VRA Investment Update: J Powell, the Embarrassment. Is The Bear Market Over? R's Are Surging!

Good Thursday morning all. If you were as confused as 99% of Wall Street and the English speaking people of the world were by Fed Chair J Powells presser yesterday, where he reverted to previous form and crushed the stock market, I encourage you to listen to Tylers podcast from yesterday afternoon: https://anchor.fm/podcast-c2cff90/episodes/VRA-Investing-Podcast---Tyler-Herriage---November-02--2022-e1q55gc

No J Powell, you are not Paul Volcker. You are instead an embarrassment to the office that you hold. 

The Fed statement held important clues and once the markets saw this in the Fed’s written statement, a near immediate 400 point rally in the Dow Jones kicked in; “we will take into account the affects of cumulative rate hikes and the lag effects of our inflationary indicators”. That sounded very much like a “pivot” to a data dependent, common sense approach to Fed policy. 

But then the money printer in-chief started talking and to this observer it sounded very much like someone that deliberately wanted to take the air out of the room and indicate that the Fed was going to be anything but data dependent. Powell’s hawkish stance screamed “we don’t care what we break…and we’re just getting started”. 

But know this; I’ve done this too long to believe the Fed about much of anything. They are deceivers, liars and frauds. Ron Paul nailed it 30 years ago….”we must end the Fed”. 

Here’s What The Bank of England Just Said…. 

“If the market's expectations are right (about much higher rates) we are going to have a two-year recession”. The BOE is saying that the market's expectations are wrong. J Powell, are you listening??

Here’s what I expect; just over 1 year ago the Fed told us “inflation was transitory”. They were adamant about it…and they could not have been more wrong. How embarrassing. 

They’re going to be wrong again. That’s my call. And here’s how we’ll know. 

The Fed never leads….they always follow. Always.

And here’s what the Fed will be following; the 10 year yield. As can be seen in this 30 year chart, each time the 10 year has hit its upper trend line it has then reversed lower. Frankly, this chart is even more powerful when you zoom back to 1980, but I doubt that it will matter much. Rates will soon head lower…and the Fed will follow the 10 year yield lower.

To be clear, the Fed’s future interest rate decisions MUST be data-dependent, as even Powell has insisted in the past. Monetary policy is hard to predict merely because the future is so uncertain. The trouble is, Powell seems to forget his uncertainty once he gets in front of a microphone. The truth is, he is more confused than just about anyone in the room. Watch. 

Final point about Powell’s presser; does this guy detest Joe Biden and the Dems or what?! Just 6 days before the midterms the Fed chair destroys the markets and kills what was shaping up to be one-helluva melt up into the midterms, a rally that would have almost certainly helped the left get more votes. I find this very interesting…the Uniparty and elite ruling class typically protects their own.

A Chart That Matters

Wall street insiders (that we respect) are pointing to this chart of the S&P 500, compared to the massive bear market rally of 1962 (I also like this comp because its the year of my birth).
You can see the chart has matched up fairly well this year and if it continues to play out it will mark a further move higher in the SPX to 4500–4600, or an approximate 18% higher from here.

Is The Bear Market Over??

Our forecast remains unchanged…a sharp “bear market rally” move higher (featuring short covering) into the midterms (at minimum) which will likely extend into year end and into Q1 2023. With the combination of deeply bearish sentiment (contrarian buy signal), seasonality (the calendar says “BUY”) and overwhelmingly bullish analytics (post-midterm data and more), this should be a good time to own stocks.

We believe we have 4 “tells” that point to the near-term lows being in place. Signs that point to a sharp rally into midterms/year end (and into 2023):

1) Analytics: the most compelling data of my career; “Since 1950, in midterm years, the S&P 500 has had an avg gain of 32% from the midterm lows over the following 12 months (with the markets higher 18 of 18 times). Add that with a divided congress and lame duck Biden, the markets should soon get their wish for gridlock in DC. There’s little more that the markets love than DC gridlock.

2) Seasonality: November is the best month of the year in the midterm cycle and Q4 is the best quarter in the midterm cycle.

3) Market Internals and Technical Buy Signals; 10/13 “CPI Capitulation”, featured a bullish engulfing candle for S&P 500 and two breadth thrusts (>90% up volume in both NYSE and Nasdaq…rare!)

4) The semis are leading. When the semis are leading the way higher it pays to be aggressively long stocks.

Portfolio Note: While we remain in a bear market (and below the 200 day moving averages) we will continue to look for trading opportunities in our selected ETF’s (using the VRA Investing System for timing) while using market weakness to dollar cost average each month into VRA 10-Baggers, our top ranked growth stocks with the potential/promise to produce gains of more than 1000%.

And yes…now is the time to be adding to your holdings in physical gold and silver.

Midterm Update: The Betting Sites Are ALWAYS The Most Accurate

PredictIt has R’s with their highest lead yet in the race for the Senate

Just So We Stay on Track and Keep Our Eyes on the Prize (immediately after midterms). Go ‘Merica!
#Nuremberg2

Until next time, thanks again for reading….

Kip

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VRA Investment Update: Bear Market Ending as We Climb a BIG Wall of Worry?

Good Friday morning all. As we’ve covered over the last year, the current bear market…the 3rd in 4 years…actually started in February 2021. That’s when groups such as SPACs, meme stocks, China, biotechnology, etc hit a top and started to decline.

The weakness was contained to small-caps and speculative stocks for a long time but started to spread to the broader market in November 2021. The indexes covered up the brutal action under the surface. The action in mega caps and big tech helped to hide the carnage that was taking place under the surface.

This past week the big-cap technology stocks have all posted weak earnings and their shares have been crushed, with bellwether Amazon joining the crash party last night with losses of more than 20%.

Are we now witnessing the final stage of this bear market? Yes, I believe we are. When the generals get smoked but the broad markets barely notice, that sure looks like it “may” be the action of a market ready to climb a big wall of worry.

And call me a rose-colored Patriot, but I think the red-pilling of America (the world, really) and the soon to be shellacking of a Dem party that has grown to hate America, are highly bullish events.

We’re also entering the best 5 trading days of the year….just as we enter the best month and quarter of the year….just as we enter the best 12 months for investors, period (12 months after midterms)

VRA Market Update

3rd quarter GDP was released Wednesday and came in with growth of 2.6% vs estimates of 2.4% (vs Q2 GDP of -.6%). As we’ve been forecasting for some time, the US economy has not entered a recession. While the signs point to growing risks of a recession in mid-late 2023, its been our view since he left office that the power of the “Trump Economic Miracle” and Trumps stunningly powerful “America First” policies would sustain the US economy for years to come (likely a decade)…regardless of the intentional damage that Team Biden is inflicting on us. 

We’re seeing more proof of the power of Trump's economic policies in Q3 earnings as well. With 263 S&P 500 co’s reporting to date (through Friday morning), 73% of co’s reporting have beaten EPS estimates on 8.75% earnings growth with 63% beating on revenues with growth of 12.17% growth.

As Tyler also got into on his podcast on Wednesday, this weeks trading has been a testament to the bear market rally that is underway and that we expect to have legs into the midterms and into year end. 

This week saw China’s markets crash yet US markets ignored it almost completely. Then we got multiple 8–9% post-earnings meltdowns in the big tech names like Microsoft, Google, Facebook (Meta), and Amazon, yet the Dow Jones and the Russell 2000 have managed to finished with gains. I can tell you with high confidence that this sort of bullish action in the markets sends shivers down the spines of bears. 

As my mentor Ted Parsons taught me some 35 years ago (RIP Ted), “it’s not the news that matters as much as it is the markets reaction to that news”. 

Our forecast…a sharp “bear market rally” move higher (featuring short covering) into the midterms (at minimum) which will likely extend into year end and into Q1 2023. With the combination of deeply bearish sentiment (contrarian buy signal), seasonality (the calendar says “BUY”) and overwhelmingly bullish analytics (post-midterm data and more), this should be a good time to own stocks. 

We believe we have 4 “tells” that point to the near-term lows being in place. Signs that point to a sharp rally into midterms/year end (and into 2023). 

1) Analytics: the most compelling data of my career; “Since 1950, in midterm years, the S&P 500 has had an avg gain of 32% from the midterm lows over the following 12 months (with the markets higher 18 of 18 times). Add that with a divided congress and lame duck Biden, the markets should soon get their wish for gridlock in DC. There’s little more that the markets love than DC gridlock. 

2) Seasonality: November is the best month of the year in the midterm cycle and Q4 is the best quarter in the midterm cycle. 

3) Market Internals and Technical Buy Signals; 10/13 “CPI Capitulation”, featured a bullish engulfing candle for S&P 500 and two breadth thrusts (>90% up volume in both NYSE and Nasdaq…rare) 

4) The semis are leading. Yes, this is a new development, but from the 10/13 lows SMH (semi ETF) is up 13%. When the semis are leading the way higher it pays to be aggressively long stocks.

While we remain in a bear market (and below the 200 day moving averages) we will continue to look for trading opportunities in our selected ETF’s (using the VRA Investing System for timing) while using market weakness to dollar cost average each month into VRA 10-Baggers, our top ranked growth stocks with the potential/promise to produce gains of more than 1000%. Learn more at VRAinsider.com

Until next time, thanks again for reading….

Kip

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VRA Investment Update: Sentiment & Seasonality Flashing Buy Signals. Q4 Rally, Here We Go.

Good Thursday morning all. After solid back to back days our markets gave a bit of it back yesterday but we remain buyers into what we expect to be a solid move higher into the midterms and year end. Sentiment, seasonality and analytics are combining to make a strong case for a significant bear market rally. And, as Tyler covered on his podcast yesterday (sign up for alerts at vrainsider.com/podcast), the power of the midterm election year cycle is overwhelmingly bullish, featuring a 32% move higher (on avg) from the midterm year lows to 1 year later, with the markets higher 18/18 times (post 1952). 

We may also be seeing an interesting development in the semis (SMH), which closed 1% higher yesterday even as Nasdaq closed lower by .90%. If the semis are going to begin leading higher, you most definitely want to be long this market.

As of yesterday's close, 62 S&P 500 co’s had reported Q3 earnings with 76% beating analyst estimates on earnings per share and 61% beating estimates for revenues. Overall, corporate earnings continue to grow, albeit at a slower pace than in the first two quarters, as balance sheets remain remarkably solid for both consumers and corp America. As always, its not the news that matters as much as the markets reaction to that news. The question we’re pondering now is, “how much of any bad/recessionary news is already baked into the stock markets cake?”

Ed Hyman, Evercores Chief Economist and likely the best on the street for close to 50 years, is out with his strongest language yet for the Fed, saying that they may be “playing with fire” with their aggressive rate hikes and monetary tightening. Of course he’s right….the Fed is always most comfortable when they are breaking things. As a reminder, the Fed hiked rates 17 straight times from 2004–2006, for those that may have forgotten why we had a housing crash and market meltdown that came close to frying the global economy in 2008. Since their creation in 1913 the Fed has caused every boom and bust cycle. It’s what our money printers do best.

We Remain Highly Bullish on Energy Stocks. 

Below we see that XLE has dramatically outperformed oil over the last 4 months, which tells us that oil is about to scream higher (the equites lead the underlying commodity).

We bought ERX (2 x Energy ETF) 3 weeks ago and have current gains of 20%. As you’ll see below, ERX is nearing extreme overbought levels on the VRA Investing System. We would hold ERX here.

Small Caps Lead Coming Out of a Slowdown/Recession

Small caps have outperformed large-caps coming out of recessions 6 out of the last 6 times with average outperformance of 14%. We see it happening now (below) in this relative strength chart of IWM (Russell 2000) to S&P 500.

The Trend Line That Matters

This chart of 10 year treasury yields (going back to 1991) shows 4 previous points where this dominant/descending trend line was hit with yields then reversing sharply lower. 

And I’ll make one additional observation about the chart below (and rates). Check out the time frame from 1995–2000…as US stocks had their biggest bull market in history (dotcom)…while 10 year yields consistently traded in the 5% to 7% area. Same with the big bull market “post 9/11/01, pre Financial Crisis” when 10 year yields traded between 4% to >5%. 

As we start trading today, the 10-year yield is 4.15%.

Know this: I am not calling a top in rates. They are in fact acting like they want to go higher. But I am making the observation that “higher yields” (from current levels) have not been the kiss of death for either the stock market or the economy. Quite the contrary, in fact.

CDC Panel Votes to Make Covid Posion Jabs Mandatory for Kids

Remember folks, however they try and spin this, once this decision is made most every blue state and several red states will make it mandatory for grade school kids to be force-jabbed. And yes, this will include kids/babies in day care too. IMO, this “red wave” that we’re hoping for in 3 weeks will mean nothing unless R’s stand up “unanimously” and “forcefully” against this decision from the CDC. 

The CDC should be dismantled to the ground. Criminal levels of child abuse cannot be allowed to stand. And we MUST have Nuremberg-like trials for all of the criminals of the plandemic.

Midterms Solidly Favoring R’s. It’s The Economy Stupid!

When the left-leaning CNBC and far-left globalists at Bloomberg come out with pieces on the same day reporting the likelihood of R’s taking both the House and the Senate, you know that Dems are in real trouble.

GOP holds big leads on key economic issues ahead of the November elections

Until next time, thanks again for reading….

Kip

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VRA Investment Update: Is This The Pivot?

Good Thursday morning all. 

The short-covering move higher to start the week marked the best start to a 4th quarter since 1938. The move may have been fueled by short covering and the extreme oversold (on steroid) conditions that we’ve been pointing out.

As investors remain shell-shocked from the first 3 quarters of the year in the short term all eyes are focused on tomorrow’s jobs report. If its disappointing, the 1600 point move higher in the Dow Jones on Monday/Tuesday will make sense, as the much anticipated Fed pivot might finally be here. I expect that to be the case.

While I’m going to resist the urge to call a top in either the dollar or yields, what is clear that is yesterday's PMI (Purchasing Managers Index) showed a surprising level of weakness in manufacturing and economic growth and sent the equity/debt/currency/commodities markets into sharp reversals. 

I’ve been wrong over the last 3 months about the Fed pivoting, but with the bizarre financial events in the UK over the last week (featuring a near meltdown in pension funds), and with clear/convincing signs that inflation has collapsed and growth has slowed, the Fed may well be blinking here. Once again, kudos to Jeremy Siegel for his “they know nothing” moment about the Fed from his CNBC interview. That was as good as it gets…it may have just helped to start turning the right heads at the Fed. 

Here is Jeremy Siegel’s interview…

https://www.youtube.com/watch?v=9Xnwh_9KV3o

And you know my longstanding view; the markets were always going to rally into the midterms. Team Biden/Uniparty needs all the help they can get. Even moreso after the conservative Prime Minister of Italy was elected and then Bolsonaro’s strong performance in Brazil on Sunday. And yes, it’s all connected. 

Now, we’ve entered the best month and quarter of the year, which is especially the case in midterm election years. Following the meltdown of the first 3 quarters of the year we highly recommend using pullbacks to be long this market (at least until we hit extreme overbought on VRA System).

In our view, not only should the markets rally into the midterms but we also expect that rally to continue into year end. We’re now in the best month and quarter of the year and we have reams of analytics that tell us the 12 months after the midterms are the strongest period on record for US stocks; 18/18 x higher since 1952 with avg gains of 32% in the S&P 500 (from the midterm lows).

The visual below makes it clear; over the last 70 years, in midterm years, Q4 has been a juggernaut for US equities. A 15% move higher into year end sounds about right to me.

Thursday's action was also bullish, the kind of days that bears hate the most, with a more than 400 point reversal higher in the Dow. The move higher was led by…once again…the semis, which put in another important reversal, from losses of 2% at mid-day to a closing gain of 1%. So far in Q4, SMH is up almost 10%. The semis lead…the markets follow. 

The action in 2022 has been so brutal that the vast majority of the “what ifs” investors have considered have been of the ultra bearish variety. 

But what If the “what ifs” are about to pivot as well?

What if?

- The war ends…or stalls

- Rate hikes slow/stop

- We don’t have a recession

- Q4 Earnings don’t disappoint 

With losses of 24% (SPX) to 32% (nasdaq) have the markets already built in a near worst case scenario? 

Because in my view….

- This is not 2008 (not even close)

- Housing, banks, credit, and consumer/corporate balance sheets are in great shape

- An increasingly red-pilled world is great for humanity

- This may be a “great reset” of a different variety, with central banks now in a position to jump right back to a rate-cutting cycle 

- With years to “rinse and repeat”

- And yes, after the midterms, “Biden as Bill Clinton” from 1994 remains my sleeper pick

VRA Bottom Line: I see a world of reasons that the markets could ramp higher. All while a “wall of worry” is perfectly set up to climb.

Until next time, thanks again for reading….

Kip

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Ugly Action, Seeking Capitulation - Quick Hitters

Good Friday morning all. After Wednesday’s 2–3% ramp higher (S&P 500, Nasdaq, R2K) it sure felt like the lows were in as we had a 90% up-volume day in NYSE with 7:1 advance/decline and as S&P 500 put in an outside day (technical buy signal). 

Then, news broke that Apple decided not to increase production levels on their new iPhones, followed by BofA’s downgrade on the stock from buy to a hold rating. Just like that, Apple fell 5% and took tech/semis and the broad markets indexes with it. All of our major indexes finished lower yesterday, and the Semis (SMH) hit new lows for 2022. Seeing the semis hit new lows is not great…Apple news being the culprit. 

We continue to expect a near-term move in the other direction (higher) for US stock markets. Here’s Why:

VRA Quick Hitters:

1.) We learned this week that the AAII 4 week moving avg of bears just hit 55.25%, the highest reading of bears since the financial crisis lows of March 2009 (which marked the bottom). 

The AAII sentiment survey also just put up back to back weeks with more than 60% bears. Thats never happened before in the history of the survey (1985) and which I’ve voted in since 1988. 
Before this week more than 60% bears had happened only 5 times and the avg move higher in S&P 500 was 33% over the next year.

2.) We are about to wrap up the worst month of the year, which beginning on Monday will be followed by the best month of the year (in midterm years) along with the best quarter of the year (Q4).
Monday, being the first day of a new month and new quarter, will also bring with it significant equity inflows as well.

Also, remember this, in just over a month (midterms) we enter an extraordinarily bullish 12 month period, where since WW2 the markets have been higher 100% of the time with an avg gain of >15%.

3.) The US Dollar had an outside day yesterday…what is called a “bearish engulfing candle”. These often result in a reversal move lower. if so, big for stocks and dollar based commodities (gold, silver, oil, copper, etc). Not a guarantee the top is in just yet, but the one-way dollar trade is starting to look very extended IMO.

4) This morning economist Jim Paulsen, another of our favorites, was on Bloomberg, reiterating that the Fed has gone too far and that stocks are a big buy here. His primary points:

- Cash is not the place to be
- Looking for a rip in stocks
- Early cycle stocks. Consumer discretionary & growth/tech. Small cap growth stocks are a great buy. 
- Dollar is too high (good short)
- Really close to a Fed blink. Something is close to breaking. 
- Powell’s Volcker moment after 15 yrs of inflation? 
- US corp and consumer balance sheets are in great shape with cash and liquid with banks squeaky clean. 

5) Of note, our FIFO stocks (first into bear market, first out of bear market) are still holding up above their bear market lows. 

- ARKK is still 8% above the lows. 
- XBI 25% above lows. 
- KWEB 20% above lows. 

FIFO is still holding up. 

Yesterday was ugly but not as ugly as Wednesday was pretty.

6) Lastly, here are the bullish theme’s we have been covering with VRA Members

- We’ve hit extreme oversold on the VRA Investing System on each major US equity index. 

- Put/call ratios hitting “reversal” levels

- BofA global fund managers have more cash than at any point since 2001.

- Investors have $5 trillion in cash in money markets accounts and mutual funds (record)

- The DSI (daily sentiment index) is at “5” for both the S&P 500 and nasdaq. AKA extreme oversold.

- Investors globally are saying “what if”. “What if we have WW3 and nuclear war….what if currencies collapse…what if a global crash takes place…what if the Fed is crashing the system intentionally, etc”. 
 I’m not saying that these risks aren’t real…because they are. What I’m saying is that over my career, when investors get this overwhelmingly bearish and start asking the ‘what if” questions it has meant we are near a significant turning point. 

- And yes, team Biden absolutely wants the stock market moving “higher” into the midterms. 

At this point it’s time for the question to be asked; “Do J Powell and his merry band of money printers at the Fed actually WANT Democrats to be wiped out in the midterms?

As Compelling as Compelling Can Be; Stocks Must Be Owned Headed Into the Midterms

Until next time, thanks again for reading….

Kip

Join us for two free weeks at VRAInsider.com

Please join us each day after the market closes for our Daily VRA Investing Podcast!
Sign up for email alerts @ vrainsider.com/podcast

Also, Find us on Truth Social and Rumble