Chicken Little

Hi Folks,

I know some of you are probably thinking I sound like chicken little.  My posts are all about how bearish I am and yet the market is not significantly lower.  This bear trend is unfolding pretty much as I expected.  This is a long term change and takes time to develop.  When I first turned bearish in December of 2014, I wrote that it would take time because the moving averages needed to flatten.  I also said that market would selloff and have a series of lower lows and lower highs.  That is exactly what is happening.  I also wrote about how the economic data looks horrible and I could see the economy slowing even though the published data did not yet show it.  You have to know how to read the actual data and not look at the "headline" numbers.  I still don't understand how Wall Street has ignored the writing that is on the wall.

In February, the Atlanta Fed had Q1 2016 GDP estimates at 2.7%.  Just last week they had 2 revisions to their estimate.  On Monday they lowered their Q1 GDP forecast to 0.7% and then on Friday they revised lower again to just 0.1%.  That is a significant drop from the 2.7% forecast just 2 months ago.  The GDP for Q1 will be announced on April 28th.

I decided to show you a couple of charts.  The first one is the current market.  You can see the market top in 2015 and how prices flattened and now the moving averages are as well.

As you might be able to see, we are  very close to the next major move down.  Below is a chart show
ing the chart action for the 2001, 2007, and 2015 tops all on 1 chart.  As you can see we are headed in the same direction.  DOWN.

Thanks and Good Trading,

Tim

Will The Fed Raise Rates?

Hi Folks,

Here we are again awaiting the FED rate decision.  Do they raise again?  The Fed Funds Futures give a 0% probability of the FED raising rates on Wednesday.  http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html.  In her most most recent banter, Janet Yellen has expressed that rate hikes will come but more slowly than previously expected.  I think the FED is exercising extreme caution here.  They have 2 mandates for their decisions, unemployment 5% and 2% inflation.  They have achieved the 2 targets for unemployment and inflation according to the most recent data so why not continue to raise?

They are looking at the weak global economic picture and the probability that it will infect the US economy.  As I have mentioned before, I believe it already has and will continue.  If they stick to what they have been preaching about economic recovery and hitting the 2 targets for unemployment and inflation, they should raise.  The problem is the FED doesn't really have those 2 mandates as their barometer, they care more about the impact of their decisions on the markets.  So I believe they will not raise tomorrow because it is not what is expected.  If they do raise, the market is going to rollover again sooner than later.  Either way, I think we rollover soon.  We hit my target for this upside move from the February 11th low on the button yesterday.  However the technical's say there could be more upside.  It will be interesting to see what happens tomorrow.


Thanks and Good Trading,

Tim

Game Over for Stocks?

Hi Folks,

Well the market did rally off the recent lows but now it's rolling over.  The S&P 500 ETF, SPY, rallied off of the $181 lows and got as high as $194,58.  I was expecting a few points more on the upside before rolling over but the big picture remains the same.  Lower lows and lower highs on  the bounces.  It looks like we are in the next leg down for the next few weeks.  I am expecting $173 in SPY then $159 over the next few weeks.

Thanks and Good Trading,

Tim

Stock Market This Week

Hi Folks,

We recently made a lower low than the August low and now we are bouncing.  I expect this bounce to continue into next week.  I'm looking for $198-$199 in terms of SPY from the $193.75 close on Friday.  Then as you can guess, I expect it to roll over again and start to make the next new low.  My guess at this point is around $170 in SPY.

Thanks and Good Trading,

Tim

What's Next For The Stock Market?

Hi Folks,

Well we hit my target for the week in SPY of $187.  As of now, it doesn't feel like we have made our short term bottom yet.  I think we get down to the $174 range next week.  We should find support in that area.

The bounce that follows the short term bottom would be the next spot to short,  Hopefully everyone has their portfolios protected as I have been preaching about.  With proper hedging these massive corrections present amazing opportunities to add to your portfolio.

I can't wait for the time in the future when I turn wildly bullish but for now you know where I stand.  Geronimo!!

Thanks and Good Trading,

Tim

2016 Off To A Great Start

Hi Folks,

As I have voiced my concern over and over, the market is in free fall.  In the short run I see SPY hitting support at $187 first then $175 if that does not hold.  That's the good news.

The bad news is that the next spike up will be a lower higher followed by a lower low and then the cycle repeats itself until the eventual final bottom.  Again this could take a few years to bottom.  My current target is $88 in SPY representing a 58% decline in the markets from the top .  However, as the debt crisis unfolds, if it turns into a currency crisis my target would be lowered to $44 in SPY.  That would represent a 79% decline in the markets.

Either way the market does not look good and I believe an official recession is around the corner.  The FED recently updated their Q4 GDP forecast.  The initial forecast they gave was 2.5% GDP growth.  Their most recent update was given on January 8, 2016.  They are now forecasting just 0.8% for Q4 GDP.  That is a huge downgrade in expectations.  It is possible that the final Q4 number will be flat or negative.  Follow that with a Q1 2016 negative GDP and boom we are in a recession.

Buckle up, the next few years are going to be a rocky road.

Thanks and Good Trading,

Tim

Will the FED raise rates on Wednesday?

Hi Folks,

The big question is will the FED raise rates next week.  Virtually everyone on Wall Street believes that they will raise.  I guess I am the lone wolf who believes that they will NOT raise rates.

Although Janet Yellen recently changed her talk from "the fed may raise rates" to "if we raise rates, the next one will not come for a while",  I still believe the answer is no.  I wish and hope that they do raise rates because that is exactly what is needed.  The fact is the FED does not want to look foolish by raising rates and then shortly there after having to cut them back again and possibly start QE4.

If you look at the economic data, the economy is slowing.  Manufacturing numbers are at 6 year lows, employment numbers are weak, and the giant retailers like Walmart are getting crushed.  The headline 5.1% unemployment rate does not show the real situation.  The labor force participation rate is at 40 year lows and we are losing higher paying jobs.  The jobs that have been added in the past few years are mainly lower income jobs.

There are plenty of bubbles that will be popping with higher rates.  The auto industry is a giant bubble, the housing market is in a bubble, and the credit markets are in a major bubble.

I am still very bearish for the longer term(next 1-3 years) and I believe, as in my last post, that from here we make lower highs and lower lows going forward.  My long term target in SPY(SP500 ETF) is 89, currently trading roughly 206.

Thanks and Good Trading,

Tim