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 Buy Signals Are Back. The Trump Economic Miracle, Still Driving the US Economy.

Good Thursday morning all. Back to back excellent days, with strong smart money hours and market internals to match. In addition, tech/semis are leading the way, with seasonally bullish small caps charging higher. If you’re a market timer, these are the short term, heavily bullish signals you look for. 

Authoritarian tyrants the world over might be doing their damnedest to keep CV insanity alive, but We The People have the final word. Once we stop complying, this madness ends. Slowly buy surely… even in blue states…the masses are moving on from the plandemic. 

Using the VRA Investing System as our timing guide, we took profits on several positions in November, as our markets hit extreme overbought (on steroids) on the VRASystem. Beginning earlier this month we began re-building the VRA Portfolio (VRAinsider.com). Each remains a buy here, as we expect 2022 to be a strong year for our markets as well. The markets don’t peak until earnings peak…and we don’t see corporate earnings peaking until 2025–2026. 

This remains the bull market of bull markets, driven by The Big Bribe, $37 trillion in fresh global stimulus and surging corporate earnings. Dow Jones 100,000 remains our long term target…and its exactly the current action in investor sentiment that helps to cement our view. The Fear & Greed Index collapsed from 87 (Extreme greed) to 18 (Extreme fear) inside of 3 weeks. Seeing the same type of collapse in sentiment survey after sentiment survey. This is NOT how bull markets react at significant tops. What would concern me? When the markets fall 5% but sentiment remains overwhelmingly bullish, that’s the type of red flag we’d pay attention to. 

However, when the markets fall just 3–5% and investor sentiment plunges to extreme fear, contrarians know what this most likely represents; a major buy signal. 

The bigger point here, from the medium-long term view, is that the US economy is still being powered by “The Trump Economic Miracle”. As much as our current fearmonger-in-chief tries to take America down, by killing Trumps economic magic wand, Biden keeps failing miserably while Trumps low taxes, less bureaucratic red tape and his America First policies remain fully intact. The Trump Economic Miracle will continue to power the US economy for years to come. 

And have you noticed what’s happening in China? Many of Trumps China tariffs remain in place, while Trump also exposed China for what they are; brutal communists that rule only by government force and propaganda (AKA what the permanent ruling class has been desperately trying to force on America). KWEB, the China Internet ETF and a significant discounting mechanism/barometer for the Chinese economy, is now down 63% from its 2021 highs. FXI, the largest US traded China ETF is down 34%. Again, Trumps America First polices continue to do their thing. China is “uninvestable”, much like Japan was beginning in the early 1990’s.

With Biden as a lame duck, a first in modern history for a president inside of his first year, America is in much better political shape than many believe. Soon, the markets will begin to discount the midterms, which we expect to be an avalanche of destruction for Dems. That will give the markets what they love just about more than anything; gridlock in DC. 

We remain highly bullish on US stocks, for all time frames; short, medium and long term, with 10/12 VRA System Screens bullish. 

As todays Stock Trader Almanac breaks down (next), now is the time to prepare for the Santa Claus rally, which technically begins on Monday, as its the last 5 trading days of the year plus the first 2 trading days of the New Year. Bullish Trading Ahead of Christmas: Small-Caps Lead

Everyone is anticipating the Santa Claus Rally, but that doesn’t start until next Monday, 12/27. The Santa Claus Rally was defined by Yale Hirsch in 1972 in the Stock Trader’s Almanac as the last five trading days of the year and the first two trading days of the New Year. This short, sweet rally is usually good for about 1.3% on the S&P 500, but the real significance of the SCR is as an indicator.

It is our first seasonal indicator of the year ahead. Years when there was no Santa Claus Rally tended to precede bear markets or times when stocks hit significantly lower prices later in the year. As Yale’s famous line states (2021 Almanacpage 116 and 2022 Almanac page 118): “If Santa Claus Should Fail To Call, Bears May Come to Broad and Wall.”

For decades we have been tracking the market’s performance around holidays in the annual Stock Trader’s Almanac. In the 55thedition for 2022, data for DJIA, S&P 500, NASDAQ and Russell 2000 can be found on page 100. Of the eight holidays tracked, Christmas has been one of the most consistently bullish with respectable average gains occurring two days before and the day before.

Tomorrow, Wednesday 12/22, two days before Christmas, has been more bullish over the past 33 years with greater average gains and a greater number of advances. Small caps measured by Russell 2000 have enjoyed the most consistent strength on both days. Volatility also tends to be subdued ahead of Christmas as well. Prior to 2018’s pre-holiday selloff, the worst decline recorded by any of the four indexes on either day was 1.63% by DJIA in 1997.

Until next time, thanks again for reading…

Kip

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VRA Investment Update: Brutal Smart Money Hour. Investor Sentiment Flashing Buy Signals. Flatting Yield Curve and the Reality of Obama's 3rd Term.VRA 10 Bagger

Good Thursday morning all. From +518 to -461 at the close, the Dow Jones had a near 1000 point reversal lower yesterday. An even larger percentage decline occurred in Nasdaq, which had a near 600 point swing. 

Not what we wanted to see…not what I expected to see. Horrible smart money hour. Once again, Nasdaq new 52 week lows keep putting up big numbers as 571 stocks hit new lows. And this stat is attention getting; while the S&P 500 is down a tiny 4% from ATH, at the same time there are now 486 stocks in the S&P 500 down 25% or more, in the last 30-days. Brutal action underneath the surface, as mega caps continue to support the broad markets from exhibiting larger losses.

And we’re really seeing fear make its presence known (that’s bullish), as the AAII Sentiment Survey saw bulls collapse to 26.7% with bears jumping to 42.4% (highest reading since Sept 2020)

And wow. The Fear & Greed Index has plummeted to 22 (extreme fear). Just over 3 weeks ago it was 87 (extreme greed). Bearish sentiment like we’re seeing now is exactly how bottoms/reversals take place.

This morning, Dow futures are once again higher (+200) while Nasdaq is -40. The culprit? Breaking news from late yesterday that Apple is telling suppliers that iPhone demand is slowing.

As we’ve said for some time, and as Apple may now be witnessing, we are in Obama’s 3rd term. That’s likely what this decline is about. The US economy will only grow more slowly from here. And, if the Fed removes the punch bowl, we’ll be witness to a massive policy error as we head into midterms…Dems will get crushed even worse. Any Fed tapering will be short-lived.

We see the slowing US economy here, in the change in longer term treasury yields, since 10/1, as 10–20–30 year yields continue to decline. AKA, we are seeing a flattening of the yield curve.

Treasury Yield Change, Post 10/1, Bottom Line:

- Since October 1, the yield on 3-year notes has gone up 32 basis points.

- The yield on the 30-year long bond has fallen 26 basis points.

- This is a relative flattening of 58 basis points, or more than double what two 1/4 point rate hikes would achieve.

VRA Bottom Line; the markets (bond market vigilantes) are front running the Fed. If the yield curve continues to flatten, the word “recession” will be begin to be heard. While we do not expect a recession, we do expect growth will slow. Not go negative, but slow. This will become the next goldilocks set-up for higher stock prices, as the Fed pushes back their taper and rate hikes, and as 10 year yields keeps falling. 

Trump Media (DWAC): We will soon be adding to our position in DWAC, officially bringing down our cost basis. DWAC jumped some 20% after hours on the news that they are raising $1 billion. 
DWAC is a VRA 10 Bagger and must be owned, short, medium and long term. https://finance.yahoo.com/m/af64c690-aed3-3a13-bf56-04fc7058067a/digital-world-acquisition.html

Peter Navarro from yesterday, becoming even more direct about Fauci the Fraud. Until they start “publicly” talking about the 100’s of business deals with big pharma that Fauci has closed over the last 40+ years, as head of US healthcare (NIH), likely netting him more than $100 million (The Real Anthony Fauci, by RFK, Jr), the public may never wake up.

Until next time, thanks again for reading…

Kip

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VRA Investment Update: Repeating Pattern From March. The Best 3 Months of the Year. Trump Media, Own It.

Good Thursday morning all. 

Yesterdays trading…actually the last 2 days of trading…have served as an important reminder that until we break the pattern of market sell-offs/pauses that’s been in place from March (once reaching extreme OB on VRA System momentum oscillators), we must continue to respect this pattern. For the 2nd day in a row we’ve seen weak smart money hours and poor market internals. Yesterday, even when the Nasdaq was +120 (it finished flat) Nasdaq advance/decline was 2:1 negative. Not good. NYSE finished especially weak, with 3:1 negatives in both A/D and volume. Markets finished at their lows of the day. 

We’ll be watching the internals plus the final hour of trading for signs of a reversal back higher. In addition, the Fear & Greed Index just hit 71 (Greed)….not far now from extreme greed. Just 1 month ago the reading was 21. 

We don’t think it will take long for this pause to play itself out….we are entering the best month of the year and we continue to expect the markets to melt up into year end. Any pullback will likely be short lived.

With thanks to Stock Traders Almanac, below we see the hard evidence that we are entering the best month of the year and the best 3-month span of the year, for the Dow, S&P 500 and nasdaq.

November, December and January constitute the year’s seasonally strongest 3-month period for the S&P 500, Dow Jones Industrials and the NASDAQ Composite. This seasonal strength is created by a combination of the annual, semiannual and quarterly operations of institutions and the habitual behavior of retail investors and consumers.

The November-January 3-month span has produced a gain of 4.3% for the S&P 500 & DJIA since 1949. October-December runs a close second at 4.1% for S&P and 3.9% for DJIA. Since 1971 NASDAQ has gained a whopping 6.3% November-January with December-February in second at 5.0% and October-December in third at4.4%.

These charts also highlight the Best and Worst Months of the year with the Best running from October/November to April/May/June and the Worst from May/June/July to September/October. Stocks have been firming up since we issued our Seasonal MACD Buy Signal to subscribers on October 8 and look poised for a solid yearend rally that continues into early 2022.

3rd Quarter GDP Comes in Weak

You know our thoughts…we are in Obama’s 3rd term. This mornings 3rd qtr early read came in with just 2% GDP growth vs the 2.7% estimate. Folks, these numbers will only stagnate further from here. When the government takes over the economy the end result is universally the same; economic growth is stifled. The same scenario is playing out globally. Just remember this all important point; the stock market is not the economy. Our views on a market melt-up are unchanged. 

Another major plus is that Biden appears to be a lame duck president (yes, already). Regularly on my podcast I challenge people to name a single major accomplishment of Bidens…not a single taker so far (obviously). Have we ever had a lame duck prez inside of his first 10 months in office?? And this is excellent news for the markets, who like little more than DC gridlock. This will only amplify if R’s demolish in the midterms. Again, gridlock is highly bullish. 

It’s Time for Small Caps to Shine

The #1 performing group from now into year end, going back 50+ years, is the small caps. As we see in the chart below IWM (Russell 2000 ETF) is actually the least overbought of our broad market indexes and still the only index yet to hit an ATH. 

The 8 month channel you see below has been tested 3–4 times on both the upside and downside and we see HIGH probability that the breakout from this channel will be higher. Of note are the rising trend lines on MFI and RSI. Highly bullish. Momentum is building in small caps for a spectacular melt-up into year end and Q1. 

Trump Media (DWAC)

Just giving you a heads up…I’m going to be a dog with a bone on this one. Not going to make the same mistake I made with Tesla. I am pounding the table on DWAC. 
It’s a buy and will continue to be a buy for years to come. 

Login to any stock chat room (Reddit, Yahoo, etc) and these are the types of comments that you’ll see re DWAC;

Trump Media has the potential to be unlike any stock to ever trade publicly. Period.

Lastly, thank you for your feedback on Tuesday’s podcast. Among several topics, Tyler covered Ayn Rand, author of many great books but likely best known for Atlas Shrugged, a book that Tyler first read in high school and which I can attest made a deep impact on his world views. We are living through the dystopian times that Rand envisioned some 7 decades ago. Here’s the link to Tyler’s cast:

https://soundcloud.com/user-640389393/vra-podcast-tyler-herriage-daily-investing-podcast-oct-26-2021?si=29ceefb5d6c249ce9d16defbbc18194a

Until next time, thanks again for reading…

Kip

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VRA Weekly Update: Confirming Capitulation. Significant Lows Look to Be in Place. J Powell and the Future Moves of the Fed.

Good Thursday morning all. Not only was yesterday a big up day across the board, with gains of 1% to 1.5% in each of our broad market indexes (small caps led the way, +1.51%. Importantly we had confirmation from the internals, namely in NYSE up-volume, which came in a big 85.6%. Roughly 3:1 positives everywhere else. After Mondays 90% down volume day in NSYE, which looked to us like a clear sign of capitulation, yesterdays stellar readings were ’significant”. 

I’ll repeat; Monday’s sell-off, which had the Dow -950 at one point, should mark the lows for this cycle move higher (into year end at minimum). Remember, we really didn’t just have a 1 week sell off or capitulation. Most stocks have been declining for months. Through Monday more than 50% of all NYSE stocks had declined by about 15%. And it was worse among small caps, with more than 60% down more than 20% from their March highs. Thats why Mondays capitulation was so important. It represented a true wash-out. And it’s exactly what every great bull market needs in order to begin its push higher into the next levels of the stratosphere. 

Important point to remember: when investor sentiment reaches extreme fear levels (as it did this week) just 2 years into a new bull market thats driven by a) unprecedented global liquidity ($32 trillion) and b) surging corp earnings, as investors we must be prepared to back up the truck and add to our favorite positions. 

J Powell and the Future Moves of the Fed.

If there’s one thing we know about Fed Chair J Powell, the money printing rock star of our financial masters of the universe, it’s that he has a massive tell when it comes to his pressers. When JP starts talking, the markets start falling. It happened again yesterday as the Dow fell from +510 points to a close of +338. This was actually outperformance from JP. Reminds me of one George W Bush over the last 18 months of his presidency. We aggressively shorted the market beginning a couple minutes before Bush was due to give an address. To this day I believe Bush’s speeches made us more money as traders than any single one-off trading strategy over my entire career. Just another example of how horrible W was as a president. And now he’s the darling of the liberal media…of course he is. 

But investors locked on to two specific things that Powell said, and folks, it’s the markets reaction overnight (overseas markets) and in trading this morning (Dow +210) that looks to be another important tell.

1) Tapering of their $120 billion/mo in QE will be announced at the November meeting with it beginning in December and ending in 6 months, a reduction of $15 billion in the taper per month. Here’s the schedule, with thanks to Zero Hedge

2) Half of the voting members of the Fed believe that rate hikes will begin by year end 2022.

One would think that the markets would dislike both of these announcements but that’s not been the case. Why is that? It’s because the markets don’t believe it. 
Take this to the bank folks; once we have our first 10% correction, the Fed will pause any taper. Should we have a 20% correction, the Fed will act to increase QE.

This is our brave new world of financial engineering. Our financial masters of the universe know that this is QE Infinity. 
Take this to the bank too; as rates in the US ultimately head towards zero percent, the Fed will announce they are (officially) buying stocks too. Just like the Bank of Japan. Just like the Peoples Bank of China. 

And for all of this, TINA will continue to apply to US stock markets. This bull market has “forever” to go.

VRA Playbook: Our broad market macro views on the economy, market, bonds, energy, precious metals and cryptos….along with some top buy rec’s for the next year.

BIG PICTURE: We have entered the 3rd term of Obama’s presidency. Get ready for slower growth, lower rates, more QE/stimulus and a melt-up stock market driven by central bank financial engineering.

ONE: Stock market (remember, the stock market is NOT the economy).

We’re in just the second year of a new bull market that will take the Dow Jones to 100,000 +. Three times higher from current prices, in approximately 5 years (by 2027).

This melt up will rival the Dot com melt up and is being driven by two major factors:

a) unprecedented global liquidity of $32 trillion; fiscal (government stimulus) and monetary (central banks)…with much more on the way. TINA (There is no alternative) and FOMO (fear of missing out) will continue to force stock markets higher. Don’t fight the tape, don’t fight the Fed.

b) surging corporate earnings that won’t peak for 5 years (the power of a new economic cycle…they last more than 5 years, on average)

Best ways for a long term, more conservative equity investor to invest: a 50/50 mix of $SPY (S&P 500 ETF, plus dividends) and $IWM (Russell 2000, plus dividends) should produce gains of 30% + per year. More aggressive investors should of course use the VRA Portfolio. And oil/nat gas prices will soar with the insanity of The Great Reset depopulationists climate change.

And remember, cash is trash!

TWO: Bonds

If you’re a true contrarian, you MUST believe that interest rates will continue to plummet. While 99% of PHD economists (most all employed by the Fed) are telling us that rates will rise sharply from here, here’s why they are wrong:

*the majority of PHD economists are NEVER right.

*rates have fallen for 40 years. It’s hard to find a more powerful repeating pattern.

*We are in a new world of financial engineering, run exclusively by central banks. The financial masters of the universe. They cannot stop QE, ever, or the system implodes.

* We believe rates in the US will be negative, likely by 2025, just as they continue to be in Japan and Germany (broadly throughout Europe)

Best way to invest: Use the VRA Portfolio in recognition of TINA. Buy real estate/homes. As rates continue to fall, home values will continue to skyrocket.

THREE: Precious Metals

- We’ve just entered the most bullish seasonal period for gold and silver (now through year end).

- Central banks have resumed buying at record levels

- The publics ownership of gold is right at all time lows (as a percentage of investable assets). As a contrarian, there is no bigger buy signal.

- Record Currency inflation demands that precious metals move higher.

- If/when it all blows up, precious metals will be the only real place to hide.

Best way to invest: physical gold and silver and gold/silver miners

FOUR: Cryptos

Bitcoin is the top play (with Ethereum #2).

Because they will never create more than 21 million BTC, this is a unique “supply and demand 101” story.

Timing wise, BTC is now below its 200 day moving average at $42,000…its important that BTC regain this level.

BTC also just had a “golden cross” where the 50 day moving average crosses over the 200 day moving average. Golden crosses are highly bullish, high probability technical events….to date, not so much.

Regulation is becoming a larger risk to cryptos. The SEC just started targeting them as “securities”. This is a battle that cryptos have been trying to avoid.

Until next time, thanks again for reading…

Kip

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