VRA Weekly Update: Housing and Transports on Fire, But We Are Expecting Volatility. Technical Pause in PMs.

Good Friday morning all. US and global markets taking a pause after hitting new ATH's this week in consumer discretionary, consumer staples, semis, health care and home builders. New highs tend to beget new highs. With no resistance above in these sectors, the path of least resistance remains higher.

The transports hit their highest levels since January, +70% in 4 months. Housing index at another ATH, +114% in 4 months. Housing and transports are telling us that this V-shaped recovery is real.

The following is from Evercores Ed Hyman (with thanks to VRA Member Jeffrey S) who sees surprising strength in housing. Lumber prices are up from $264 to $710...stunning. Folks, inflation is very quickly bubbling up. Know that. This is the message that precious metals have been sending...and its why interest rates have reversed sharply higher of late.

We're just a stones throw away from ATH in S&P 500, but there was an interesting point that Tyler made on our podcast Wednesday (sign up for alerts at vrainsider.com/podcast); market internals were not close to what you'd expect to see when the Dow is up close to 300 points and Nasdaq +230. 

Not a cause for concern but the VRA System keys off of market internals to detect either a reversal or lift-off...we believe an increase in volatility over the coming days/weeks is likely, our thoughts:

1) The VIX has hit a level of extreme oversold that points to a reversal higher. While this doesn’t mean a sharp drop in US equity markets is directly ahead, we do see short term risks emerging.

2) Interest rates have reversed higher and while the 10 year yield still sits at just .71%, that’s a rather significant 41% spike in 10 year rates in just 10 days. Attention getting.

3) Stimulus talks in DC are dead. Both the House and Senate are on August recess and with both parties conventions directly ahead, little progress is expected over at least the next 2–3 weeks. Without question Trumps executive orders will help…we hear that more could be on the way. What’s becoming very clear is that the left appears unmotivated to get a deal done. It’s a dangerous ploy by Dems…sticking it to the American people in order to “Get Trump.”

It’s looking more and more likely that no further stimulus will come from DC. Only from Trumps EO’s. The wild card is the Fed. They still have another $2 trillion or so they want to get out in the form of QE. Will they take additional action with less than 3 months before the election, or will that make it appear that they are tipping the scales and trying to get Trump re-elected?

4) So yes, ST risks have emerged. The question is, with $11 trillion in global QE/stimulus, and with a V-shaped economic recovery that looks to be very real, will these risks even matter? Or, will they only serve as a wall of worry for a bull market that wants to go higher still?

Again, the internals have not been great of late. Not poor either…but definitely weaker than we’ve seen of late. This is typically the tell for the VRA System. Watching closely.

Sentiment Update

In our weekly sentiment update we see that, finally, the AAII Survey is getting more bullish...if only by a hair. Bulls now at 30% (+6.7%) and bears at 42% (-5.5%).

The Fear and Greed Index has hit "extreme greed" reading of 75, the highest reading since the onset of CV insanity. There are elements to this index that have hit rare-air lofty, bullish extremes, namely the put/call ratio and stock price breadth.

Precious Metals

The shake-out in Precious Metals looks to have been a near perfect technical (extreme OB) correction. 50% Fibonacci retrace across the board in GLD, SLV, GDX and GDXJ. As long as Tuesdays lows hold...which I expect will be the case...we should be off to the races again.

The following article and video is from our friends at GATA, who see the attack this today on PM’s as a “rigged selloff”. Chris Powell and Andrew Maguire know what they speak of. The shake-out is likely behind us.

Dear Friend of GATA and Gold:

Tuesday’s attack on gold and silver futures prices was a “rigged selloff” aimed at speculative longs with “surgical precision,” London metals trader Andrew Maguire said yesterday in an interview with Kinesis Money’s Shane Morand, but it won’t change the trajectory of the monetary metals.

The instigators of the raid violated futures position limits, Maguire adds, and the CME Group, operator of the New York Commodities Exchange, is “pandering” to the big bullion bank shorts that can’t deliver metal.

Maguire adds that the Bank for International Settlements is trading real metal for unallocated — imaginary — metal to help bullion banks meet the delivery claims giving them trouble.

Central banks and bullion banks, Maguire says, are aiming to move gold prices up to $2,500 and silver prices up to $35 soon but had to strike the market on Tuesday because prices were rising too fast for them.

The interview is 24 minutes long and can be viewed at YouTube here:

https://www.youtube.com/watch?v=kZcrB489LSc&feature=youtu.be

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

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

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/17 years.

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VRA Weekly Update: MSM Fear Mongering Hype in Overdrive, Again. Investor Sentiment Update. Fed Nominee Judy Shelton Loves Gold.

Good Thursday morning all. Yesterday's +275 point move higher in the Dow brought us to 29,500 for the first time. Post fear-mongering outbreak of the corona with lime virus US markets have now jumped by approx 5%, but the semis have rocketed 8.5% higher (semi’s lead tech, tech leads the market).

As Tyler covered in yesterday's podcast, after this sharp move higher, our broad market indexes are hitting heavily overbought….a pause should not surprise…but should we have one, expect it to be short-lived.

This morning…and I’m sure you’ve already seen this because its EVERYWHERE…based on Chinese media reports there were 15,000 new cases of the virus in the last 24 hours (so now everyone trusts China’s reporting…got it). But here’s what they’re conveniently forgetting to tell you; 82% of all cases require little to no medical care. Oops.

Keep an eye out for companies that blame their poor results on the China flu. They are to be shorted rather than bought. And remember, we were never making light of the health risks to people and certainly not to those that lost their lives, only pointing out that the flu is a deadly risk, year in and year out, killing 1 million globally. But we also value perspective. Our fear mongering, ad dollar driven MSM should be ashamed of themselves. They won’t. And they’ll do it again…likely in 3…2…1…

SENTIMENT SURVEY UPDATES

AAII Survey out last night. All it took was ATH after ATH for bulls to jump back to 41%, with bears down to 26%. For our newbies here I’ve voted in this survey for more than 30 years and here’s all that really matters; until we surpass 60% readings for weeks on end…frankly it’ll be 70% in my view…we won’t come close to a significant top in the markets.

Just a month ago the Fear and Greed index was sitting at 90 (extreme greed). Today? 60. Sure, that makes sense. Investor sentiment drives markets as much anything you’ll ever find. Keep buying pullbacks.

If you’re on social media it’s hard to miss the sky is falling clickbait list building permarbears. When they flip to bullish…and most will…that’s when we’ll be switching to bearish/short positions. And yes, that day will come Circa 2024.

Today I’ll be a watching Fed nominee Judy Shelton's grilling from the senate. She’s Trump's personal pick and she loves gold… LT fan of hard money…even a form of the gold standard. Imagine my surprise when The Economist came out with a hit piece on Shelton last night. I expect she’ll be confirmed. I also expect that her addition to the Fed will be another signal to the markets to own gold.

Deep Value in Oil

Oil is coming off of its most oversold levels since the 12/18 Christmas from hell capitulation. We find this chart highly compelling. Below is a 4-year chart of USO (Oil ETF), marking each instance where oil has reached similar extreme oversold levels to today.

In the 3 previous cases oil has been this oversold, here’s what happened immediately thereafter:

2016: Oil rose 66%

2017: Oil rose 88%

2018/2019: Oil rose 51%

Interesting, no? Add that the Jim Cramers of the world absolutely hate oil and energy stocks here and you have all of the ingredients of another monster move higher, directly ahead. Fits nicely with our Trump Economic Miracle, global economic recovery, global bull market, global reflation trade. Keep buying the energy names in the VRA Portfolio. We need this group to regain its 200 day moving averages…but this is deep deep value here and you know how much we like repeating patterns…that’s the chart above. And yes, this is a well defined chart of higher lows.

Finally, from the absolute asshole of our recent past, Lloyd Blankfein, the ex head of Goldman Sachs…that vampire squid blood sucking destroyer of worlds…had the unmitigated gaul to tweet out his disdain of Trump this week. Blankfein and Goldman led the way in destroying the US economy and MANY 10’s of millions Americans financial way of life, that resulted in the 2008 financial crisis. Folks, if karma is a real thing, Blankfein should look both ways before he crosses the street…for the rest of his miserable life.

Until next time, thanks again for reading…

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/17 years.

Join us for two free weeks at VRAInsider.com

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VRA Weekly Update: Impeached. Investor Sentiment Getting Frothy. Markets Flashing Extreme OB.

Good Thursday morning all. 

Yesterday President Trump was impeached in the House. Regardless of how right or wrong it may be, get ready for non-stop never-Trump MSM coverage and political ads with “Trump is only the 2nd president in modern times to be impeached”.

Whether or not it moves the needle for the elections next year, know this; the left missed on “Russia, Russia, Russia”, followed by the 2 year Mueller investigation. Complete whiff.

But they haven’t missed on impeachment. They got Trump on impeachment, a scarlet letter that no president wants to be marked by. In my view, shameful. Most voters appear to feel the same way. But how will the public feel after 11 months of non-stop media coverage reminding us of impeachment? That’s the question.

Regardless, the markets should only be fazed if polls start to show a sizable lead for one of the far left Dem candidates…in other words, any of them. More than anything, this should be a nice wall of worry for the markets to keep climbing. With investor sentiment getting more positive (finally) and with our more and more Wall Street shops and financial MSM predicting a’melt-up” (we beat them by 3 years with this prediction), things are getting a bit frothy. The contrarian in me getting just a bit nervous.

We see some froth in the Fear and Greed index, which has clawed its way back to 89 (extreme greed);

The weekly AAII Sentiment Survey is also out. Bullish readings now at the highest level since 2/18. Bearish readings at the lowest level since 1/18. As we’ve covered here often, the public is beginning to fall back in love again with stocks.

And who can blame them for being bearish forever…. from 2001–2016 was likely the worst 15 years in US history. 9/11, recession, ME wars, financial/housing crash, 2 year Depression, $4 trillion in QE with $13 trillion in added govt debt, destruction of healthcare, the opioid crisis.

Name a worst 15 year period in the US…not sure we can.

So it's natural for investors to distrust the markets…completely natural for investors to remain bearish…forever.

The Trump Economic Miracle is finally convincing investors that its safe to go back in the water. BTW, what impeachment??? The markets couldn’t care less…it’s not the news that matters most, but instead, the market's reaction to that news (as Tyler covered in yesterday's VRA Investing Podcast).

But…and here’s the but…with investors getting bulled-up, and with our markets beginning to red-line overbought, we are not adding to positions here or putting new ones on. It’s our discipline…it’s not a sell signal.

AAII Sentiment Survey. 44.1% bulls (highest reading since 2/18). 20.5% Bears (lowest reading since 1/18)

SEMICONDUCTORS FLASHING EXTREME OVERBOUGHT

Market timers know that tech leads the way and that the semis lead tech. Below is the 1-year chart of SMH (Semi ETF). Great looking ascending channel from early August. The semis have been a freight train. Today, they have reached the top of the channel…a pullback would match the channel pattern….with extreme OB readings in momentum oscillators. And this; SMH is now 21% above it’s 200 dma…highest OB readings in some time. Again, not a sell signal…we love stocks/sectors that reach OB and keep rising…but it does match our VRA views that a pause here should not surprise.

We also see it in the most important stock index/chart on the planet, the S&P 500.

Here’s what we see; we are hitting extreme overbought in RSI and Stochastics. We call it “redlining” and while it doesn't mean the markets have to drop, this IS when bad things tend to happen. Money Flows (MFI) have room to run…no issues there.

But this; as of this morning, SPX is 8.4% above its 200 dma, matching it’s greatest spread of the year. The last time SPX was this extended (July), it then fell 7% in 2 weeks. Our discipline prevents us from aggressively adding positions or adding to positions, with readings like this. We continue to buy pullbacks…should we get one. Not a reason to sell…just a time to be smart.

Until next time, thanks again for reading…

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.

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VRA Weekly Blog Update: The Next Leg Higher In Precious Metals and Miners

Good Thursday afternoon all. For today’s update, we want to get into PM’s and miners.

PRECIOUS METALS AND MINERS

For our newer VRA Readers, a quick trip down memory lane. In our second ever VRA Update (2003) we recommended gold and silver, which were coming out of a brutal 20 year bear market. Gold was below $400/oz and silver was below $5/oz.

Over the next decade we crushed this group, over “many” trades. Our best was 1300% 10 month profits in Ivanhoe Mines (now Turquoise, TRQ). It wasn’t all roses….we were also crushed in NUGT and JNUG, giving up big gains and riding it into big losses, after QE “mysteriously” bombed gold prices. But bottom line, we have done quite well in this group over the years. Know this group well. And yes, I am a gold bug.

The fundamental side of the story is well known. PM’s are the only true currency…for 6000 years. Cannot be printed and hold their value amazingly against inflation. Since the FED was created in 1913, the USD has lost 94% of its value, while you can buy exactly what you could have in 1913 today with the same amount of gold. Today, with more funny money floating around than ever and a world that is locked in to negative rates, owning gold and silver here makes more sense than ever.

Bank on this; not only is inflation returning…its already here. If you pay for housing, college, healthcare or any of the gazillion new and hidden taxes we’re increasingly forced to pay, you know that the cost of living has never been higher. Currency inflation will not decrease…likely not ever in our lifetimes. Gold is a must own asset for the smart money investor.

The pariah for PM’s has been “manipulation”. Spend a few minutes getting to know GATA.org, if you don’t already know this story. They’ve been fighting the good fight against the JPM’s of the world since just before I met them some 20 years back. It’s the one downside story for PM’s that remains our biggest risk. The banking cartel has had this game wired. But, that may be changing…another story for another time.

After a great start to the year (gold was +27% by September and GDX was +47%) the group has been trending lower the past 3 months. We believe the next move higher is nearing. This is a highly seasonal period (now til March). And we see two charts that are of interest. Many think that if rates are rising, that must be bearish for gold prices.

This is a fallacy.

As this 20 year chart of gold to 10 year treasuries shows, there is actually a small correlation between gold and rates. We’ve had bull markets and bear markets in both scenarios. There is just a 28% correlation between gold and rates, over the past 20 years.

What this chart also makes clear is that we’ve had an explosion in volume over the last decade.

In fact, its picked up speed over the last 3 years. Volume begets price movement…a timeless truth as taught to me by my mentors.

We want to see a move back through $1500/oz. The rounded bottom you see in this chart…its been developing for 8 years now…it should send gold to new ATH. $2000/oz + is coming.

Below is a 4-year chart of GDX to gold….our top timing signal. The miners lead gold…in both directions. This is where the leverage is (similar to oil to energy stocks). We went aggressively long PM and miners at that circle you see below in 2016. That marked the first rate hike since the ’08 crisis. (as we just covered, gold in fact does rise when rates rise). The miners led the way straight up for 9 months…massive gains in the miners. The repeating pattern is marked below as well. The miners tend to make explosive moves higher coming out of mini-rounded bottoms, just like we’re seeing right now. Over the past 2 months, the miners have been leading gold. We want to see GDX break $28.50 with velocity…last trade here $27…then new highs of $31, then much higher, look likely.

The next leg of the Precious metals and miners bull market looks to be kicking in.

Following the Fed meeting yesterday that contained no real surprises (no rate increases on the horizon), the group is taking off. Gold and silver both spiking 1–1.5% yesterday, but as always the action is in the miners.

One step at a time, we want to see gold break $1500/oz (1482 today) and GDX break $28.50 ($27.75 today), which should then lead to new 52 week highs, and we are watching volume in both continue to ramp higher. We believe this is the beginning of the move that takes gold to $2000/oz. We’ll make fortunes in this group.

Until next time, thanks for reading…

Kip

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.

Join us for two free weeks at VRAInsider.com

Sign up to join us for our daily VRA Investing System podcast

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Jobs Growth Blowout, Global Bull Market Will Continue to Impress

Good Friday Morning all,

Tyler Herriage here with you for today’s update.

After a slow last 2–3 sessions, the markets are positive as we received the closely watched Labor Department’s monthly employment report this morning, which came in with a blowout number.

April non-farm payrolls crushed estimates of 190,000 new jobs by over 70,000, coming in at 263,000 new jobs created in April. Even more good news came from revisions of February’s weak number which was raised from 33K to 56K. Unemployment also continued to drop from 3.8% to 3.6% and remains at a 50 year low compared to 3.5% in 1969. That is right the best jobs market in 50 years. While we have to sift through all of the numbers still, it looks that the minority unemployment rate just dropped to all time record lows, a point President Trump will certainly be making shortly, as he should as this is hugely bullish for our overall economy and prosperity as a nation.

If you’re still concerned about a recession…or maybe slower corporate earnings…we recommend that you listen to experts that know what they’re talking about. They’re the ones that get it right, much more often than they get it wrong. If you’re not sure who the real pros are (outside of the VRA, of course) a good place to start is with my Twitter feed (@kherriage). Each day I retweet some of my most trusted sources. Begin following some of them…you’ll find that you no longer need those wrong-way gurus.

$2 Trillion Infrastructure Deal?

We also learned Wednesday that, and this was a shocker to yours truly, that Trump and leading Dems look to have reached a basic agreement on a $2 trillion infrastructure deal. Thought I was reading The Onion at first. They claim to need 3 weeks to put together the funding side, which means that anything can happen between now and then, let’s hope that our Washington leadership can prove that they actually care about the people of this country.

A bipartisan deal on infrastructure would be hugely bullish for the economy and equity markets. Structured correctly, with public-private partnerships, targeted directly at our most pressing infrastructure needs (roads, bridges)…instead of Obama era fundings like now bankrupt and out of business solar fraud Solyndra.

Earnings Numbers

We continue to see the best quarter of earnings in nearly 10 years. 67% of the S&P 500 (333 co’s) have reported 1Q19. 77% beat EPS ests on +7.2% growth. 61% beat sales estimates on +4.4% growth. Don’t listen to the market bears who have told you there was a coming recession. When they were wrong they said there would be an “earnings recession”. Well it appears that they were wrong again and I’m sure they will have a new story to tell us here soon.

Not only is the economy not slowing, its continuing to pick up speed. We’ll repeat our long held beliefs, once more. Trumps tax reform and deregulation efforts will drive the US economy past 4% GDP growth…possibly even past 5%…before he leaves office. 50,000 + DJ.

This is just the 4th year in S&P 500 history that the first 4 months of the year each had positive returns of at least 1.75%. Bodes very well, for at least May and June.

WSJ Loves Small Caps…Welcome to the Club.

This Tuesday’s Wall Street Journal reads like a VRA Update from the last couple of weeks. Small caps are ready to run. Their primary thesis? A rising tide lifts all boats. With S&P 500 and Nasdaq at all time highs, and with the Dow Jones knocking on the door, its time for a serious catch up move higher.

WSJ also makes the very good point that the strong US dollar has little of the same impact on small caps that it does on large cap, US multinationals, where a strong dollar acts as a headwind to earnings.

With the Russell 2000 still 8% below its all time highs, as we’ve been writing, this is the index we want to pay serious attention to.

We featured the chart of small cap ETF (IWM, Russell 2000) last week in our blog, along with our forecast that a breakout was nearing. We have that breakout, as can be seen on the trend line below. In addition, IWM just experienced a Golden Cross (50 dma crossing over 200 dma), another bullish technical event.

This chart checks all the boxes for the VRA Investing System. We are aggressively long small caps…the move higher is still in the very early innings.

Importantly, each US broad market index (S&P 500, Dow Jones, Nasdaq) today sit at overbought levels. The Russell 2000 does not. Another reason to like small caps here.

Global Conditions

Finally, for the day, U.S. China trade talks continue in full as the two parties look to get a deal done in the near future. Next Wednesday Chinese Vice Premier Liu He is scheduled to arrive in Washington with the hope of wrapping up a deal. This resolution will be a big win for both countries and we want to be positioned ahead of a deal being announced.

This trade war has been brought about for many necessary reasons, but probably one of the most crucial elements is cracking down on China’s IP theft from U.S. Businesses. China is already known to spy heavily on its own citizens. Check out the article published yesterday by Bloomberg exposing Chinese surveillance methods based on research by the Human Rights Watch.

https://www.bloomberg.com/ news/articles/2019–05–01/ alibaba-backed-face-scans- show-big-tech-ties-to-china-s- xinjiang?cmpid=BBD050219_BIZ& utm_medium=email&utm_source= newsletter&utm_term=190502& utm_campaign=bloombergdaily

If they have this level of research on their own people, which includes foreign citizens who travel to Xinjiang, think about the broader implications of what this would mean if we had more unregulated Chinese communications and technology services in the United States. No privacy would be safe, much less protecting our business IP. Although we would be naive to think the U.S. isn’t already doing the same to many of us here in the U.S.

Asian markets have seen a pullback after their tremendous start to the year, but looking at the charts it is more of a lull than a correction. Now, their indexes are at oversold conditions on VRA screens.

Check out the chart of ASHR, meeting all of our technical parameters, above the 200 day MA, extreme oversold on Stochastics, strong volume of buying since February. No better time than now to be positioned before the train leaves the station.

Until next time, thanks for reading…

Tyler Herriage

Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.

Learn more at VRAInsider.com

Also, Find us on Twitter and Facebook