VRA Investment Update: CPI at 40 Year High. Thanks Again Biden. Textbook Bottom and Bear Trap. Gold and Miners Love Rising Rate Cycles

Good Thursday morning all. The much awaited CPI data is out and its a hot number, with inflation hitting a 40 year high as the CPI posts a 7.5% annual gain in January. Honestly, don’t most of us look at this number and say “what do you mean it only rose 7.5% year over year…based on what I’m paying for stuff it feels much more like annual inflation of 20% +.”

Lets see, what’s changed over the last year? Thats right, we got a new president…the basement dweller with “81 million votes”. Not sure about you but I cannot find a single person that will admit to voting for Biden. 

The markets were flat in advance of the CPI data but immediately went south, with DJ now -225 and Nasdaq down a bigger 260 (-1.8%). 

In the bigger picture, this market has been on an absolute bull run, following what looks to this market watcher to have been a perfectly set “bear trap”, as I explained in our VRA Podcast yesterday. 

The 1/24 market bottom and the corresponding move higher has been “textbook”, so far. 

First, we had the 1/24 capitulation…classically completed on a sharply lower Monday open, just as the average Nasdaq stock had already collapsed by more than 50%.

Second, tech…led by the semis…have led the way higher. Nvidia (NVDA), which we highlighted in yesterdays VRA Update, has been a nonstop freight train higher…up a big 6.5% yesterday…and +22% from those 1/24 capitulation lows. 

Third, our VRA Investing System continues to pick up “significant pattern changes”, both in market internals and key leadership action, as the smart money hours are flipping back to bullish as well. Yesterdays internals were the best readings of 2022, with 80–85% up volume (NYSE, Nasdaq)…6:1 for Nasdaq…and another big day for advance declines. Back to back, fantastic days.

VRA Bottom Line: The markets have zoomed higher from the 1/24 lows. In just 2 weeks, a 2300 point move higher in the DJ (+7.5%) and a near 1400 point move higher in Nasdaq (+10.6%) and a BIG 16% move higher in the Semis (SMH)…and we remain buyers of dips, in our VRA Portfolio Positions. 

We’re still in the most seasonally bullish time of the year, equity inflows and share buybacks are piling in and the biggie; we’re still just entering year 3 of a new bull market, driven by (still) solid corporate earnings and record amounts of global liquidity. As we’ve said now for 18 months plus, this is a structural bull market, with the Trump Economic Miracle (still) serving as its springboard and corporate financial engineering emerging as a dark horse element for sharply higher prices. 

Plus one of mine and Tyler’s favorites; we told you several months ago that Biden was already a lame duck president…that’s now being recognized as fact…and the markets love DC gridlock as much as just about anything. They also love (early) rate hikes…but that looks like a stat that many market watchers have (oddly) yet to figure out. I think they’ll get there…”

Gold and the Miners LOVE Rate Hike Cycles 

Check out this 20 year chart of gold below, marked by points 1–6.

Point 1 is where I first recommended gold and silver, in my 2nd ever VRA Update in 2003. Gold was $375/oz….silver was $4.75/oz. 

What followed was the rising rate cycle of 2004–2006 (17 straight rate hikes) when gold that more than doubled in price. 

Point 5 was the next rate hike cycle (2016) as the Fed jacked rates higher 8 times in Trumps first 2 years. Again, gold doubled in price.

They REALLY love rising rate cycles. 

Finally, here’s golds 1 year chart, featuring a pennant formation (even the flagpole is in place). I believe a big breakout is nearing.

Until next time, thanks again for reading…

Kip

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VRA Investment Update: The Fed Statement & Powell Presser Had Little in Common. Dovish! Markets Have (Likely) Bottomed. Sentiment is Screaming "Buy".

Good Thursday morning all. Following another wild day in the markets, here’s what looks to matter most. The last 3 days have brought severe intraday weakness…Powell made sure of that yesterday…but on each of the 3 days the smart money hour was “bullish”. On Monday we recouped 1200 points in losses….500 on Tuesday…then 500 again yesterday. Markets that rise in late day/smart money hour trading are typically anything but bearish. 

But just a horrible presser…the worst I’ve seen in my career. He was nervous, stuttering and stammering, completely non-committal and man oh man does this guy like to blabber. The markets have no confidence in the money printing rock star, whatsoever. From +500 to panic selling to someone cutting his mic. Of course, the second his mic was cut, it was lift off.

Quick recap of JP’s (latest) disaster of a presser, which I forced myself to go back and watch again last night:

- It was even more dovish than I remembered it. Powell committed to “nothing”, as he said a version of “we don’t yet know” more than 50 x. 

- He opened by saying (exact quotes): “The economy is slowing. The implications for the economy are uncertain and its causing great hardships for families. We have not yet made decisions on exactly what we will do”.
 
- Does any of the above sounds like 4 rate hikes in 2022 to you??

- Again, the FOMC statement read NOTHING like the words that came out of JP’s mouth. Importantly, the statement made clear that they would NOT start selling bonds (they own $9 trillion), but would instead let them “roll off” or “run off”, meaning they will simply let the existing bonds mature. Again, that’s not QT. 

My read: Obviously, inflation is the Fed’s biggest concern. Yellen (Treasury Sec and previous Fed Chair) is now a full-on political creature. Hiking rates aggressively in a midterm year and causing a severe bear market potentially in the process is NOT what her boss wants to see happen. JP likely has Q1 to get inflation under control, hence all of the jaw boning and supposed hawkishness. 

The markets have little to no confidence that JP know what he is doing. They’re right to have that view, certainly with the fact that he’s already made 4 major policy mistakes since taking the job.

VRA Bottom Line: Mondays lows should be THE lows. Thats:

- 33,150 on the Dow (34,168 today)

- 4222 on SPX (4349 today)

- 33,150 on Nasdaq (13,542 today)

** If these lows are taken out (by more than a hair), lower prices are likely into the first rate hike…then blast off higher. But I see Mondays lows holding. Next up: we must regain the 200 dma’s.

Sentiment HIGHLY Bearish (that’s bullish):

Folks, it’e getting harder to find bulls on Wall Street. But I promise you this; if we get the move higher that Tyler and I expect, these same gurus will tell us that they bought the dip. I was actually a bit surprised to see this yesterday. As flattered as Tyler and I might be that GS (vampire squid), Citi and JPM are following our market calls, you know our views as contrarians; we almost always feel more comfortable when we are in direct opposition to what the NY swamp has to say.

BUT…in this case, since we’re leading and not following, we are in complete agreement. 

This is still setting up as a strong rally into weeks end. Likely longer. 

AAII Sentiment Survey is hitting the highest levels of bears since the final 2 weeks of CV insanity, March 2020. Bulls are a measly 23%. 
Again, if you’re a contrarian (this guy), you are salivating to add to your positions…as we’ve just done.

** Futures are solidly higher as we start the day. I think these gains will hold and I look for another strong smart money hour. 


CV Insanity is officially over in the UK. Who would have thought they would end the ridiculous policies of masking and jab mandates before we did in the US??



God Bless The Truckers! Largest convoy in history. 50,000 trucks and more than 1.4 million people. US truckers are on their way now as well. Who knows, this might be enough to give (more) Canadians a backbone. 

https://twitter.com/MaajidNawaz/status/1486508908093087751



Until next time, thanks again for reading…

Kip

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VRA Investment Update: Biden is a Disaster. AAII Survey, Extreme Fear! Opportunity is Nearing.

Good Thursday morning all. A big about-face in the markets yesterday, as another weak smart money hour brought steady selling pressures, with each index finishing right at their lows of the day. Nasdaq has now fallen into correction territory, down 10.7% and doing so in short order. And we’re hearing more chatter about Russia-Ukraine…certainly if you watched Biden’s presser yesterday. The permanent ruling class owns the vast majority of our media (through well placed intelligence community assets), so it was no surprise that more than 50% of the questions were about Russia. The drumbeats of war. 

What do presidents tend to do when their ratings are in the toilet, with an election coming up? Wag the dog. 

And trust me when I tell you that the last thing the Fed will do is start hiking rates aggressively if global conflict, between 2 nuclear powers no less, becomes a possibility. 

I’m not a big TV news guy but I will say that Tucker Carlson has been all over this issue the last few nights, putting the military industrial complex on notice…we’re on to you. 

One of the more popular online polling orgs is Breaking 911. With 6 days left to go on their latest Twitter poll, “what grade would you give Biden”, check out the early results: 85% give him an “F”. Desperate presidents do desperate things. What a horrible presser, from this pretender in our White House. 81 million votes my ass.

The internals were better but that’s not saying much. Another day with poor readings for nasdaq 52 week lows (772 new lows, following Tuesdays 818). This market is trading very heavy. Selling pressure of size. 

But we smell opportunity approaching, as covered in yesterdays VRA Update with our pre-alert on TQQQ (3 x Nasdaq 100 ETF) and the NEW pre-alert that we have for you this morning NAIL (3 x Housing ETF).

AAII Investor Sentiment Survey

Last nights AAII Survey (weekly, which I’ve voted in for >20 yrs) shows a big drop in bulls, down 3.9% to to 21%, with bears up a very big 8% to 46.7%. This is the lowest number of bulls since July 2020. 
As contrarians this is music to our bullish ears.

LOTS of fear is building in this market. The bricks are going up in our wall of worry. It’s the stuff of short term bottoms. 

But the reality is that this trading has been heavy….ugly…frankly the Fed’s first rate hike can’t get here soon enough. 

They should do it now….raise rates by .50% this week and be done with it for 6 months. The markets would scream higher on this, IMO. 

Three Steps and a Stumble

That’s what my first mentor, Ted Parsons (RIP) called it, once the Fed started hiking rates. “3 steps and a stumble”, meaning that stocks continue to rise until “at least” the 3rd hike.

Here’s the supporting data. Going back to 1958, big gains have historically followed the initial rate hike, on average for more than 3 years with an average gain in the S&P 500 of 67%.

Personal note: I am stunned by some of the fear mongering we’re seeing from long term market watchers (“gurus”) over rate hikes. The data above is available to all…it’s not exactly a secret. 
A reminder to be careful about listening to permabears. They are, more than anything, list builders. That is their business model…building lists…and they know that fear is the most powerful motivator in getting people to act. Man oh man, have we ever seen this with the plandemic called CV insanity.

Be Prepared To Act

With a wall of worry that’s quickly building, I look for us to first get a “flush” before bottoming and reversing higher. That’s mine and Tyler’s wish, as Tyler covered in detail on his podcast yesterday. We have 2 targets that are setting up perfectly as VRA Investing System as our strongest buy candidates; check them out with our 14-day free trial at VRAInsider.com

Until next time, thanks again for reading…

Kip

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VRA Investment Update: Structural Bull Market of Size and Scope. Q4 Earnings. Investor Sentiment Buy Signals. CV Insanity; Wake Up DC, Wake Up America!

Good Thursday morning all. After a solid open, following the worst inflation data in the US in almost 40 years, the markets traded listlessly throughout the rest of the day but importantly, the internals do continue to show improvement.It’s not the news that matters most, it’s the markets reaction to that news. Tomorrow kicks off Q4 earnings reports in style as big banks begin reporting (Citi, Wells, JPM, Blackrock). While US markets never reached heavily/extreme oversold levels on the VRA System, even as tech had a quick 10% correction, we may have just seen the lows for the near term. Semis and tech continue to lead, the internals are improving and we expect earnings reports to “significantly “ beat analyst estimates once again. Frankly, that should be the theme throughout the year, even as yes, the midterm election year in the 2nd year of a presidency tends to be weak.

We’ll continue to pick our spots with our ETF’s, while focusing on our top growth stocks that should (significantly) outperform the broad markets. We’re also in the best period of the year for small caps.

Investor Sentiment

Last nights AAII Investor Sentiment Survey, which I’ve voted in for more than 30 years, came back with sharply bearish readings, with bulls falling a big 8% to 25% and bears rising to 38% (+5% on the week).

As contrarians, this is just what we want to see. 25% bulls, just a week or so away from ATH’s in the S&P 500 and Dow Jones can only be called “massively bullish”.

Bit of a mixed bag here, as the Fear & Greed Index never really got hit hard during the last downdraft, with a reading today of 64 (Greed). Frankly, this is in line with how sentiment should be acting.

As a reminder, we would not want to start taking significant profits until the Fear & Greed Index is hitting 85+.

Rona is ending (except in blue states..sorry friends), we’ve just had a 10% shake-out correction in tech, Biden is a lame duck and the midterms get closer with each passing day. 

And yes, this still feels (kinda sorta) like Bill Clintons presidency to me, home to the best 8 years for the stock market in US history. Biden can try all he wants to rule by fiat (Executive Orders), but unless our SCOTUS has completely sold out to America hating communists…I don’t believe thats even close to being the case…Biden will soon have no choice but to work with a deeply red and much more MAGA-ish house and senate. 

Tyler and I continue to see this as the best set-up for our markets since 1995–2000. And yes, we love the fact that we’re about the only people you’ll find saying it. 

This bull market is entirely structural in nature, driven by unprecedented liquidity, surging corporate earnings…which will soon blow away estimates again…and powered by the most important economic and leading indicator elements of housing and transpiration. As long as housing and the trannies are on fire…they very much are today….the US economy will continue to be on rock solid footing. 

Even with this mornings inflation reading of a hot 7% CPI (year over year), the structural components of both the economy and markets should continue to power stocks higher. Bull markets do not end until corporate earnings top, which we still see as a 2026-ish event. 

As to the bond market and higher rates, you know our thoughts. Rate hikes are bullish for stocks. And no, we will not have 4 rate hikes this year. Today, there are a record number of shorts in the treasury market, meaning that even when we get a hot CPI number, the path of least resistance is lower for yields (as the shorts cover). It’s one of the best times in my career to be a contrarian, when it comes to rates. Most all economists move in lockstep…they are monoliths…driven by what their employers at the Fed command. Lower rates, for longer, remains the smart money play.

CV Insanity Update

While we continue to see highly encouraging signs that CV insanity is ending in the US, we must keep a close eye on these authoritarian tyrants that wish to turn the planet into a dystopian communist monolith.

Have you see the new walls/barricades that late yesterday started being erected around the White House? What exactly is going on here?? All while our nations capital is full-on totalitarianism, requiring that before you leave your home you must have your vax papers and ID. Lets see if we have this right; it’s racist to require ID to vote, but completely fine to require ID’s to leave your home. WHAT? Where are our R elected officials, who should be screaming from mountaintops? Outrageous!!

And folks, it’s becoming equally dystopian here in Texas, as Houston Methodist Hospital has announced they are requiring all employees to have their booster from March 1 or be fired. As we’ve said for close to 2 years, we must stop complying…because they won’t stop pushing. Governor Abbott, please come out of hiding and answer the calls for a special session of congress to make tax mandates illegal. Your EO is doing exactly nothing. Texas needs new leadership. Feels like Beto o’Rourke is Governor today.

Here’s the bottom line. If we keep complying, they will keep taking. And taking. And taking. Are you awake yet?

First it was ‘prevent transmission’. 

Next it was ‘prevent symptoms’. 

Then it was ‘prevent hospitalization’. 

Then it was ‘prevent serious illness and death’. 

Now? If you end up vented in the ICU, in Australia (and Canada) it means the vaccines working. Global mass psychosis.

If you think this can’t/won’t come to America, you have not been paying attention.

#DoNotComply

#Nuremberg2

Until next time, thanks again for reading…

Kip

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VRA Investment Update: The Fed Freaks Out. Being a Contrarian Has Never Felt Better. Bonds Reaching Extreme Oversold.

Good Thursday morning all. The good news? Both the S&P 500 and Dow Jones hit (intraday) all-time highs yesterday. The bad news? It didn’t last long. 

Following the FOMC minutes, with news that several on the Fed say they want to have “multiple rate hikes, quickly”, the markets took an immediate turn south with the Dow finishing -1%, S&P 500 -1.9% and Nasdaq and Russell 2000 down a big 3.3% 

I missed this completely. After Mondays dramatic move higher in semis/tech, in the face of sharply higher rates, it looked to me that the markets were coming to their senses over higher rates…meaning that they were figuring out that, historically, early rate increases are HIGHLY bullish for stocks…because of course, thats been exactly the case. 

That was the hallmark of the 1995–2000 dot com melt-up as well, certainly the final stage of the melt-up which saw Nasdaq skyrocket over the last 18 months of that historic move higher from 1357 to 5132, a parabolic blow-off top of 278%. 

What was that repeating hallmark that sent the nasdaq to mars? Higher interest rates, namely on the 10 year, which saw its yield scream higher from 4.14% to 6.78% (from Q4 1998 to Q1 2000). Yes, rates and stocks soared higher together. 

Lets start there….1995–2000. During that 5 year, unprecedented moonshot, which saw the Nasdaq soar almost 600% (117%/yr compounded), the yield on the 10 year T-Note “averaged” better than 5%. Today, the 10 year yield sits at 1.66%. But again, check out that final move higher in rates below (from 4.1% to 6.7%)…because its that move higher that also marked the true melt-up in stocks. Are we seeing this same dynamic beginning to play out today? 

Here’s the chart on 10 year yields from 1995–2000. How remarkable that permabears are worried about rates rising today, even at these low (comparative) yields…admittedly as we have a mountain of debt, with QE the primary driver for low yields.

Folks, we’ve said this for some time, because historically its a repeating pattern of vast significance. Early interest rate hikes are HIGHLY bullish. My mentors called it “3 steps and a stumble”, meaning that stocks rallied along with rates through the 3rd Fed rate hike. As Ed Hyman and team at Evercore have pointed out of late, early rate hikes are not only bullish, they are extraordinarily bullish. Both Q1 2022 and the full year could produce another period of excellent returns. We expect exactly that. 

And here’s that chart of Nasdaq that saw it skyrocket over the last 18 months of that historic move higher from 1357 to 5132, a parabolic blow-off top of 278%. We believe this period is most similar to that 1995–2000 melt-up, hence our targets of Dow Jones 100,000 and nasdaq 40,000 (by 2027).

As of now, I jumped the gun on that call. 

But I repeat: I’ll be shocked if I’m proven wrong over the medium-long term. As long as I’ve been in the business, the markets have loved higher rates, through at least the 3rd hike. “3 steps and a stumble” 

A panicky Fed is the last thing that Team Biden (permanent ruling class) wants for the midterms. Absolutely the last thing. 

Aggressive rate hikes in an election year, when Dems are running the show in DC, is an oxymoron of size and scope. 

Evidence: Under “W”, 17 straight rate hikes from 2004–2006 (hence the housing crash). Under BHO, just 1 hike over his 8 years. Then, in just Trumps first 2 years, 8 rate hikes. 

The permanent ruling class doesn’t do much of anything to hurt their favorite party. 

Ipso facto; I’ll give the Fed one rate hike this year. Just enough for Powell and his merry band of masters of the financial universe to show their faces at dinner parties. Beyond that, we’re looking at a significant pattern change…in an election year, no less. 

My experience with Fed meetings/minutes is that the initial move of the markets, following Fed jitters, has quite often proven to be the wrong move. I still look for the markets to rally. But yesterday was ugly (although the internals held up much better than the losses indicate). If the Fed wanted to freak the markets out, they’ve just succeeded. 

Also know this; most everything I’ve written above puts me in the vast minority of market watchers/economists. That’s never been a problem for me. It’s not now. Show me a year when the majority of economists have been right and I’ll eat my hat. 

Prediction: “something” will happen that changes the Fed’s aggressive hawkishness. I believe that “something” will be a slowing US and global economy. But I will must also state that my prediction flies in the face of what our favorite Wall Street research firm (Evercore and the unmatched Ed Hyman) sees. They see an economy that continues to soar, with inflation that rules the day…meaning that they too believe Fed tightening and rate hikes are “real” and will “continue”. 

But I think we have a key bond market indicator that is telling us “the move higher in rates is about to take a breather”. And it’s lining up with near perfection on the VRA System.

TLT (20+ Year T-Bond ETF)

TLT just tagged its 200 dma, while also hitting extreme oversold on stochastics and MACD, while approaching extreme OS on MFI and RSI. 
The rubber band is getting stretched here. Another day or two of bond market weakness and we’ll be at “extreme oversold on steroids” on the VRA Investing System. 
And yes, we are looking for a leveraged ETF to play this counter move in the other direction (just as we’ll be doing in Parabolic Options).

Until next time, thanks again for reading…

Kip

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