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VRA Update: Housing is Rocking. Perma-Bears Continue to Amaze.

The Trump-mania bull market continues with no signs of slowing down. The VRA has been bullish on US markets since early 2013 and my LT targets remain in place...Dow Jones 25,000 on the low side...but what's more likely is a massive blow-off rally phase that sees the DJ top 30,000. All before the end of Trumps (first) term.

First up today, the broad market and some VRA Analysis. It never ceases to amaze me how the perma-bears come out of the woodwork each time we have a modest correction. I've fallen into this trap a time or two along the way, but only from the position of short term, massively overbought market trades designed to make short term profits as the markets corrected. However, longer term, the VRA has been bullish since 2013 and I see no reason to deviate from this view today. This is when I have to post a fresh housing chart, to make my case as clear as possible.

Below is a 15 year chart of HGX (housing index). I've included two blue circles. The first represents the 2005 highs in housing. Once the highs were in place, the bottom really began to fall out in early 2006. This is when I began to post warnings to VRA Subscribers that something big was coming and that it almost cleanly would not end well. I was a bit early...the stock market would hold up until 2007...but then the bottom fell out and we all remember the end result; the worst economic crisis since the Great Depression (while the VRA booked 630% in net profts during the worst 6 months of the decline). 

That horizontal blue line you see below tells us something very interesting, namely that HGX is just now approaching a new all-time high for housing stocks. Let me repeat; in my now 32 years in the investment business there has never been a significant market top when the housing market was performing this well. This is a point that perma-bears cannot argue...which is why they almost never discuss it.  

Two final points on housing. One; Donald Trump is one of the most successful real estate investors in all of history. As president, he knows that solid real estate/housing markets are the underpinning of a strong economy. He also knows that bank lending and money flows hold the key to expanding said economic growth. Hence, it's highly unlikely that this pattern of a strong housing market will reverse anytime soon. Add to this, the FED....even as they slowly raise rates....has made it very clear that they are more than willing to let the economy run hot before worrying about inflationary pressures building. Yellen and team have one primary job...protect their banking brethren...and they do this by insuring that the growth of debt markets is allowed to continue, without friction. I see nothing that says this commitment is about to change. NO broad market top is likely until housing reverses...

Next up, take a look at this 3 year chart of QQQ (Nasdaq 100). Recently, the QQQ fell below its 50 dma and is fighting to regain this important moving average. While not yet at extreme oversold levels that we've seen on the 3 occasions marked by the vertical blue lines below, QQQ is beginning to approach the same oversold levels that have marked moves higher of 20% plus. The bears that have come out of hibernation recently and are boldly predicting that the top is in place and that the next crash is directly in our path. 

Highly unlikely. Don't fight the tape...don't fight the FED (especially when central banks globally are aggressively buying both debt AND equities).

Yes, I continue to believe that FANG stocks are ridiculously overpriced...this certainly applies to Netflix (NFLX), which I see as the next company to be steamrolled by Amazon (and a myriad of fresh competition), but it's highly unlikely that the Nasdaq/QQQ will see a final top until we have that blow-off mania phase that marks the top of every major bull market. 

Let me also repeat; the Dow Jones will likely reach 25-30k before any final top is in place (barring the always possible black swan surprise). 

Next up, precious metals and the miners. I'm posting just one chart here below....its of GDX (miner ETF). This chart is not my handiwork but its making the rounds online and we see some most important developments in it. What you see below is GDX trading back towards the $21 level, a triple bottom going back to March. This level has served as a springboard for sharp moves higher each time and with GDX hitting 85% oversold, I look for exactly the same this time. 

As tempted as I am to aggressively recommend additional purchases of my favorite miners, I must also stick with the VRA System. This group (including gold and silver) MUST regain their primary trend bull markets (50 and 200 dma). Until this happens, caution is warranted. But remember, these are technical indicators only....the fundamental story of PM's and the miners could hardly be more positive. Massive global debt and bubbling currency inflation tells us that we MUST own this group for the long term. 

HT @bamabroker

Until next time, thanks again for reading...


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