VRA Saturday Alert: What. A. Week. VRA Market Update

Good Saturday morning all. What. A. Week. I’ve run all VRA System Scans and screens this morning and have a number of important points for us to cover. If you’re reading this, you are likely anxious about the markets. If not, you have more ice water in your veins that me…nerve wracking might be an understatement. But if I can be so bold, this is also why you subscribe to the VRA. The VRA System helps us to remove emotion from investing…as much as possible…making clear headed decisions, based on whats worked for me over 3 decades.

We’ll cover the VRA Alerts from this morning next, but first, the question that’s most on your minds; “are the lows in place?” I honestly do not know at this point, but we do have some hard data that points to the likelihood that a deeply oversold bounce should be in the cards come Monday morning and the early part of the week. Consider:

1) Both the put/call ratio and the VIX hit near panic-selling levels this week. On Friday, the put/call ratio averaged 1.4. Anything over 1 tells us that options traders are heavily bearish…almost always a solid contrarian indicator…a reading of 1.4 tells us that (if nothing else), a relief rally should be in the cards.

The VIX (volatility or the “fear index”), spiked to 50 on Tuesday…an 118% 1-day increase (an all-time record) and a 2.5 year high. But, on Wednesday and Fridays sharp declines, the VIX failed to surpass 31, closing at 29 on Friday. This tell us that the declines are becoming more orderly…less fear induced…and that’s a positive.

2) Investor Sentiment has flipped from 60% bulls (AAII Weekly Investor Sentiment Survey) all the way down to 37% bulls. We have to keep in mind that these are the readings from Wednesday, but we also learned on Friday that the USA Today Sentiment reading was down to 8…it had been as high as 80 just 2 weeks prior. Again, as contrarians, we want to act against the majority…most especially during a bull market, when bearish sentiment reaches a fever pitch. We’re getting there now.

3) Fridays wild day in the DJ (+300, -520, +500…with a close of +330) was just the kind of messy retest of the lows that we’ve been discussing. While the Dj remains some 1300 points above its 200 day moving average (200 dma)…never getting close to the 200 dma…the S&P 500 fell to EXACTLY its 200 dma on Friday. Here’s the SPX chart…this is the one that every smart money market watcher is talking about…its the only chart we will look at this morning.

At its lows, SPX traded down to 2359…again, exactly to the 200 dma (circled below). Investors that invest almost exclusively on fundamental analysis pay close attention to the 200 dma. Here’s why; if a stock or index is above the 200 dma, investors can assume the trend will continue to be “higher”….and will buy/add to positions. Conversely, if a stock/index is below its 200 dma, this is when investors can look to go short, betting against a move higher, looking for lower prices instead. The VRA keys off of the 200 dma for exactly this reason.

We can also see that the momentum oscillators are reaching heavily oversold levels….not yet extreme oversold on the VRA System…but certainly getting close. Should we get an additional test of the 200 dma, dollars to donuts we can bet that extreme oversold levels will be reached. These levels of extreme oversold readings commonly mark a bottom (at least for the short term). We also saw some interesting readings in trading volumes. As you can see below, buy-side volumes were higher on both of the recovery moves higher (Tuesday and Friday) than at any other point during the week, as the market was plunging. This is a positive divergence…and that’s good.

Fridays reversal higher was most important. If we had seen a sharp sell-off headed into the weekend, investors that wait until the weekends to review their portfolios would likely have entered sell orders, for first thing Monday morning. This is how black Mondays occur. This is how a standard market correction can turn into something much worse. The rally into the close could prove far more important than most realize. Again, another positive.

We also saw BIG reversals higher in some of the most important market leading indexes…aka, the same indexes that have led the market higher over the past year. The Housing Index (HGX) finished up .73%. The Semiconductor Index (SOX) finished up a huge 3.05%. The Bank Index, another important market leader, finished up 1.98%. Often, major intraday reversals like this signal important market bottoms.

So…as we can see…there are a number of signs pointing to the likelihood that the markets may be reaching their lows. Add to this that the economy is powering ahead, tax reform is just now kicking in, and we have a president that is committed to MAGA, and the fundamentals look solid. Globally, as well.

Now…the negatives. And yes, this decline “could” be signaling that something bad is headed our way.

For my members, I’ll remind you of my Wednesday podcast. Swamp draining is in high gear. It could also come with a steep price tag. If we really want to get dark, think back to what the markets did prior to 9/11/01. Many have forgotten this, but just prior to the 9/11 attacks, from May of 2001 to the day before 9/11, the Dow had already fallen some 14% during those 4 months. After the attacks, over the next 12 months, the Dow would plunge another 20%. 34% in combined DJ losses.

Was the 14%, 4 month decline in the DJ…just prior to 9/11…signaling trouble on the near horizon?

If you’ve seen the recent news out of Syria, which has already developed into a proxy war between Syria, Iran, Russia, Turkey, Israel and the US (among others), the news is getting steadily worse. In just the last few days, planes, helicopters and attack drones have been shot out of the sky. Are we nearing a much more serious global conflict?

I’ll resist going too far down the rabbit hole, on this already bleak and rainy Sugar Land, Texas morning. And honestly, its most often when paranoia begins to set in, that we’ve reached a market bottom.

Until Monday morning, thanks again for reading…enjoy the rest of your weekend.

Kip

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VRA Market Update. January Barometer. Higher Rates Causing Concern. Investor Sentiment. Perspective.

At the beginning of 2018 I made the comment (to anyone that would listen pretty much) that I believed this year would our best year…possibly ever…for the VRA Portfolio and our bottom line results. If that sounded like marketing rhetoric, I get it…but it was simply what I believed, based on what the VRA System was telling us.

On all VRA Buy Recommended positions we have a total net gain of 897% with an average gain per position of 69%. This is why the VRA is a top performing investment newsletter. We can find no one who has done better.

We’ve got a long ways to go in 2018 and it will take hard work and some very good fortune to put up these numbers for the full year. To the investment gods (little g), please know “this is not me bragging” (karma isn’t a big fan of bragging), I’m simply passing the results on so we can celebrate them together.

Crushing the Markets Year After Year. Who we are and how the VRA Investing system works. 

For those of you who are new to, or maybe just learning about, the Vertical Research Advisory (VRA) I wanted to put together a video that explains how the VRA's Investing system works, tell you a little bit more about my story and how we generate returns, year in and year out, in good markets or bad. 

https://youtu.be/8-8y21NvwCw

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VRA Market Update:

January closed with gains of 5–7% for the major averages (SPX, DJ, NASDAQ), while the Russell 2000 finished the month with just a 1% gain. To put things in perspective, for those that think this was the end of some sort of “melt-up”, China (Hang Seng Index) finished the month with gains of 13%.

Still, a great month to start the year. And no, we almost certainly will not keep us this torrid pace for the rest of ’18, unless we believe that the markets will end up 60–84% higher for the full year (January’s gains annualized). I’m ultra bullish…have been for a long while…but not that bullish (if I was, I would expect you to laugh me out of the business).

But here’s the most important point; the VRA does not invest in the broad market. We pick and choose our spots, with individual stock/ETF positions, using the VRA System to handily beat the broad markets (year after year). Remember, it’s not a stock market…it’s a market of stocks. As long as we’re in the right stocks at the right time, we’re good.

Note: The last 4 days marked just the 3rd time since the election that the VRA System has flashed “negative/correction”. For this pattern to continue, we should see a reversal higher in the next 1–2 trading days. If not, this will mark a pattern change, which could signal something larger than just a ST pause lies ahead.

As goes January, So Goes the Year. From the Stock Traders Almanac:

Conversely, a strong Januarys signals “high odds” that the full year will close higher. My year end target for 2018 continues to signal 30,000+ on the Dow Jones (or 14% higher from todays prices, minimally).

Still, its a market of stocks…

Booming January Jobs Data.

This mornings January employment report showed 200,000 new jobs created, beating estimates by roughly 10,000, with the official unemployment rate at 4.1%. But the real kicker was wage growth, which powered to an 8.5 year high. Wage growth grew a big 2.9%, beating estimates by a country mile. This is what a strong economic recovery looks like…this is also how we get back to 4%+ GDP. In fact, this weeks Atlanta Fed’s estimates for Q1 were a shocker even to me, with an estimate for first quarter GDP hitting 5.4%. We’re seeing hard core evidence of what a Trump economy looks like…just imagine what he might be able to do over the next 7 years.

But even range expansion bull markets need to take a breather. As we covered yesterday, if the entire year were to follow Januarys lead, the market would finish the year with gains of up to 70%. Just not gonna happen…hence the overbought pause from time to time, always necessary to remove excessive optimism and stow some fear back into the market. Fear is beginning to show up, as seen in this weeks AAII Investor Sentiment Survey.

Bulls at 44.8%, bears up 4.7% to 28.8% with neutral investors still at a high reading of 26.5%

I’m looking forward to next weeks readings….I can almost guarantee you that bearish readings will surge by double this weeks 4.7% gain, following the sell-off of this week. Remember, especially for our newer members, until the AAII survey shows bullish readings of 60%, for weeks on end, there will be no signifiant top in this bull market. I’ve followed this survey since the late 80's…highly reliable. We have yet to see investor euphoria in this market, certainly not from the retail investor. Just last year I was reporting that investors actually in the stock market had hit 19 year lows. Without question, the public is falling back into love with stocks…but that’s a process that will take years to play out.

Think of it this way; when most every market guru is predicting Dow Jones 50,000, we’ll know its time to reverse my bullish viewpoint. We’re not there…not close. This is the power and importance of investor psychology, both as a short term and long term indicator. These are the lessons my mentors taught me some 30 years ago. I don’t see them even going out of style.

But again….it doesn’t mean that we won’t have corrections. Stock market corrections are necessary to the health of a long term bull market. Trees don’t grow to the sky.

Rising Interest Rates Causing Concern

A primary boogeyman, according to those that are bearish, is that rising rates will suffocate the stock market. While its true that the move higher in rates (10 year) has accelerated, with the 10 year yield hitting 2.72%, my view remains that rising rates are a natural end game from an economy that is picking up speed. Perfectly natural.

We can see the fear in this one year chart of XLU (utilities ETF), which has crated some 14% since its November highs. Utilities are the largest borrowers of money in the country, which explains the move lower. Pretty ugly chart, yes? But keep reading…

Now, take a look at another chart of XLU…this time the 8 year chart. Here, this correction looks perfectly normal, taken into broader context. Interesting…no?

While we’re on the subject of perspective, if you’re on social media like I am, it can feel like we’re living on the edge…so much going on in the world of politics and business…but are things “really” that crazy?

I was too young to remember much of the 60’s, but again, some perspective might be in order. How crazy were the 60's!

State of the Union

Wednesday’s SOTU was off the charts fantastic…of course I say this as a Trump supporter…an early Trump supporter that both predicted his victory in late 2015 and then wrote a book about his winning (that I started 2 months prior to the election). The strength of my conviction.

Dems hated it. We know this because they refused to stand throughout the night. Even for our flag, our veterans, a booming economy, the lowest black/hispanic unemployment, possibly ever. Sickening, frankly. And they wonder why they’ve lost 1031 net national elections over the last 9 years? They wonder why their fundraising efforts are collapsing? But somehow, they think they can take back the House/Senate in this years mid-terms….uhhh…..no chance, not as I see it anyway.

The markets sure like the SOTU. MANY billions in fresh capital will come flooding into stocks (month beginning money from corps, pensions, retirement plans, etc). And the BIGGIE; Trumps tax cuts start showing up in paychecks.

Important Point: Reagans tax cuts caused the DJ to more than double over the last 6 years of his presidency. But Trumps could be even more powerful…I fully expect that they will. Here’s why; unlike Reagans tax reform (where the cuts were phased in over years), the beauty of Trumps tax reform is that its all hitting NOW. No phase in…no waiting…everyone gets to keep/make more today. I cannot overstate the power of this. This is why pullbacks, like the last two days, must be bought.

Biotechs

FYI, I still want to own this group… And our timing looks to have been spot on. Early this week Amazon (with partners Buffet/Berkshire & JP Morgan) announced they are moving into the healthcare industry. Hello….

If you remember the beating that grocery stocks took when Amazon bought Whole Foods, you’ll have an idea of the carnage that may be coming to healthcare/insurance stocks. And, hell yes. Since Obamacare was forced on us, our insurance costs have skyrocketed while healthcare/insurance/hospital stocks soared at the same time. Gee…wonder is there’s a connection here? Bottom line; I am perfectly fine with Amazon running our entire US healthcare industry. I know this kind of blanket statement sounds a bit insane/stupid, but I also know that when Amazon enters a field, consumer costs plummet while our level of service actually improves. Talk about a win-win.

Until next time, thanks again for reading…please remember to login to your VRA Members Site at least 1–2 times each week to make sure you are positioned properly.

Kip

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VRA Update: 360% Gains in Just 11 Days. Next Up.

VRA Update: 360% Gains in Just 11 Days. Next Up.

Since the beginning of 2018 the VRA Portfolio ( stocks and options) has produced gains of 360%. I’ve been saying this will be my best year ever. This bull market is just getting started, and I fully intend to crush it again this year.

Market Update

Walmart announced that they would raise their starting wages, announced they are giving big cash bonuses to employees, plus something I have not seen before...a $5000 adoption benefit, for Walmart employees that adopt a child.

Wow.

Here's an AM tweet from Charles Payne...one of the rare MSM "gurus" that is actually a guru, in my book.

Since Trump's tax bill was passed into law, just 3 weeks ago, we've seen more than 80 fortune 500 companies making employee cash/benefits awards, similar to Walmarts. 

Can anyone name a single fortune 500 company that offered company wide cash & benefits packages to ALL employees, during Barack Obama's entire 8 years in office? There must be at least a few...right?

And here's a reminder tweet of mine, once we knew the tax bill had the votes to pass:

I remember the Reagan years pretty well. I was young (18-26), but I remember the news of the day...great news that went on for years on end; tens of millions, new jobs created...higher wages, year after year...and a rip roaring stock market, that more than doubled over his 8 years in office.

Under Reagan, it took 12-18 months before his polices began to make a difference in the stock market, but jobs growth was a different story...job creation began to rise quickly after just 6 months in office, with interesting rates topping out near 20%. 8 years of economic boom.

Under Trump, we've seen near immediate improvement with major employer after major employer, paying it back to their best assets...the people that work for them. Who the president is matters a great deal. 

I had people scoff at my year-end target for 25,000 for the Dow Jones, just as some are scoffing at my 30,000 target this year and my 40,000 target by 2020. But folks, this is what earnings growth of 10-15% per year works out to, assuming the P/E multiple stays around 20. It's really just math, at the end of the day.

Regardless, we'll continue to use the VRA System to ensure we are positioned correctly...whatever the future may hold.

Investing Tenets and Observations of the Day    

A few of my mentors investing lessons...

1) "Don't fight the tape, don't fight the FED". Yes, the FED has started raising rates...at some point the markets will have to deal with this...but the rising "tape" says we must be bullish.

2) "The trend is your friend". When the major averages are in confirmed bull market status (above 200 dma), we must be long. Conversely, stocks trading beneath their 200 dma pose big risks.

3) "There is no more bullish sign than an overbought market/stock that continues to rise". This is exactly what we're seeing today. Overbought markets that continue to rise. Highly bullish

4) "It's not a stock market....it's a market of stocks". One of the best investing lessons my mentors taught me. There's always an opportunity to make money, by focusing on both fundamental & technical research. This rule is at the heart of the VRA System.

I remain a bull...

...a big one...with the amount of money coming into the markets (a massively unreported story in my view), our next move should continue to be on the long side.

Remember, when inflation (and higher rates) first begin to return to the global economy, it is a highly, highly bullish event for stock prices. It's the confirmation of a strong economy and a much brighter global growth story. How could this be bearish?

It's only after a year (or even 2-3 years) of rising inflation and higher rates that we must start to become concerned. Please do not listen to the bears that tell you otherwise. It's not that they are wrong...they are just early (likely very). 

Ideally, I'd like to see the market take a breather...maybe even have a 200 point down day, just to get some fear back into the market. But frankly, we may not get anything close to this kind of decline...this bull market has too much higher to run.

Oil Powering Higher. Commodities Must Be Owned. 

Oil is breaking out to 4-year highs. Long-term readers will remember that I was bearish on oil at $100 and then turned bullish on oil at $32. Today, at $64.50/barrel, I could hardly be more bullish. ST overbought, yes... but we want to continue to own/buy.

Let me repeat; this is the beginning of the move higher...this is not the time to take profits...my $70/barrel target (WTI) for oil this year will likely be too low. Most continue to miss the power of the reflationary move in global economies. We're talking a 2-3-4 year cycle of MAJOR moves higher, in commodities across the board. 

I've been saying that the pause in gold/silver/miners would be short lived. It's likely that we've already seen the ST lows in each. $2000/oz remains my target for gold this year. Price suppression schemes may have just reversed course...in favor of higher gold and silver prices. And what a reversal that would be. Still looking for one final sign of proof....we must see buy side volume in GDX (miner ETF). Once volume confirms, look out above.

 

Final point on PM's and miners. History tells us that PM's love higher interest rates. History also tells us that PM's and miners love higher inflation. Folks, we have both of these today. 

VRA Market Update

Congress is back in session...this is when market accidents happen. Known as the Congressional Effect, going back some 60 years, more than 90% of all stock market gains have occurred when both houses of congress are out of session. Pretty powerful statistic. While we also know that more than 90% of all gains occur during the November to May time frames, I am not getting bearish on the markets...just pointing out that if a correction is going to occur, its more likely to take place when the House and Senate have an opportunity to screw things up.

Important New Years Market Pattern

Below is a link to an article from Zero Hedge that could foretell what we can expect for 2018, along with my tweet about the piece. Bottom line; we saw the Dow begin the new year with a gain of 2% or more. In years where the first 5 days of the year saw gains of 2% +, the market went on to rise in 15 of 15 years, with an average gain of 18.6%. 

https://www.zerohedge.com/news/2018-01-06/stock-markets-bulls-monday-matters

Most interesting statistical research.  

It matches well with my year-end target of DJ 30,000 (20% higher from the beginning of 2018). In April of 2017, I stated that my year-end target for the DJ was 25,000. We missed that by just two days. Frankly, I'm even more confident about my 30,000 target for this year. Range expansion meets momentum,...this is the market we appear to be in today...is highly, highly bullish. It makes sense when you think about it this way; when the markets (or individual stocks) hit all-time highs, there is no one that owns that particular investment that has a loss...meaning that there is little to no reason for that investor to sell. When there's little selling pressure, even small amounts of buying pressure can send an investment soaring. 

Today, with the largest tax reform package in US history about to be unleashed...with corporate earnings already growing their best in a decade...and then add in the coming $2 trillion infrastructure bill and up to $4 trillion that could be repatriated back into the US, you can see why I remain so bullish about the future for stock prices. 

Yes, we remain extended and overbought...but that's no reason to sell. In fact, statistical analysis also confirms for us that markets that reach overbought levels and remain overbought tend to be one of the best investment environments of the last 100 years. 

In our next VRA Update we'll cover several charts that make up the VRA Portfolio. I continue to see major moves higher in energy, biotechs, China, precious metals & miners and small caps.  

Until next time, thanks again for reading….have a great week.

Kip

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VRA New Year Update: 2018 is Here! Trump Bull Market. My Forecasts and Predictions. VRA System and Sector Analysis. Extreme Options Program

Good Tuesday morning all. Happy New Year! Are you ready for an off the charts incredible 2018?

Because….I AM!

I honestly cannot remember being this positive to start a new year. Not in my 33 years in the business. At this time last year we had a new president that got elected because he said BIG things on the campaign trail that resonated with so many across the country (and the world). Those big words/ideas got him elected. But, in January of last year we had no actual proof that Trump would in fact be a man of his word. Most politicians say whatever it takes to win so that they can then line their own pockets with our money. It’s why we loathe the vast majority of elected officials.

Until Trump got into office and started governing, how could we know?

After 11 months in office, we have our answer. There’s not just evidence that Trump is a man of his word…there is 100%, unmistakable rock solid proof that Trump has been a man of his word. A few examples: Border security/immigration enforcement….destruction of business killing hyper-regulation…the largest tax reform/tax cuts package in US history…ISIS destroyed…3%+ GDP/US economic revival…70 new all-time highs in the Dow Jones…unemployment at 17 year lows. Next up, get ready for up to $4 trillion in corporate liquidity to come flowing back into the US economy (repatriation from tax reform legislation), along with a $2 trillion + infrastructure bill. Even the biggest left leaning Dems are ready to agree to a deal on infrastructure.

Just…wow.

The biggest driver for higher stock markets going forward? Massive amounts of retirement/pension/401k are about to come flooding into equities. Frankly, most investors are nowhere near bullish enough, based on my work and the VRA Investing System.

It’s gonna be a busy year folks…I believe a “highly” profitable year for us here at the VRA…now’s the time to get strapped in for the ride.

Lots of bases to cover this morning…I’ll use some tweets from the last couple of days to speed up the writing process:

In 2017, US markets had a banner year. The VRA did better, with a 32% gain (marking 14/15 years this has been the case):

VRA MARKET UPDATE

Based on everything I see, 2018 looks to be one of our best years ever. In 2011, the VRA put up a return of 260%. My best year on record. I repeat…my goal is to beat 260% in 2018.

The VRA System sees no signs of trouble. None. Yes, we’re still ST overbought…but nothing like we were in mid-December. Check out the latest readings from the VRA System (remember, Extreme Overbought readings on VRA System occur when an index/stock is at 90%+ overbought):

S&P 500: 75%

Dow Jones: 84%

Nasdaq: 64%

Russell 2000: 81%

The “pause” over the last week of 2017 brought the overbought readings down….just the kind of “correction” that bull markets love. Now its time for onward and upward. The markets internals continue to point to exactly this. For example, on Friday, when the DJ lost > 100 points, new 52 week highs to lows registered 504 new highs to just 70 new lows. Powerful…and not at all indicative of a market thats ready to reverse course.

VRA Sector Analysis

My favorite sectors have not changed: energy, retailers, biotech, PM’s & miners, China and small caps. Check out what China did overnight….Hong Kong +2%….meaning that our holding in YINN (3 x China ETF) will open some 8% higher.

Precious Metals and Miners: Bring on the Rate Hikes! $2000/oz Gold in 2018.

Over the weekend I saw 3 different “gurus” predicting that gold would not do well this year, due to ongoing rate hikes from the FED. Poppycock…!

And heres the chart that matters most….we want to see gold break $1340…then $1370. Then….its liftoff folks.

In this weekends Barron’s, on both the cover and in 2–3 articles, they predicted that commodities/metals/gold would have a banner year and that inflation was on the way back. Nice to see Barron’s join the party on the global reflation trade. The VRA nailed this forecast long ago:

Yes, the VRA System shows PM’s and miners at Extreme Overbought readings. We must be aware of this…just as the US dollar is flashing Extreme Oversold. No need to change course…just important to be aware of a ST pause. However, the shorts are piling into this trade now. If PM’s continue their surge (the best since 2011), the squeeze could send PM’s and miners screaming higher.

Extreme Options Program

The first day of the new year is not the ideal time to laugh a new options program. Look for this email with full details in the next 24–48 hours. If you want in, just send us an email a support@vraletter.com and we’ll make sure your place is reserved (first 100 only). We’ll then launch the next Parabolic Options program within a couple of weeks.

Finally, check out this video (below) of Tyler from yesterday. A wild deer kiss. What a way to start the New Year!

Again, Happy New Year everyone. Looking forward to crushing the markets together in 2018.

Until next time, thanks again for reading….have a great week.

Kip

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https://twitter.com/therriage18/status/948004235102310400

VRA Weekly Update 12/22/17: Merry Christmas! 2017 in Review. Big Happenings in Mining Stocks and Bitcoin.

If you had a chance to listen in last night, you know that Wayne and I covered a lot of territory. 2017 has been nothing short of remarkable…alternate universe kind of stuff. The gurus and pundits, once again, got just about everything wrong:

If Trump wins the market will crash.

If Trump wins, the world will burn (and not just from global warming/global cooling/climate change)

The market is wildly overvalued and cannot keep going higher.

Cryptocurrencies are a scam.

The oversupply of oil will send it crashing back below $40

And my personal favorite; Trump won’t last a year….Russia, Russia, Russia!

But I saw things differently. I even wrote a book about it. The Trump bull market is very real…and its just getting started.

At the end of the first quarter, I first stated in writing that DJ 25,000 was likely. We’re almost there. As you may have heard last night, my 2020 target is being raised to DJ 40,000 (and that may be low).

Of course, no one knows for certain. But I do believe I know this for certain; our current bull market will not end until we have a “blow off phase”. The phase where investor euphoria takes hold and sends stocks screaming higher. We’re simply nowhere near this today.

When everyone starts talking about DJ 40,000….maybe even DJ 50,000…we’ll know that its time to be concerned about a top. Major bull markets do not end until we reach the mania phase. At the soonest, this kind of a top is at least 1 year away…likely 2–3 years away.

Market Internals Solid

My mentors taught me, way back in the mid-late 1980’s, that if you listen to the market, it will tell you what it is about to do. The single best way to do this? Charts, technicals and especially the market internals.

Take a look at yesterdays figures. When we see 2–1 positives across the board, as we saw again yesterday, the markets telling us that it almost certainly wants to go higher still. Once again, we see new highs to new lows at close to a 10–1 ratio. Highly bullish.

2017 — The Trump Bull Market

During the last year we’ve seen more than 75 new all-time highs and a record 5000 point Dow Jones advance (the first in history), as the country is reminded of what a pro-growth, business friendly economy is supposed to look like. We’ve also seen a multitude of highly burdensome regulations slashed…allowing entrepreneurs to do what they do best…grow their businesses.

Remarkable. And yes, who the President is matters a great deal.

But folks, “literally” everything that I see, using the VRA System and my 32 years of experience, tells me that we are nowhere near the end of this rally, certainly not after passage of Trumps massive tax reform bill.

Here are the some of the most important markers that I follow:

1) Sentiment; yes…investors have become much more bullish (as you’d expect with this kind of a move higher), but the most important sentiment survey that I follow…the same one that I’ve followed since the late 80's…shows bullish percentage still at just 50%. While its beginning to elevate, yours truly will not become concerned about this market reaching dangerously overbought levels until bullish percentage reaches 60%…and for weeks on end. We’re nowhere near this.

Here’s the latest AAII Survey readings from Wednesday, presented in graph form that shows bullish sentiment readings from the market lows of 2009 (exactly when the VRA switched from bearish to bullish….we actually called the stock market bottom within 5 minutes of it occurring).

As you can see, bullish sentiment is finally picking up steam, back to 50%, however we’re still quite a ways from the 60% readings that could begin to signal euphoria. The highest bullish reading over this time frame was 63% (late 2010).

As a contrarian, the odds are slim to none that I will become worried about sentiment becoming too bullish before the end of Q1, 2018 (at the earliest).

2) Seasonality: in what may be the most important statistical investing fact that exists, over the last 50 years more than 90% of all stock market gains have occurred from November to May. Again, 90% folks.

We barely had a single whiff of a sell-off during the historically volatile September/October risk filled months, which told us that we must be positioned aggressively for higher stock prices. My year target of Dow Jones 25,000 is 275 points away. 30,000 in 2018 is not a stretch.

3) My mentors taught me, at the young age of about 24, that you can track markets by the success in the following areas: income tax receipts, health of the housing markets and health of financial stocks. We see all-time highs in all 3 areas today. Highly, highly bullish.

Also, by following the Nasdaq (the best barometer for excitement in the markets), we get a great feel of what the future holds. Remember, since the election, the nasdaq is up a big 30%.

Final point on the markets and the economy: the stock market has always served as a discounting mechanism for the future. It tells us, roughly 6 months in advance, what we can expect economically going forward. Today, I believe the stock market is telling us that both the US and global economy will continue to surge.

In my book “CrashProof Prosperity, Becoming Wealthy in the Age of Trump” I laid out two investing scenarios. In one, I said that “if” we were going to have a bear market and sluggish economy, that it would come early on in Trumps first term (lots of historical precedence for this, during the first year of a new presidency).

That did not happen.

In my second scenario, I laid out the more likely probability that Trump would take the markets to all-time highs, based on economic growth that finally got back to the 4–5% GDP growth of years past. Remember, in not a single year of Obama’s 8 years did US GDP hit 2%. Today, we’re already back to 3% +.

Imagine what Trump might be able to accomplish in years 2–3–4.

I am “all-in”. The DJ is headed to 35,000….possibly even 40,000…over the next 3 years. If that sounds impossible, consider this; a move to 40,000 would mean that the market would need to average a 20% return over the next 3 years. Not impossible at all.

BITCOIN

I first bought bitcoin at $600. When it crossed $2000, I began writing publicly about it in these pages, saying “Bitcoin is breaking out…higher prices are on the way”. Bitcoin rose to $20,000….but today its going through another big drawdown (correction).

Here are the big drawdowns for 2017:

For those interested, Bitcoin at $12,000 represents a Fibanacci retracement of 38.2%. If this level does not hold (and its breaking through it as I write), then we can likely expect a move to $9500 (or so). Just some basic technical analysis for those interested.

GOLD and MINERS

Wayne and I covered this last night as well. Here’s my tweet from the trading action in the miners over the last 2 days. Back to back days of 4:1 ratio, GDX (miner ETF) to gold. First time we’ve seen back to back 4:1 days in more than 18 months.

There is no more bullish sign for the future price of PM’s and the miners than this kind of outperformance. Now, we want to see GDX break though their most important moving averages…and we want to see it take place on heavy trading volumes. This morning, gold, silver and GDX are knocking on the door for this most important breakout. Here are the levels we want to see surpassed:

Gold: $1288/oz ($1273 now)

Silver: $17/oz ($16.29 now)

GDX: $23 (22.70 now)

My target for 2018 remains $2000/oz gold. We will make an absolute killing in the miners (which move 3–5x faster than the underlying metals).

Finally, the markets are quite this morning. I wish you a very Merry Christmas and a great holiday season. The markets are closed on Monday, so I’ll see you back here first thing Tuesday morning.

Thank you for making the decision to join the VRA. Every bone in my body says we are going to absolutely crush the markets in 2018.

Until next time, thanks again for reading…

Kip

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