charlatans assigned to it. As always, we should ignore what these wrong-way PHD economists tell us....because here's the hard core truth; the US was actually in a "Depression" for 4 years. That's right...we actually went through an economic depression.
 
With GDP barely averaging 1% during this time frame, when you remove the 1.4% in GDP that the income for government workers provides for the US economy, from 2009-2013, the US was actually in a tough depression.
 
This is why, in early 2013, the VRA went from LT bearish on the stock market to LT bullish...and I've remained LT bullish ever since.   
 
Now, take one final glance back above at the HGX chart. That blue circle tell us where we are today....fresh all-time highs. And here's what matters most; when markets break out to new all-time highs, that breakout actually marks "the beginning" of the move higher...rather than "the end" of the current move. I can find no example of fresh 10 year highs in any market that then signaled reversal, once those new all-time highs have been reached. Not a single example. 
 
Barring a black swan event, a ramping housing market, along with US income tax receipts at record highs and the bullish combination of sentiment and seasonality, we have no choice but to remain fully invested. We also have no choice but to be highly bullish on prospects for the US economy.  

It's for these many reasons that I can now predict an end to the long term destruction in US retailers. As my son and research assistant Tyler reminded me this week, "Amazon is not the only company that's learned to use the internet to grow their business. The weak hands have already been driven out of business...today, only the strong have continued to survive". 
 
Now, take a look at this 2 year chart of XRT (Retailer ETF). First, XRT remains 13.5% below its 2016 highs...in this kind of powerful bull market its hard to find any sector that's down this much from its highs. As a contrarian, we love this disparity.  



For all of the myriad of reasons I've written about, I expect this highly bullish seasonal period (November-May) to produce the next ramp higher in the broad markets. Last week the bears had their chance to take the markets lower with back to back intraday DJ losses of 150 points. But the bears look to have failed, as the markets came roaring back mid-week (outside of a Friday -100 point day). 
 
For the DJ to reach my 25,000 target by year end we'll need to see a 6.8% move higher to close the year out. Admittedly, that's one heckuva Santa Claus rally, but whether or not we reach 25k by year end, I remain highly confident (based on VRA System readings) that a sharp move higher is directly in front of us. 

US markets look near-perfectly poised to have a strong close to this holiday shortened Thanksgiving week and then begin their next spike higher to fresh all-time highs into end of year. Based on the VRA System, we MUST stay fully invested in the market.

Finally, I'm looking for a vey solid close to trading this week, and a continuation of a big move higher into year end. We are positioned well. The best value that I see today resides in energy, precious metals/miners, biotech and the retailers. Until the facts change, this is how we'll continue to stay fully invested. 

Until next time, thanks again for reading....have a very Happy Thanksgiving! 

Kip 

 

To receive two free weeks of the Daily VRA Updates, sign up at VRAinsider.com

Friday
Nov172017

VRA Update: 25,000 Year End Dow Jones. The VRA Approach to Crushing the Market, Sentiment Back to Heavily Bullish Readings.

Nov 17, 2017

Good Friday Morning all. A big recovery day in the markets yesterday, with 1% to 1.5% moves higher across the board in the Dow Jones, S&P 500, Nasdaq and Russell 2000.

As we’ve covered here often, in powerful equity bull markets like the one we are in today (globally) corrections are short-lived, quickly reversed and soon thereafter lead to fresh all-time highs. This is what we witnessed the beginning of yesterday. Take a look at these internals:

1) 4–1 across the board, advances to declines

2) Almost 10–1 new highs to new lows

3) Nasdaq at close to 10–1, up volume to down volume

The internals of the stock market make up an important element of the VRA Investing System. Even during the “pause” the markets internals held up well. Were this to be a large decline in the offing, the internals would have been negative, over a 7–14 day cycle. We did not get a whiff of this…instead, we saw a near immediate reversal move on heavy volumes.

Combined with the manner in which investor sentiment flipped from bullish to bearish over the course of just one week…along with record numbers of investors buying the VIX (fear index)…the VRA System signal was clear; the pause was to be short-lived only. Next up, the year end rally is ON. My DJ target of 25,000 by end of 2017 remains intact.

The VRA Approach to Crushing the Market

Going back to inception of the VRA in 2003, each year we have outperformed the markets (using the S&P 500 and Russell 2000 as benchmarks) in 13 of 14 years. Through the 3rd quarter of 2017, our positions were up an average of 44%, versus just 11% for the S&P 500 and 9% for the Russell 2000.

Going back these 14 years we have had numerous VRA buy rec growth stocks that have risen 500–1000% while also using the VRA System to time our purchases of leveraged ETF’s and big cap domestic/international buy recs, giving us exposure to the broad markets as well.

The VRA has always been aggressive. It always will be. My investing style is not for everyone, for just this reason, but for those willing to invest a portion of your funds in high growth opportunities, well…this is my niche market. This is my USP (unique selling proposition).

I have always recommended building concentrated positions in my favorite holdings because this is how big gains in your portfolio take place. Peter Lynch, the best mutual fund portfolio manager in history (Fidelity Magellan Fund) averaged 28% returns over a multi-decade career. He did this by investing in growth stocks that he loved (great products with great mgt team) and then holding those positions until the story changed.

Remarkably, Lynch made money on just 6 out of 10 stocks he purchased, over the course of his career. 60% is Hall of Fame on steroids numbers for a baseball player but one might think that the best in the business could do better than a 60% success rate.

Here’s the key to his success; Lynch wrote often that the vast majority of the stocks he bought tended to produce small returns for an extended period (sometimes for years)…he used these pullbacks to add to his positions…because once his favorite stocks began to run, they REALLY took off. Lynch made his big killings in stocks that he owned for 3–4–5 years. By that time, he had accumulated big positions in his favorite companies. And his patience allowed him to crush the markets.

My approach with the VRA is similar to Lynch’s, but a big part of my work is timing the markets to ensure we are on the right side of both short and long term moves. Bottom line; I would rather not have to wait 3–4–5 years or more for my favorite investments to soar. And I really don’t want to lose money on 4 out of 10 holdings.

VRA Portfolio Holdings That Have the Potential to Jump 50–100% + With One “Event”

Having worked on Wall Street for 15 years, I know my personal investment psychology. Over the years my clients came to me because my own style matched theirs. I want to beat the markets, year in and year out, but what I really want to do is absolutely CRUSH the markets. I also know thats why many/most of you are here with me today.

In order to accomplish this, we must buy/hold growth stocks that have the potential to rise 50–100% + in very short order….namely on one “event”.

VRA Market Update

Below is a (rather large) screenshot of how various markets have performed through this past Friday. Dow Jones and S&P 500 up about the same (15% and 18%), while the Nasdaq has jumped a big 25% and the Russell 2000 (small caps) pulling up the rear, up just 8%.

The one that gets our attention of course is Bitcoin, up a huge 617%. While I’ve written positively about Bitcoin for years I have never officially recommended it…it does not trade as a stock, and while that’s similar to gold and silver in many ways…I have not yet found a method of investment that would allow me to include it in the VRA Portfolio.

But that should change in early 2018. I received word over the weekend that 2–3 IPO’s will be taking place that will allow us the opportunity to jump on the Bitcoin train, officially. As I learn more I’ll give you an advance heads up. Based on what I am hearing, a February launch looks likely. And no, based on the VRA System I would not recommend buying Bitcoin (or other crypto currencies at todays prices). A shakeout is taking place…we’ll wait until we have better timing…which looks to be a Google-like IPO of a crypto currency system…again, early to mid-February.

What we also see above is the fact that gold has risen some 10% in 2017. Take a quick look at the chart below. We see a most interesting pattern when it comes to December FED rate hikes.

The FED has raised rates twice in December, over the last 2 years. As you can see below, both rate hikes brought with them a huge move higher in gold (and an even larger move higher in the miners).

Following the 12/15 rate hike, gold spiked a big 31% over the next 7 months. Then, following the 12/16 rate hike, gold went on another tear, rising more than 20%in the following 8 months.

See the pattern here?

Next up, the FED will almost certainly raise rates at next months meeting. Should gold repeat its past two spikes, which brought an average gain of 25%, the next move in gold will take it from its current price of $1278/oz all the way to $1592/oz.

AAII Investor Sentiment Survey

The latest readings from the AAII Investor Sentiment Survey, my go-to sentiment survey for more than 25 years. As you can see, bullish percentage has collapsed back to 29.3%, a huge 15.8% drop in just a week, while bearish investors have surged to 35.2% with neutral investors at an also enormous 35.2%.

And folks, this massive jump in pessimism took place with just a small move lower in the markets. Stunning changes. Let me repeat…this is not how bull markets end…not even close. Bull markets end when bullish % is over 60% for weeks on end. Bull markets end when everyone and his/her mother is ALL IN…and are certain that stock prices will soar going forward. Just based on this reading alone, it is highly likely that this short term pause in the markets is close to ending.

We also got this update on the VIX this Wednesday. The VIX index is also referred to as the “fear index”….a gauge of investor optimism or pessimism. What we see below is that investors are buying the VIX more aggressively than at any point this year, which also means at any point EVER.

Never in the history of the VIX have investors been this bearish. As a contrarian you already know what this means….its almost certainly time to take the other side of this equation…the majority is very, very seldomly on the right side of any trade.

OIL Update

Take a look at this 3 year chart of oil. Besides the major bottom that you see below from 2/16, take a look at the explosion in trading volumes.

My mentors taught me that “volume precedes price movement” and nowhere can that be more clear than the surge in oil trading volume below.

Based on everything that I look at, from both fundamentals and technicals, the price of oil is in a multi-year bull market that might just send oil prices back to the $100 levels far faster than just about anyone is forecasting. We certainly have a Mid East war brewing…the sides have been drawn…Saudi Arabia vs Iran (with allies backing both sides that appear ready for a fight). We are positioned here perfectly.

Until next time, thanks again for reading…

Kip

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