VRA Weekly Update 12/29/17: Happy New Year! The January Effect. VRA 2018 Game Plan.

Good Friday Morning All,

In March of this year I predicted DJ 25,000. We’re almost there. Today, I could not be more bullish. Not on the economy, not on the markets and not on the future of our great country. How weird was it that everyone was proudly saying “Merry Christmas” again this year and that we noticed the huge difference from years past?? That’s a sign of things to come that I wrote about in my book, Crashproof Prosperity: Becoming Wealthy in the Age of Trump(download here).

Market Update

US equity futures are trading higher this morning, as we get one final opportunity to crack 25,000 on the Dow Jones. Should the DJ close 163 points higher, 25K will become a reality.

In reality, DJ 25k means little. The VRA System is structured to give us maximum exposure to the groups with the highest probability for big gains, regardless of what the broad market does. Today, these opportunities lie in precious metals and miners, energy, biotech, retail and of course, small cap story stocks…

2018 Snapshot

For those that don’t follow me on Twitter, here’s a snapshot of my thoughts about the New Year.

The amount of money thats about to flood into the markets….as all of the year end bonuses and retirement/pension/401k money comes storming in….could send the DJ up 1000 points in just 2–3 weeks.

This is what I expect to see….I’ll be surprised if it does not happen. Just wanted to put this on record.

The January Effect

From my first year in the business (1985) I was taught…by two great mentors (Ted Parsons and Mike Metz, RIP both) about the investing power of the January Effect. Here’s the official definition:

“The January effect is a seasonal increase in stock prices during the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains, prompt a sell-off.

The January Effect produces some of the best short term gains of the year, as stocks that were sold in December for tax purposes come roaring back in the first month of the new year. This applies even more so to small cap stocks that sell-off in December…when liquidity is low…sending the shares of small cap stocks lower, only to snap back quickly in January. In 2018, I look for the January Effect to be powerful

IWM (Russell 2000 ETF)

IWM is displaying one of the most bullish chart patterns you’ll see. A rising bullish wedge, that is compressing into a coiled spring. It’s also flashing buy signals on every important technical and at least 1 week away from reaching Extreme Overbought Levels on the VRA System. IWM is comprised of small cap stocks…with some mid caps as well…but this is the group that will benefit most from the January Effect. This is of course the sweet spot for the VRA Portfolio.

GOLD BACK ABOVE $1300

As I write, gold is trading at $1302/oz with silver back to $17/oz. This places both gold and silver back above every important moving average (50, 100, 200). Highly bullish (while ST overbought).

Here’s my tweet on gold’s recent trading pattern from yesterday.

This trading pattern is highly bullish. It most often occurs before major spikes higher. Our biggest concern? The return of the price suppression manipulators, the global central banks that have kept the price of gold cheap for many, many years. Will 2018 be the year that the price suppression schemes finally fail? I am most hopeful. It’s a major component of my $2000/oz price target for gold.

In this scenario, the miners will explode higher. Especially the VRA Portfolio miners. As always, I’ll be watching closely. However, there is one item that concerns me that I mentioned on Twitter this morning.

Volume Proceeds Price Movement

OIL

I was bearish on oil at $100/barrel and remained bearish until oil bottomed at $26 (I called the bottom at $32). Take a look at this 3 year chart of oil. Notice the volume surge? This told me that smart money was coming in…likely in a major way. My target for 2018 is now $70 (minimum) but I would not be surprised to see $75–80. The global economy is back…of this there can be no doubt. Great for oil and energy stocks.

COPPER

Or Dr Copper as its commonly referred to, one of the best all-time indicators for economic growth. In this 3 year chart we see a major increase in volume. I called the global reflation trade here, in these pages, at the beginning of 2017. Copper is now on its best run in close to 3 decades.

Volume precedes price movement. A most important lesson from my mentors….some 30 years ago.

AAII Investor Sentiment Survey

Here’s the latest from AAII from Wednesday. Well folks, its finally happening. Investors are getting bullish. This reading shows bulls at 52.6% and bears at 20.6%. I see no real reason for caution here….but once we start approaching 60% readings we will be forced to be more cautious on the broad market. But…its happening just as we expected…just as we cover here weekly.

I’ll close this holiday trading week VRA Update with a final macro thought; in my estimation, few are prepared for the move that is about to take place in the markets. An absolute flood of fresh money is about to come into the market…from early January retirement plan/401k/pension contributions…to investors that are deciding its finally time to get back into stocks.

I look for a 1000+ point move higher in the Dow Jones…in January…and it may even happen inside of a single week. Yes…I remain highly bullish. My system says we have no choice.

Until NEXT YEAR….thanks again for reading…have a very Happy New Year! See you again in 2018 (and on Twitter, much sooner).

Kip

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VRA Update: Tax Bill Volatility. FED Rate Hike. Fresh All Time Highs fro 2018. Gold v Bitcoin

Good Friday morning all.

Busy week with Tax Reform and the FED Rate Hike, I will get right to it.

The FED acted just as we expected, hiking rates by .25%, the 5th rate hike since December 2015. Yellen had a number of interesting comments at her presser as well.

 

1) We remain perplexed about what's happening with inflation (not me...its everywhere we look).

 

2) Bitcoin/cryptos are not under our purview. We cannot regulate it. It's also not large enough to be a systemic risk (as I've predicted, I see no harmful regulation here until the combined market cap of all cryptos reaches $1 trillion...we're about 34% of the way there).

 

3) The economy is picking up steam (duh), but they only raise their growth forecasts modestly (they're wrong again...its now likely that we will have 3.5% GDP...or higher...in 2018).

Tax Reform

Mid-day yesterday the rumor began to float that Florida Senator Marco Rubio "may not" support the tax bill. The 125 point reversal in the DJ and the 1.1% decline in the Russell 2000 gives us an idea of what might happen should tax reform fail...we could easily see a drop of 1000 points in the DJ...maybe more. This morning, a reversal from Rubio...he says he's voting yes...but its a paper thin margin headed in to next week. 

US futures are sharply higher this morning, pointing to a +100 point open on the DJ. I put the odds at 90% that tax reform passes. The markets have been telling us that it will. But in 2017 politics, we know that anything can happen. Hedging with some deep out of the money index puts or VIX calls might not be such a bad idea. You'll most likely lose your entire investment...but should the bill fail, you'd make 5-10 x your money (again, I see the bill passing).

Yesterdays internals were not good. Weakest in 3 weeks. Should we have 3 straight days of readings like this, the VRA System would flip to "short term neutral" from "ST bullish". Watching closely...but as we've seen throughout this entire move higher for 2017, these negative readings do not tend to last long. 

Weekly AAII Investor Sentiment Survey

Here are the weekly AAII Investor Sentiment Survey readings from late yesterday. Bulls now sit at 45%, bears at 28.1% and neutral investors at 26.9%. This weeks bullish readings match the 2017 highs from last month. Yes, investors are beginning to get excitedly positive about the stock market...but still nowhere near the 60% levels that will force us to think like a contrarian (and become concerned about being part of the majority). 

Going forward you'll hear me discuss this concept more, but I see the move in cryptos as LT bullish for growth stocks...just like the ones that we own. 

Gold and Miners

With a couple of weeks left in the year, gold has gains of 9% and silver is down slightly. Not the worst year ever...but you wouldn't know it from the sentiment surrounding precious metals and miners. The crypto currency action has drained the excitement from PM's...theres little doubt about this...while price suppression from bankers has continued. Gold, silver and the miners continue to trade below their most important moving averages, but as we've covered here, based on the last 4 FED rate hikes we should have a powerful move higher directly in front of us. 

Take a look at my Twitter Pole from earlier this week

Which asset will perform better in 2018....gold or Bitcoin? 

You know I'm a contrarian. Hence, you know how I believe 2018 will turn out (Gold wins).

VRA Portfolio 

Lastly, a quick recap of 2017, the VRA Portfolio has a net gain of 411% on all Buy Recommended stocks (including the '17 profits we've already locked in). This puts us at an average return per stock of right at 30%. 

To our new Members, please make sure to log to your VRA Members Site at least 1-2 x each week. Make sure you are positioned correctly...we're going to have some fresh trades here by year end. 

To become a new member sign up today at VRAinsider.com to receive 2 Free Weeks!

 

Until next time, thanks again for reading..

 

Kip  

VRA Weekly Recap 12/8/17: Market internals and the Fed Rate Hike

Good Friday Morning All,

After running VRA System scans I can report that last weeks wild trading (from last Fridays flash crash, the market has been volatile) has significantly reduced the overbought status of each US major equity index. Again, we are in the most seasonally bullish time of the year and the (likely) passage of the tax bill is not priced into the market yet. In addition, the mega deal between CVS and Aetna Insurance…$69 billion in size…is almost certainly a sign of things to come.

Remember, the tax bill will bring $2 trillion + back into the US. Repatriation makes a great deal of sense to US multinationals when its taxed at 20% compared to 35%. While I expect most of the incoming cash to be spent on mergers and acquisitions…plus share repurchase programs…without question, a good chunk will also go towards hiring and wage increases.

But there’s also a larger macro point that gets lost in the weeds. Since 1995, the US has lost 55% of all public companies to M&A activity…buyouts and taking companies private. The other culprit of late has been the Dodd-Frank act of 2010. It’s design may have been to minimize future risks from the 2008–2009 financial crisis, but its overly burdensome regulatory effect destroyed the IPO market in the US.

Take a look at the chart below. IPO’s topped out in 1999 at 486. Last year, the number of IPO’s fell to just 105. Going forward, we can expect a sharp increase in IPO’s…its another of Trumps goals.

The larger point here is that the 55% drop in publicly traded US co’s has resulted in a supply/demand imbalance. The investment markets are approaching $100 trillion in total size (globally), meaning that we have far more money chasing far fewer public co’s. HIGHLY bullish for stock prices going forward…it also helps to make sense of todays higher P/E multiples.

You know my thoughts. DJ 25,000 by year end. DJ 35,000 by end of 2020.

Market Internals

The rotation out of tech and into value continues. The tech heavy Nasdaq has been weak, but no, I do not expect the weakness to turn into a sharp sell-off. The markets internals are holding up just fine. Take a look at yesterdays closing numbers. While New Highs & Lows volume were mixed, the number of Advance/ Declines was very bullish.

For this market hiccup to evolve into a more serious pullback (even in stocks being rotated out of), these kinds of powerful market internals will have to begin weakening…quickly…I simply do not see this in the cards.

Markets that refuse to demonstrate weak internals, even during negative news like both of this past weeks “fake news driven declines”, are telling us that they want to continue moving higher still. Here are yesterdays closing internals, on what was a flattish day.

2–1 positives across the board. I’ll be as clear as I can; these are not the internals that we would expect to see in a market that wants to go lower. Add in the fact that we are in a highly bullish seasonal period…in fact the most bullish of all…and its highly likely that last Fridays flash crash lows will be the lows for some time.

We’re also seeing new all-time highs in housing, financials and the transports. Just not at all the kinds of market action that we would expect to see in a market (or economy) that is about to change direction.

AAII Investor Sentiment Survey

Below is Wednesday’s weekly AAII update. Bulls at 36.9%, bears at 34.2% and neutral investors at 28.9%. Bull markets end when bulls are hitting 60% and for weeks on end. Until we have the final ‘lift-off” stage in the stock market…the same one that I believe will take the DJ to 35,000 or more…I see no significant top in the stock market.

FED Meeting and Rate Hike

The FED meets next Tuesday and Wednesday…they’ll then announce their rate hike on Wednesday at 2PM EST. And yes, the FED is going to raise rates, barring a major surprise. In fact, if the FED does not raise rates, I would expect the market to sell-off a good deal. The markets do not like surprises…as we’ve seen in the last weeks trading sessions with TWO fake news stories about the Trump administration (ABC news fake news on Friday and the fake news that Mueller has subpoenaed Tumps bank records…also fake news).

IMPORTANT: the action we are seeing in the markets…which features what I can only call bizarre trading anomalies…is taking place in front of the FED’s expected rate hike next Wednesday. Emerging markets, like China, are being taken to the woodshed. We’re seeing the same in precious metals, miners, industrial metals, energy, etc….the global relation/inflation themed names.

Because we have seen this exact action take place before the last 4 rate hikes, we also know what the outcome will almost certainly be resolved higher. IF NOT, then this would represent a pattern change…I see a 90% probability that there will be NO pattern change (because at this point the markets, especially rates and bonds, are hinting at a slowing global economy…possibly even a recession). I see the odds of this as tine, meaning that the current correction in global relation themed names is giving us a gift here

I also expect the current sell-off in PM’s and miners to end within the next 48–72 hours or so….in the next 2–3 trading sessions.

Final point on precious metals and miners; increasingly I am increasingly hearing from clients and traders that they have been selling their gold and buying Bitcoin. Frankly, who can blame them? Bitcoin is trading at $15,896 as I write this morning. The manipulators have yet to find a way to manipulate cryptos…of course they’ve been doing this to gold/silver for decades. GOLD SHOULD BE DOING WHAT BITCOIN IS DOING…and it should be over $5000/oz today.

For my subscribers(click here to receive 2 free weeks), in our next update, as we get closer to the FED’s hike, I will show you exactly what I am talking about. The price suppression in PM’s is criminal. It’s robbed us of bitcoin-like gains…of this I am beyond certain. But this suppression is about to end. 2018 will tell the tale…and its this final pre-rate hike selloff that will remove the final weak hands in precious metals and miners.

As to Bitcoin, its in parabolic mode right now. This is when huge moves higher take place, almost universally followed by sharp selloffs. But bubbles can take on a life of their own…this one could take bitcoin higher still. Also know this; the public is now rushing in to buy Bitcoin…this typically marks the beginning of the end of the current move. I have no idea where that top may be…as long as investors are properly diversified, Bitcoin still has a place in a portfolio. But gold is a far smarter investment today…especially with the post rate hike recovery move higher that I see happening.

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

Kip

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VRA Update: 1 Year Election Anniversary. Bull Market to Ramp Higher Into Year End. Precious Metals and Miners.

Good Wednesday morning all. Today marks the 1 year anniversary of the election of #45, President Donald Trump. Love him or not, here are the bottom line investment results since 11/8/16.

S&P 500: +21%

Dow Jones: +28%

Nasdaq: +30%

During the last year we've seen an amazing 70 new all-time highs, as the country is reminded of what a pro-growth, business friendly economy is supposed to look like. We've also seen overly burdensome regulations slashed...allowing entrepreneurs to do what they do best...grow their businesses. 

Remarkable. 

But folks, "literally" everything that I see, using the VRA Investing System and my 32 years of experience, tells me that we are nowhere near the end of this bull market. You hear me talk about the following often, but quickly, here are the some of the most important markers. Indicators that I have followed closley since the 1980's:

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 American Association of Individual Investors (AAII.com) that I've followed since the late 80's...shows bullish percentage still under 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 still nowhere near this.

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. 90%!

And yes, we are now in November. 

We barely had a single whiff of a sell-off during the historically volatile September/October risk filled months, telling us that NOW is when we must be positioned aggressively for higher stock prices. My year target of Dow Jones 25,000 remains intact. 

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. This is where high tech, high growth mometmum stocks reside, which is why so many market timers key off of it. 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, the stock market is clearly telling us that both the US and global economy will continue to surge. 

Don't fight the tape...another piece of age old investing wisdom.

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). 

Clearly, 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. 

I am "all-in". The DJ is headed to 30,000....possibly even 35,000...over the next 3 years. If that sounds unllikely or even impossible, consider this; a move to DJ 35,000 would mean that the market would need to average a 16% return over the next 3 years. 

The Dow just had a +28% year. Not impossible at all. 

Finally for this morning, a fresh chart of gold, which is up $9/oz this morning to $1285.

As you can see below, gold has been in a solid uptrend from its December 2016 lows. Everything about this chart says it is about to have a major breakout. Big volume builds confirm this. Once gold breaks $1375/oz, there will be no stopping it.  

Now is the time to make sure your positions are in place in my favorite miners (which move 3-5 x faster than gold/silver). 

Without question, the miners will be the biggest winners in the precious metals space. My target for gold in 2018 remains $2000/oz. Once we surpass $2000 gold, we'll see a Bitcoin-like move higher. Everything that Ive learned over my 3 decades confirms the bull market that's underway in gold, silver and the miners. 

Until next time, thanks again for reading...

Kip

Insider Trading and Financial Anomalies Surrounding the Las Vegas Attack

Insider Trading and Financial Anomalies Surrounding the Las Vegas Attack

October 7, 2017

Note: With this report, I make no claim to specific knowledge of any wrongdoing or improprieties. Instead, this report includes trading patterns, news releases and/or public record SEC filings. 

We will examine the share price movements of two gun manufacturers (American Outdoor Brands and Sturm Ruger) and the share price movement of MGM (which owns Mandalay Bay). We will also examine additional financial events surrounding MGM, including what can only be referred to as massive levels of insider selling in the shares of MGM, by the CEO/Chairman and MGM officers/directors. As you'll see, more than $200 million in MGM shares were sold in the weeks leading up to the attack.

Background. Interesting Trading Patterns in AOBC, RGR and MGM.

Over the course of my 32 years in the investment industry I have constructed a proprietary investing model that I refer to as the “VRA Trading & Investing System”. In short, its design is to track money flows in the stock market and detect sector and stock analysis/movements that then alert me as to when/where money is flowing in the markets.

For example, prior to the 2016 Presidential Elections, the VRA System noticed that the share price of gun manufacturers had begun to decline rapidly. This was one of our first financial clues that Trump might beat Clinton (Trump's strong support of 2A). As you can see below, American Outdoor Brands (AOBC, formerly Smith & Wesson), hit a high of $31/share in August of 2016. As the bottom began to fall out, it would ultimately drop 55% in price, before hitting its low price of just over $13 on 9/11/17.

The market is referred to as a "discounting mechanism" and as such, it often predicts future events. It certainly did so in the case of the election and the share price of AOBC. 

We see the same trading pattern in gun manufacturer Sturm Ruger (RGR). RGR traded as high as $73 in March of 2016 before ultimately dropping 37%, when it too bottomed within one trading day of AOBC hitting it's lows (9/8/17). Again, my system noted the rapid decline in gun stocks, which led me to believe that Trump may in fact win the election. Remember this point; both AOBC and RGR hit their lows at the same time, just over two weeks prior to the Las Vegas shooting. 

Something Changed in September

Let's now examine the trading patterns of AOBC and RGR in detail, just over two weeks "prior" to the attack. As you can see, AOBC bottomed on 9/11/17 at $13.30 before the spike higher began. From 9/11 to just after the attack, AOBC rose 23% in price. It did so on a noticeable increase in buy-side trading volumes. 

Below, we see the same chart and reaction in the shares of Sturm Ruger (RGR). From it's 9/8/17 lows, RGR bottomed at $46.25 and then spiked to $55.90 just after the attack, for a move higher of 21%.

After falling in price from early-mid 2016 to their early September 2017 lows, the two largest publicly traded gun manufacturers bottomed, then spiked higher, at almost exactly the same time. In addition, buy-side volume increases rose sharply as well. 

And, while not covered in this report (more work is needed), we also saw a spike in call option purchases in both AOBC and RGR, in the days/weeks leading up to the attack.

This final chart shows the share price of MGM (owner of Mandalay Bay) in the days leading up to the attack to present. MGM shares declined more than 10%, from 9/7/17 to recent lows. This decline occurred as some $200 million in insider selling was taking place. 

Bottom line: Beginning in early-mid September to this report, gun manufactures AOBC and RGR rose in price 23% and 21% (on higher trading volumes), while the shares of MGM fell in price by 11% (as $200 million in insider selling occurred). 

MGM: Heavy Levels of Insider Selling

As the SEC insider transaction reports below detail, from 9/5/17 to 9/12/17, approximately 6 million shares of MGM were sold by officers and/or directors of the company, totaling approximately $200 million in proceeds to sellers. Included in this group is the selling of approximately 450,000 shares by MGM CEO and Chairman James Murren (a seller of size since late July) and who appears to have sold more than 85% of all holdings. We also see that MGM Board member Grounds William Warwick sold 176 million shares of his MGM stock on 9/6/17. 

We have no indication that MGM insiders sold these 6 million shares due to any advance knowledge of the 10/1 attack. I am not making that claim. I am simply pointing out facts that cannot be in question.

But I will make a few observations:

1) If MGM/Mandalay Bay were to lose law suits associated with this attack, the downside risks to MGM share price may be extensive. 

2) We also know that MGM CEO James Murren was appointed to the Homeland Security National Infrastructure Advisory Council by President Obama in December 2013. This fact could make for some interesting depositions, as it relates to exactly what type of advanced security systems Mandalay Bay had in place, leading up to and on the night of 10/1/17. 

"The National Infrastructure Advisory Council is tasked with providing the president with advice on the “security of the critical infrastructure sectors and their information systems.” The council is composed of a maximum of 30 members, appointed by the president, from private industry, academia and state and local government."

3) I am also aware of the fact that MGM put options activity spiked as well (needs more work), beginning at the same time gun stocks were rising and MGM was falling in price. 

4) For those curious about the trading in other major Las Vegas Hotel casino stocks, during this same time frame, this also needs more work. However, I can report that at the same time MGM's share price was falling, the share prices of Las Vegas Sands (LVS) and Wynn Resorts (WYNN) were actually rising.

Closing:

In closing, let me repeat; I make no claims or assertions that anyone mentioned in this piece has done anything nefarious. They likely did not. 

The question I might ask is, "Did someone else profit from the heinous acts of 10/1/17? Possibly the planners?"

Like many of you, I am interested and I am asking questions. I also remember that during 9/11/01, reports surfaced widely in the financial media that "many, many millions" in profits were made off of the purchase of put options in the shares of United Airlines and American Airlines, the two airliners that operated the four aircraft that were hijacked on 9/11 (among other well-documented reports of large put option purchases in numerous companies that had the most exposure to a shocked US economy). 

There's more...like the recent trading pattern in OSIS, which makes "detection systems" of all kinds (similar to their subsidiary "Rapiscan", which makes the TSA body scanners that were put in place following 9/11). Many are wondering how long it might be before we are forced to walk through similar devices, as we enter hotels/casinos.

I will continue to follow this story. Should you have information that might assist in my research, you can reach me at kip@vraletter.com.

I am a proud American. I want the best for our country. Wherever the truth leads us, that is where we must go. Follow the money.

Kip Herriage

VRALetter.com