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

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

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

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

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

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

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

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

AAII Investor Sentiment Survey

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

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

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

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

Three Steps and a Stumble

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

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

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

Be Prepared To Act

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

Until next time, thanks again for reading…

Kip

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

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

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

Investor Sentiment

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

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

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

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

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

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

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

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

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

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

CV Insanity Update

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

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

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

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

First it was ‘prevent transmission’. 

Next it was ‘prevent symptoms’. 

Then it was ‘prevent hospitalization’. 

Then it was ‘prevent serious illness and death’. 

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

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

#DoNotComply

#Nuremberg2

Until next time, thanks again for reading…

Kip

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TLT (20+ Year T-Bond ETF)

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

Until next time, thanks again for reading…

Kip

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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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