Bulls Fear Nothing……Is There a Message Here ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,004
S&P 500: 3,120
Nasdaq: 8,540
Russell: 1,596
Monday  November 18, 2019
     9:15 a.m. 
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gbifr79@gmail.com
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TODAY:
The Federal Open Market Committee (FOMC) meets Wednesday but no presser is scheduled.  Even so. a follow up commentary  can be expected.  I see nothing new except platitudes about the economy being in a good place (it isn’t).
       Leading economic indicators for October will be reported Thursday  at 10 a.m. and are expected to mark the third straight decline in this important index. It is doubtful  the Street will react.
The main focus here is on trade talks which the Administration claims are going well ??
In spite of the fact House impeachment proceedings are not going well for President Trump, the Street does not seem to care.
All told, the Street is not concerned with anything, and that is classic bull market arrogance/denial.
When the bear strikes, it will be straight down 12% -18% for openers.
When ?
Early January is a good bet.
TECHNICAL
The Street will have to deal with the impeachment proceedings again today. So far the Street could care less about what is happening at the highest level in our country. That’s sheer arrogance. Of course it matters. The Street punishes corporations for management dysfunction, why not for running the country ?
Friday  Nov 15  “Bear Market….. WHY ?
Why a bear market ?
   A couple things come to mind.
Lies, lies, lies at the highest level,  a clueless indifferent public, press bias, debt, debt, debt, arrogance, greed, denial, earnings, inequality imbalance, overvaluation assets (stocks, real estate) ………. Too few people expect it.
What will the bear look like ?
Straight down.  Traders, hedge funds and fast money will hit the exits first and overwhelm cruise-control buyers. The public will follow and the institutions will hold out until fear and pressure by clients screaming “raise cash.”
       FYI that happens near the bottom when everyone wants out and few (myself) are urging readers to work back in.
After an initial plunge of 12% – 18%, numerous attempts to rally will fail as new negatives and negative pundit commentary pound the market lower.
WHAT MUST BE UNDERSTOOD HERE IS:  there are no new eras, no markets that go uncorrected.  Excesses get punished beyond reason just like bull markets run to excess beyond reason.
EXTREMES: If one has the smarts and psychological discipline the exploitation of extremes is how BIG money is made.
Unfortunately, this is so much about human behavior the buy low/sell high adage is almost impossible to achieve.
This economy is phony, the market is phony and our governance is phony. That spells TROUBLE.
        WHEN ?   January !
WHY ?   More in coming days.
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Thursday Nov. 14  “Bull Market Top Forming
     The DJIA is not the market average (index) the pros use.  It’s 30  blue company stocks combined in a price-weighted average that gives more weight to higher priced stocks.   The Street prefers the S&P 500, weighted by market cap (shares X price).
But when the press and investors in general refer to the market being up or down a number of points, it is referring to the 30 Dow Jones industrial average (DJIA).
While yesterday’s gain of  92 points for the DJIA looked like another good day, the average would have been down 8 points if Disney (DIS) was not up 10.18 points.
Three days ago it was Boeing (BA) that distorted the DJIA with a one-day 24-point jump. Without it the DJIA would have been down 154 points.
This kind of misinformation lulls investors into a false sense of security, i.e. there is no need to raise cash, the market was up today.
       Currently the technical indicators support  positive market action, though  stretched and vulnerable.
President Trump won’t be removed from office, a Republican Senate would not do that. He may resign, though.  But the Republican brand will be damaged and their control of the presidency  and the Senate put in jeopardy by the impeachment process/conclusion.
The market is up 45% since the Republicans gained control of the presidency and for two years both houses in 2016.  Loss of control would adversely impact the market from these lofty levels at least over the intermediate term.
At some point, the Street will begin to worry about this. If too many of the big hitters see it all at once, we’ll get a flash crash, DJIA down 12% – 18%.
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Wednesday November 13  “Where a Correction Becomes a Bear Market”

The Street is in denial  – too much of a good thing – a Fed-mis-managed, over-extended economic recovery and bull market has erased memories of what can happen when  buyers vanish and  the bottom falls out of the market.
This 10-year old bull market has had numerous corrections, but the market has always bounced back as corporate buybacks and Fed intervention triggered rebounds.
      But, here’s where a correction becomes a bear market.
A correction starts from an overbought condition, or as the result of bad news.
The correction  takes the market down to a level the Street thinks represents a good point to buy. Traders investors, institutions and corporations  step in expecting a rebound to new highs.
BUT new negatives hit the market and pound it below the level everyone thought represented a buying opportunity.
This process repeats again  and again as new negatives prevent a rebound, worse yet drives it lower.
Optimism fades, fear creeps in.  Attempts to rebound encounter sellers, investors fearing the worst is yet to come, and for the first time since the market topped out, they are right.
I don’t know when all this will happen. I thought it should have started many months ago.
The Fed, Street and Administration hype will continue to inflate the bubble.
When it starts it will be straight down 12% to 18%. Valuations mean little until they suddenly do, as the Street senses the Fed is powerless to prop the economy and stock market up.
The GOOD NEWS is:   The carnage will end but not until all those deluded, cocky, clueless bulls are too petrified to buy.
        Total damage:  It depends on the “new negatives,” but anywhere from 38% to 58%.
The bear bottom will not be a “V” shaped turn, but  most likely will feature numerous wide swings up and down before an up turn gains traction.
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Wednesday  November 13  “ Flash Crash – the New Normal – Careful”
This is what a stock market run by algorithms looks like  –  booooring !
        Well maybe not for inactive investors who  simply want predictability.
Algos  for investment decisions have been designed to take human emotion out of the equation and to reduce the mental workload of investment professionals who don’t like the angst of boiling  all key elements of market analysis down every day.
Clearly algos take a lot of volatility out of market swings, but at the end of the day, they must be programmed to anticipate all of the unknowns that could adversely impact stocks.
I have often written that the biggest challenge to investors and especially professionals in that there are always  “several
balls up in the air,” anyone of which can come down suddenly to change the direction of the stock market.
       If algos aren’t programmed to cope,  the investment portfolios will get clobbered.
It appears the new normal  for market corrections is the flash crash, a precipitous plunge in stock prices (8% – 18%) without warning as  investors (pros)  abandon the conclusions of their algo and stampede  out the exit door.
We last saw a flash crash in Q4 of 2018 with the S&P 500 plunging 20% in 3 months.  It took the market 4 months to recoup that loss.
OK, so what’s my point
Be damn sure you have a cash reserve in line with your tolerance for risk, so you are ready for the next flash crash.
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Monday November 11  “Impeachment Proceedings Could Crunch Stocks:

This will be a light week for reports on the economy.  The main focus will be on U.S. House impeachment hearings, which will go public this week.
That could put a lid on stock prices as uncertainty builds, but  the debate will be along party lines with conviction of President Trump by the Republican  Senate doubtful.
Nevertheless, the process will adversely impact confidence and concern for the Republicans that they may lose control of the presidency and both houses of Congress next year if this plays out poorly.
Risk of downside is heightened by the fact the market averages are trading near all-time highs.
So far, the Street has ignored the impeachment process – not a good idea.  Perhaps that’s the kind of bulletproof mentality that accompanies an  economic expansion/bull market after 10years.
I don’t believe in “new eras.”  Bear markets have a way of showing up when least expected.   Careful.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
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George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

Bear Market ! WHY ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,781
S&P 500: 3,096
Nasdaq: 8,479
Russell: 1,588
Friday  November 15, 2019
     9:15 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
      Why a bear market ?   A couple things come to mind.
Lies, lies, lies at the highest level,  a clueless indifferent public, press bias, debt, debt, debt, arrogance, greed, denial, earnings, inequality imbalance, overvaluation assets (stocks, real estate) ………. Too few people expect it.
What will the bear look like ?
Straight down.  Traders, hedge funds and fast money will hit the exits first and overwhelm cruise-control buyers. The public will follow and the institutions will hold out until fear and pressure by clients screaming “raise cash.”
       FYI that happens near the bottom when everyone wants out and few (myself) are urging readers to work back in.
After an initial plunge of 12% – 18%, numerous attempts to rally will fail as new negatives and negative pundit commentary pound the market lower.
WHAT MUST BE UNDERSTOOD HERE IS:  there are no new eras, no markets that go uncorrected.  Excesses get punished beyond reason just like bull markets run to excess beyond reason.
EXTREMES: If one has the smarts and psychological discipline the exploitation of extremes is how BIG money is made.
Unfortunately, this is so much about human behavior the buy low/sell high adage is almost impossible to achieve.
This economy is phony, the market is phony and our governance is phony. That spells TROUBLE.
        WHEN ?   January !
WHY ?   More in coming days.

TECHNICAL
The Street will have to deal with the impeachment proceedings again today. So far the Street could care less about what is happening at the highest level in our country. That’s sheer arrogance. Of course it matters. The Street punishes corporations for management dysfunction, why not for running the country ?
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Minor Support: DJIA:; S&P 500:; Nasdaq Comp.:
Minor Resistance: DJIA:; S&P 500:; Nasdaq Comp.:
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Thursday Nov. 14  “Bull Market Top Forming
     The DJIA is not the market average (index) the pros use.  It’s 30  blue company stocks combined in a price-weighted average that gives more weight to higher priced stocks.   The Street prefers the S&P 500, weighted by market cap (shares X price).
But when the press and investors in general refer to the market being up or down a number of points, it is referring to the 30 Dow Jones industrial average (DJIA).
While yesterday’s gain of  92 points for the DJIA looked like another good day, the average would have been down 8 points if Disney (DIS) was not up 10.18 points.
Three days ago it was Boeing (BA) that distorted the DJIA with a one-day 24-point jump. Without it the DJIA would have been down 154 points.
This kind of misinformation lulls investors into a false sense of security, i.e. there is no need to raise cash, the market was up today.
       Currently the technical indicators support  positive market action, though  stretched and vulnerable.
President Trump won’t be removed from office, a Republican Senate would not do that. He may resign, though.  But the Republican brand will be damaged and their control of the presidency  and the Senate put in jeopardy by the impeachment process/conclusion.
The market is up 45% since the Republicans gained control of the presidency and for two years both houses in 2016.  Loss of control would adversely impact the market from these lofty levels at least over the intermediate term.
At some point, the Street will begin to worry about this. If too many of the big hitters see it all at once, we’ll get a flash crash, DJIA down 12% – 18%.
………………………………………………………………………
Wednesday November 13  “Where a Correction Becomes a Bear Market”

The Street is in denial  – too much of a good thing – a Fed-mis-managed, over-extended economic recovery and bull market has erased memories of what can happen when  buyers vanish and  the bottom falls out of the market.
This 10-year old bull market has had numerous corrections, but the market has always bounced back as corporate buybacks and Fed intervention triggered rebounds.
      But, here’s where a correction becomes a bear market.
A correction starts from an overbought condition, or as the result of bad news.
The correction  takes the market down to a level the Street thinks represents a good point to buy. Traders investors, institutions and corporations  step in expecting a rebound to new highs.
BUT new negatives hit the market and pound it below the level everyone thought represented a buying opportunity.
This process repeats again  and again as new negatives prevent a rebound, worse yet drives it lower.
Optimism fades, fear creeps in.  Attempts to rebound encounter sellers, investors fearing the worst is yet to come, and for the first time since the market topped out, they are right.
I don’t know when all this will happen. I thought it should have started many months ago.
The Fed, Street and Administration hype will continue to inflate the bubble.
When it starts it will be straight down 12% to 18%. Valuations mean little until they suddenly do, as the Street senses the Fed is powerless to prop the economy and stock market up.
The GOOD NEWS is:   The carnage will end but not until all those deluded, cocky, clueless bulls are too petrified to buy.
        Total damage:  It depends on the “new negatives,” but anywhere from 38% to 58%.
The bear bottom will not be a “V” shaped turn, but  most likely will feature numerous wide swings up and down before an up turn gains traction.
………………………………………………………………………………
Wednesday  November 13  “ Flash Crash – the New Normal – Careful”
This is what a stock market run by algorithms looks like  –  booooring !
        Well maybe not for inactive investors who  simply want predictability.
Algos  for investment decisions have been designed to take human emotion out of the equation and to reduce the mental workload of investment professionals who don’t like the angst of boiling  all key elements of market analysis down every day.
Clearly algos take a lot of volatility out of market swings, but at the end of the day, they must be programmed to anticipate all of the unknowns that could adversely impact stocks.
I have often written that the biggest challenge to investors and especially professionals in that there are always  “several
balls up in the air,” anyone of which can come down suddenly to change the direction of the stock market.
       If algos aren’t programmed to cope,  the investment portfolios will get clobbered.
It appears the new normal  for market corrections is the flash crash, a precipitous plunge in stock prices (8% – 18%) without warning as  investors (pros)  abandon the conclusions of their algo and stampede  out the exit door.
We last saw a flash crash in Q4 of 2018 with the S&P 500 plunging 20% in 3 months.  It took the market 4 months to recoup that loss.
OK, so what’s my point
Be damn sure you have a cash reserve in line with your tolerance for risk, so you are ready for the next flash crash.
………………………………………………………………
Monday November 11  “Impeachment Proceedings Could Crunch Stocks:

This will be a light week for reports on the economy.  The main focus will be on U.S. House impeachment hearings, which will go public this week.
That could put a lid on stock prices as uncertainty builds, but  the debate will be along party lines with conviction of President Trump by the Republican  Senate doubtful.
Nevertheless, the process will adversely impact confidence and concern for the Republicans that they may lose control of the presidency and both houses of Congress next year if this plays out poorly.
Risk of downside is heightened by the fact the market averages are trading near all-time highs.
So far, the Street has ignored the impeachment process – not a good idea.  Perhaps that’s the kind of bulletproof mentality that accompanies an  economic expansion/bull market after 10years.
I don’t believe in “new eras.”  Bear markets have a way of showing up when least expected.   Careful.
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Friday November 9 “At an Intersection Waiting for the Light to Change”

Let me open with a pitch for the annual Stock Trader’s Almanac, just out. Purchase is accompanied by frequent market analysis to keep it current.
I purchased the first Almanac in 1968, Its founder/publisher, Yale Hirsch, is a legend in the investment analysis/publishing business with many groundbreaking stock market discoveries  in recurring technical patterns and seasonality.
The good news is, it is power-packed with daily, weekly, monthly savvy. The bad news is, once you start reading, all else takes a back seat. Son Jeffrey has taken it over and adds a whole lot more each year plus frequent follow-ups  to this treasure trove of timely information. Contact: 978-750-8400.
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THE MARKET:
The Street is in a quandary, the market is seriously overvalued on a historical basis, unless corporate earnings find a way to rebound.   That is generally expected to happen next year but that is  where a problem exists.  If earnings DON’T rebound, the Street will have to revise them downward, which with an overvalued market spells bear market.
        I believe they will be revised downward, as a recession looms  in spite of the Fed’s efforts to prop the economy until the 2020 elections are over.
        Is the Fed politically biased ? It looks like it, but for whom ? Yes, delaying would help Trump – if he runs.( I don’t think so, I sense Nikki Haley will be their candidate).  If the Fed feels the  need for a change, they may want to make sure the recession/bear market is in full swing by mid 2020. They have the power. It would be nice if they understood the need for stock prices to find a level that discounts reality rather than trying to micro-manage levels, which the tend to screw up on a regular basis.   Bankers !
Don’t take impeachment proceedings lights whatever your political preferences.  This process could expose a whole lot more than expected. Loss of the Presidency, Senate, House  and more changes stock market dynamics, bad initially, good long-term.
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Thursday  November 7  “Trade Breakthrough  ?    Careful !

The market will get a boost today from news that China says a deal would result in the United States rolling back tariffs. At this time, it looks like progress would be pursued  step by step  as points are negotiated.
     But one reason stocks are hitting new highs is just that – perceived progress.
We already know everything appears to be pushed into December as the two countries haggle over a location to have talks.
Even so, stocks need some tangible news on trade before doubts set in “again.”
This is so classic with dominating issues between countries – On again, off, again, on again……
The announcement takes the heat off both leaders and gives them a better chance  at negotiating small concession rather than one big all encompassing  solution.

Obviously, a disappointment in U.S./China trade talks would whack stocks at this pricey level
But the real sleeper would be any significant downgrade in 2020 earnings.  That is not expected  at this time based on what I see on FactSet and  searches on Google.
As noted often, the Street is unconcerned (clueless) about impeachment proceedings  launched against President Trump. It is serious as it stands.  What is more serious is, where this can go.  It may be just the beginning.
 That is another thing the Street hasn’t taken time to consider…. That is what a Fed micro-managed bull market can do to sensitivity. The stock market is no place for delusion….for long.
Conclusion: Favorable trade news out of China, how about the United States ?  Does it go along or have a different solution. Failure to go along kills a rally from lofty levels.  Agreement with China’s concept  is worth more upside.
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Wednesday  Nov. 6  “Street in Denial – Economy, Trade, Impeachment”

After Reuters reported progress in U.S./China trade talks and a likely delay in U.S. tariffs on European autos, the stock market cannot afford any disappointments.
       In fact, at these levels, the stock market is vulnerable, and unless news gets much better from here, the stock market is fully priced.
In November 2016, the Street  celebrated the election of Donald Trump with a strong rally in the stock market.
But the Street has not given consideration to his removal from office via resignation, impeachment/conviction, or defeat in 2020.
With impeachment proceedings well underway, it is likely it will begin to think about alternatives.
A 10-year old bull market wipes out memories of the  most recent bear market (2007 – 2009) where the S&P 500 dropped 57%. At the time the world looked like it was ending, and without gallant efforts by the Bush and Obama administrations and the Fed, we would still be recovering from a global meltdown.
I think tops are tougher to call than bottoms. No one wants bull markets to end, everyone wants bear markets to.  Unless a bear market is triggered by dramatic news, tops take longer to develop as the market begins to sense worsening economic news. However, investors are usually in a state of denial trying to eke out one more big score, and with prodding by the pros in the Street, they keep buying.
Bottoms tend to develop faster, as mounting fear convinces investors prices will continue to fall, and they better sell out completely, resulting in one or more selling climaxes until there are no sellers left.
So, where am I going with all this ?

The end will come when it is least expected, and the outcome will be ugly. Be sure to have a cash reserve and sit close to the exits with the restyou’re your holdings.
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Tuesday Nov. 5, 2019 “Bubble  Expands Further”
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”
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Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.
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Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”

The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
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Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.
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Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

Bull Market Top Forming

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,783
S&P 500: 3,094
Nasdaq: 8,482
Russell: 1,598
Thursday   November 14, 2019
     8:43 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The DJIA is not the market average (index) the pros use.  It’s 30  blue company stocks combined in a price-weighted average that gives more weight to higher priced stocks.   The Street prefers the S&P 500, weighted by market cap (shares X price).
But when the press and investors in general refer to the market being up or down a number of points, it is referring to the 30 Dow Jones industrial average (DJIA).
While yesterday’s gain of  92 points for the DJIA looked like another good day, the average would have been down 8 points if Disney (DIS) was not up 10.18 points.
Three days ago it was Boeing (BA) that distorted the DJIA with a one-day 24-point jump. Without it the DJIA would have been down 154 points.
This kind of misinformation lulls investors into a false sense of security, i.e. there is no need to raise cash, the market was up today.
       Currently the technical indicators support  positive market action, though  stretched and vulnerable.
President Trump won’t be removed from office, a Republican Senate would not do that. He may resign, though.  But the Republican brand will be damaged and their control of the presidency  and the Senate put in jeopardy by the impeachment process/conclusion.
The market is up 45% since the Republicans gained control of the presidency and for two years both houses in 2016.  Loss of control would adversely impact the market from these lofty levels at least over the intermediate term.
At some point, the Street will begin to worry about this. If too many of the big hitters see it all at once, we’ll get a flash crash, DJIA down 12% – 18%.
TECHNICAL
The Street will have to deal with the impeachment proceedings again today. So far the Street could care less about what is happening at the highest level in our country. That’s sheer arrogance. Of course it matters. The Street punishes corporations for management dysfunction, why not for running the country ?
………………………………………….
Minor Support: DJIA:27,707; S&P 500:3,055; Nasdaq Comp.:8,461
Minor Resistance: DJIA:27,794; S&P 500:3,098; Nasdaq Comp.:8,487
………………………………………………………….
Wednesday November 13  “Where a Correction Becomes a Bear Market”

The Street is in denial  – too much of a good thing – a Fed-mis-managed, over-extended economic recovery and bull market has erased memories of what can happen when  buyers vanish and  the bottom falls out of the market.
This 10-year old bull market has had numerous corrections, but the market has always bounced back as corporate buybacks and Fed intervention triggered rebounds.
      But, here’s where a correction becomes a bear market.
A correction starts from an overbought condition, or as the result of bad news.
The correction  takes the market down to a level the Street thinks represents a good point to buy. Traders investors, institutions and corporations  step in expecting a rebound to new highs.
BUT new negatives hit the market and pound it below the level everyone thought represented a buying opportunity.
This process repeats again  and again as new negatives prevent a rebound, worse yet drives it lower.
Optimism fades, fear creeps in.  Attempts to rebound encounter sellers, investors fearing the worst is yet to come, and for the first time since the market topped out, they are right.
I don’t know when all this will happen. I thought it should have started many months ago.
The Fed, Street and Administration hype will continue to inflate the bubble.
When it starts it will be straight down 12% to 18%. Valuations mean little until they suddenly do, as the Street senses the Fed is powerless to prop the economy and stock market up.
The GOOD NEWS is:   The carnage will end but not until all those deluded, cocky, clueless bulls are too petrified to buy.
        Total damage:  It depends on the “new negatives,” but anywhere from 38% to 58%.
The bear bottom will not be a “V” shaped turn, but  most likely will feature numerous wide swings up and down before an up turn gains traction.
………………………………………………………………………………
Wednesday  November 13  “ Flash Crash – the New Normal – Careful”
This is what a stock market run by algorithms looks like  –  booooring !
        Well maybe not for inactive investors who  simply want predictability.
Algos  for investment decisions have been designed to take human emotion out of the equation and to reduce the mental workload of investment professionals who don’t like the angst of boiling  all key elements of market analysis down every day.
Clearly algos take a lot of volatility out of market swings, but at the end of the day, they must be programmed to anticipate all of the unknowns that could adversely impact stocks.
I have often written that the biggest challenge to investors and especially professionals in that there are always  “several
balls up in the air,” anyone of which can come down suddenly to change the direction of the stock market.
       If algos aren’t programmed to cope,  the investment portfolios will get clobbered.
It appears the new normal  for market corrections is the flash crash, a precipitous plunge in stock prices (8% – 18%) without warning as  investors (pros)  abandon the conclusions of their algo and stampede  out the exit door.
We last saw a flash crash in Q4 of 2018 with the S&P 500 plunging 20% in 3 months.  It took the market 4 months to recoup that loss.
OK, so what’s my point
Be damn sure you have a cash reserve in line with your tolerance for risk, so you are ready for the next flash crash.
………………………………………………………………
Monday November 11  “Impeachment Proceedings Could Crunch Stocks:

This will be a light week for reports on the economy.  The main focus will be on U.S. House impeachment hearings, which will go public this week.
That could put a lid on stock prices as uncertainty builds, but  the debate will be along party lines with conviction of President Trump by the Republican  Senate doubtful.
Nevertheless, the process will adversely impact confidence and concern for the Republicans that they may lose control of the presidency and both houses of Congress next year if this plays out poorly.
Risk of downside is heightened by the fact the market averages are trading near all-time highs.
So far, the Street has ignored the impeachment process – not a good idea.  Perhaps that’s the kind of bulletproof mentality that accompanies an  economic expansion/bull market after 10years.
I don’t believe in “new eras.”  Bear markets have a way of showing up when least expected.   Careful.
……………………………………………………………………

Friday November 9 “At an Intersection Waiting for the Light to Change”

Let me open with a pitch for the annual Stock Trader’s Almanac, just out. Purchase is accompanied by frequent market analysis to keep it current.
I purchased the first Almanac in 1968, Its founder/publisher, Yale Hirsch, is a legend in the investment analysis/publishing business with many groundbreaking stock market discoveries  in recurring technical patterns and seasonality.
The good news is, it is power-packed with daily, weekly, monthly savvy. The bad news is, once you start reading, all else takes a back seat. Son Jeffrey has taken it over and adds a whole lot more each year plus frequent follow-ups  to this treasure trove of timely information. Contact: 978-750-8400.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
THE MARKET:
The Street is in a quandary, the market is seriously overvalued on a historical basis, unless corporate earnings find a way to rebound.   That is generally expected to happen next year but that is  where a problem exists.  If earnings DON’T rebound, the Street will have to revise them downward, which with an overvalued market spells bear market.
        I believe they will be revised downward, as a recession looms  in spite of the Fed’s efforts to prop the economy until the 2020 elections are over.
        Is the Fed politically biased ? It looks like it, but for whom ? Yes, delaying would help Trump – if he runs.( I don’t think so, I sense Nikki Haley will be their candidate).  If the Fed feels the  need for a change, they may want to make sure the recession/bear market is in full swing by mid 2020. They have the power. It would be nice if they understood the need for stock prices to find a level that discounts reality rather than trying to micro-manage levels, which the tend to screw up on a regular basis.   Bankers !
Don’t take impeachment proceedings lights whatever your political preferences.  This process could expose a whole lot more than expected. Loss of the Presidency, Senate, House  and more changes stock market dynamics, bad initially, good long-term.
…………………………………………………………

Thursday  November 7  “Trade Breakthrough  ?    Careful !

The market will get a boost today from news that China says a deal would result in the United States rolling back tariffs. At this time, it looks like progress would be pursued  step by step  as points are negotiated.
     But one reason stocks are hitting new highs is just that – perceived progress.
We already know everything appears to be pushed into December as the two countries haggle over a location to have talks.
Even so, stocks need some tangible news on trade before doubts set in “again.”
This is so classic with dominating issues between countries – On again, off, again, on again……
The announcement takes the heat off both leaders and gives them a better chance  at negotiating small concession rather than one big all encompassing  solution.

Obviously, a disappointment in U.S./China trade talks would whack stocks at this pricey level
But the real sleeper would be any significant downgrade in 2020 earnings.  That is not expected  at this time based on what I see on FactSet and  searches on Google.
As noted often, the Street is unconcerned (clueless) about impeachment proceedings  launched against President Trump. It is serious as it stands.  What is more serious is, where this can go.  It may be just the beginning.
 That is another thing the Street hasn’t taken time to consider…. That is what a Fed micro-managed bull market can do to sensitivity. The stock market is no place for delusion….for long.
Conclusion: Favorable trade news out of China, how about the United States ?  Does it go along or have a different solution. Failure to go along kills a rally from lofty levels.  Agreement with China’s concept  is worth more upside.
………………………………………………………………………………………..
Wednesday  Nov. 6  “Street in Denial – Economy, Trade, Impeachment”

After Reuters reported progress in U.S./China trade talks and a likely delay in U.S. tariffs on European autos, the stock market cannot afford any disappointments.
       In fact, at these levels, the stock market is vulnerable, and unless news gets much better from here, the stock market is fully priced.
In November 2016, the Street  celebrated the election of Donald Trump with a strong rally in the stock market.
But the Street has not given consideration to his removal from office via resignation, impeachment/conviction, or defeat in 2020.
With impeachment proceedings well underway, it is likely it will begin to think about alternatives.
A 10-year old bull market wipes out memories of the  most recent bear market (2007 – 2009) where the S&P 500 dropped 57%. At the time the world looked like it was ending, and without gallant efforts by the Bush and Obama administrations and the Fed, we would still be recovering from a global meltdown.
I think tops are tougher to call than bottoms. No one wants bull markets to end, everyone wants bear markets to.  Unless a bear market is triggered by dramatic news, tops take longer to develop as the market begins to sense worsening economic news. However, investors are usually in a state of denial trying to eke out one more big score, and with prodding by the pros in the Street, they keep buying.
Bottoms tend to develop faster, as mounting fear convinces investors prices will continue to fall, and they better sell out completely, resulting in one or more selling climaxes until there are no sellers left.
So, where am I going with all this ?

The end will come when it is least expected, and the outcome will be ugly. Be sure to have a cash reserve and sit close to the exits with the restyou’re your holdings.
…………………………………………………….

Tuesday Nov. 5, 2019 “Bubble  Expands Further”
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”
…………………………………………………………………..
Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.
………………………………………………………………………….

Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”

The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
………………………………………………..

Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.
…………………………………………………….

Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
…………………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

Where a Correction Becomes a Bear Market

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,691
S&P 500: 3,091
Nasdaq: 8,486
Russell: 1,598
Wednesday   November 13, 2019
     9:08 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The Street is in denial  – too much of a good thing – a Fed-mis-managed, over-extended economic recovery and bull market has erased memories of what can happen when  buyers vanish and  the bottom falls out of the market.
This 10-year old bull market has had numerous corrections, but the market has always bounced back as corporate buybacks and Fed intervention triggered rebounds.
      But, here’s where a correction becomes a bear market.
A correction starts from an overbought condition, or as the result of bad news.
The correction  takes the market down to a level the Street thinks represents a good point to buy. Traders investors, institutions and corporations  step in expecting a rebound to new highs.
BUT new negatives hit the market and pound it below the level everyone thought represented a buying opportunity.
This process repeats again  and again as new negatives prevent a rebound, worse yet drives it lower.
Optimism fades, fear creeps in.  Attempts to rebound encounter sellers, investors fearing the worst is yet to come, and for the first time since the market topped out, they are right.
I don’t know when all this will happen. I thought it should have started many months ago.
The Fed, Street and Administration hype will continue to inflate the bubble.
When it starts it will be straight down 12% to 18%. Valuations mean little until they suddenly do, as the Street senses the Fed is powerless to prop the economy and stock market up.
The GOOD NEWS is:   The carnage will end but not until all those deluded, cocky, clueless bulls are too petrified to buy.
        Total damage:  It depends on the “new negatives,” but anywhere from 38% to 58%.
The bear bottom will not be a “V” shaped turn, but  most likely will feature numerous wide swings up and down before an up turn gains traction.
TECHNICAL
         The Street will have to deal with the impeachment proceedings today. So far the Street could care less about what is happening at the highest level in our country. That’s sheer arrogance. Of course it matters. The Street punishes corporations for management dysfunction.
………………………………………….
Minor Support: DJIA:27,598; S&P 500:3,081; Nasdaq Comp.:8,446
Minor Resistance: DJIA:27,746; S&P 500:3,097; Nasdaq Comp.:8,501
………………………………………………………….
Wednesday  November 13  “ Flash Crash – the New Normal – Careful”
This is what a stock market run by algorithms looks like  –  booooring !
        Well maybe not for inactive investors who  simply want predictability.
Algos  for investment decisions have been designed to take human emotion out of the equation and to reduce the mental workload of investment professionals who don’t like the angst of boiling  all key elements of market analysis down every day.
Clearly algos take a lot of volatility out of market swings, but at the end of the day, they must be programmed to anticipate all of the unknowns that could adversely impact stocks.
I have often written that the biggest challenge to investors and especially professionals in that there are always  “several
balls up in the air,” anyone of which can come down suddenly to change the direction of the stock market.
       If algos aren’t programmed to cope,  the investment portfolios will get clobbered.
It appears the new normal  for market corrections is the flash crash, a precipitous plunge in stock prices (8% – 18%) without warning as  investors (pros)  abandon the conclusions of their algo and stampede  out the exit door.
We last saw a flash crash in Q4 of 2018 with the S&P 500 plunging 20% in 3 months.  It took the market 4 months to recoup that loss.
OK, so what’s my point
Be damn sure you have a cash reserve in line with your tolerance for risk, so you are ready for the next flash crash.
………………………………………………………………
Monday November 11  “Impeachment Proceedings Could Crunch Stocks:

This will be a light week for reports on the economy.  The main focus will be on U.S. House impeachment hearings, which will go public this week.
That could put a lid on stock prices as uncertainty builds, but  the debate will be along party lines with conviction of President Trump by the Republican  Senate doubtful.
Nevertheless, the process will adversely impact confidence and concern for the Republicans that they may lose control of the presidency and both houses of Congress next year if this plays out poorly.
Risk of downside is heightened by the fact the market averages are trading near all-time highs.
So far, the Street has ignored the impeachment process – not a good idea.  Perhaps that’s the kind of bulletproof mentality that accompanies an  economic expansion/bull market after 10years.
I don’t believe in “new eras.”  Bear markets have a way of showing up when least expected.   Careful.
……………………………………………………………………

Friday November 9 “At an Intersection Waiting for the Light to Change”

Let me open with a pitch for the annual Stock Trader’s Almanac, just out. Purchase is accompanied by frequent market analysis to keep it current.
I purchased the first Almanac in 1968, Its founder/publisher, Yale Hirsch, is a legend in the investment analysis/publishing business with many groundbreaking stock market discoveries  in recurring technical patterns and seasonality.
The good news is, it is power-packed with daily, weekly, monthly savvy. The bad news is, once you start reading, all else takes a back seat. Son Jeffrey has taken it over and adds a whole lot more each year plus frequent follow-ups  to this treasure trove of timely information. Contact: 978-750-8400.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
THE MARKET:
The Street is in a quandary, the market is seriously overvalued on a historical basis, unless corporate earnings find a way to rebound.   That is generally expected to happen next year but that is  where a problem exists.  If earnings DON’T rebound, the Street will have to revise them downward, which with an overvalued market spells bear market.
        I believe they will be revised downward, as a recession looms  in spite of the Fed’s efforts to prop the economy until the 2020 elections are over.
        Is the Fed politically biased ? It looks like it, but for whom ? Yes, delaying would help Trump – if he runs.( I don’t think so, I sense Nikki Haley will be their candidate).  If the Fed feels the  need for a change, they may want to make sure the recession/bear market is in full swing by mid 2020. They have the power. It would be nice if they understood the need for stock prices to find a level that discounts reality rather than trying to micro-manage levels, which the tend to screw up on a regular basis.   Bankers !
Don’t take impeachment proceedings lights whatever your political preferences.  This process could expose a whole lot more than expected. Loss of the Presidency, Senate, House  and more changes stock market dynamics, bad initially, good long-term.
…………………………………………………………

Thursday  November 7  “Trade Breakthrough  ?    Careful !

The market will get a boost today from news that China says a deal would result in the United States rolling back tariffs. At this time, it looks like progress would be pursued  step by step  as points are negotiated.
     But one reason stocks are hitting new highs is just that – perceived progress.
We already know everything appears to be pushed into December as the two countries haggle over a location to have talks.
Even so, stocks need some tangible news on trade before doubts set in “again.”
This is so classic with dominating issues between countries – On again, off, again, on again……
The announcement takes the heat off both leaders and gives them a better chance  at negotiating small concession rather than one big all encompassing  solution.

Obviously, a disappointment in U.S./China trade talks would whack stocks at this pricey level
But the real sleeper would be any significant downgrade in 2020 earnings.  That is not expected  at this time based on what I see on FactSet and  searches on Google.
As noted often, the Street is unconcerned (clueless) about impeachment proceedings  launched against President Trump. It is serious as it stands.  What is more serious is, where this can go.  It may be just the beginning.
 That is another thing the Street hasn’t taken time to consider…. That is what a Fed micro-managed bull market can do to sensitivity. The stock market is no place for delusion….for long.
Conclusion: Favorable trade news out of China, how about the United States ?  Does it go along or have a different solution. Failure to go along kills a rally from lofty levels.  Agreement with China’s concept  is worth more upside.
………………………………………………………………………………………..
Wednesday  Nov. 6  “Street in Denial – Economy, Trade, Impeachment”

After Reuters reported progress in U.S./China trade talks and a likely delay in U.S. tariffs on European autos, the stock market cannot afford any disappointments.
       In fact, at these levels, the stock market is vulnerable, and unless news gets much better from here, the stock market is fully priced.
In November 2016, the Street  celebrated the election of Donald Trump with a strong rally in the stock market.
But the Street has not given consideration to his removal from office via resignation, impeachment/conviction, or defeat in 2020.
With impeachment proceedings well underway, it is likely it will begin to think about alternatives.
A 10-year old bull market wipes out memories of the  most recent bear market (2007 – 2009) where the S&P 500 dropped 57%. At the time the world looked like it was ending, and without gallant efforts by the Bush and Obama administrations and the Fed, we would still be recovering from a global meltdown.
I think tops are tougher to call than bottoms. No one wants bull markets to end, everyone wants bear markets to.  Unless a bear market is triggered by dramatic news, tops take longer to develop as the market begins to sense worsening economic news. However, investors are usually in a state of denial trying to eke out one more big score, and with prodding by the pros in the Street, they keep buying.
Bottoms tend to develop faster, as mounting fear convinces investors prices will continue to fall, and they better sell out completely, resulting in one or more selling climaxes until there are no sellers left.
So, where am I going with all this ?

The end will come when it is least expected, and the outcome will be ugly. Be sure to have a cash reserve and sit close to the exits with the restyou’re your holdings.
…………………………………………………….

Tuesday Nov. 5, 2019 “Bubble  Expands Further”
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”
…………………………………………………………………..
Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.
………………………………………………………………………….

Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”

The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
………………………………………………..

Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.
…………………………………………………….

Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
…………………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

Flash Crash – the New Normal – Careful !

Flash Crash – the New Normal    –  Careful ~!

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,691
S&P 500: 3,087
Nasdaq: 3,037
Russell: 1,594
Tuesday   November 12, 2019
     9:25 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
This is what a stock market run by algorithms looks like  –  boooooring !
        Well maybe not for inactive investors who  simply want predictability.
Algos  for investment decisions have been designed to take human emotion out of the equation and to reduce the mental workload of investment professionals who don’t like the angst of boiling  all key elements of market analysis down every day.
Clearly algos take a lot of volatility out of market swings, but at the end of the day, they must be programmed to anticipate all of the unknowns that could adversely impact stocks.
I have often written that the biggest challenge to investors and especially professionals in that there are always  “several
balls up in the air,” anyone of which can come down suddenly to change the direction of the stock market.
       If algos aren’t programmed to cope,  the investment portfolios will get clobbered.
It appears the new normal  for market corrections is the flash crash, a precipitous plunge in stock prices (8% – 18%) without warning as  investors (pros)  abandon the conclusions of their algo and stampede  out the exit door.
We last saw a flash crash in Q4 of 2018 with the S&P 500 plunging 20% in 3 months.  It took the market 4 months to recoup that loss.
OK, so what’s my point
Be damn sure you have a cash reserve in line with your tolerance for risk, so you are ready for the next flash crash.
TECHNICAL

      Point of interest though not highly significant:  Without a 16-poing jump in Boeing’s stock (BA), the DJIA would have been down 98 points.  It’s all about how the DJIA is constructed. It is price-weighted, not market value weighted like the S&P 500 and Nasdaq Comp.
………………………………………….
Minor Support:DJIA:27,617; S&P 500:3,080; Nasdaq Comp.:8,065
Minor Resistance: DJIA:27,761; S&P 500:3,067; Nasdaq Comp.:3,089
………………………………………………………….
Monday November 11  “Impeachment Proceedings Could Crunch Stocks:

This will be a light week for reports on the economy.  The main focus will be on U.S. House impeachment hearings, which will go public this week.
That could put a lid on stock prices as uncertainty builds, but  the debate will be along party lines with conviction of President Trump by the Republican  Senate doubtful.
Nevertheless, the process will adversely impact confidence and concern for the Republicans that they may lose control of the presidency and both houses of Congress next year if this plays out poorly.
Risk of downside is heightened by the fact the market averages are trading near all-time highs.
So far, the Street has ignored the impeachment process – not a good idea.  Perhaps that’s the kind of bulletproof mentality that accompanies an  economic expansion/bull market after 10years.
I don’t believe in “new eras.”  Bear markets have a way of showing up when least expected.   Careful.
……………………………………………………………………

Friday November 9 “At an Intersection Waiting for the Light to Change”

Let me open with a pitch for the annual Stock Trader’s Almanac, just out. Purchase is accompanied by frequent market analysis to keep it current.
I purchased the first Almanac in 1968, Its founder/publisher, Yale Hirsch, is a legend in the investment analysis/publishing business with many groundbreaking stock market discoveries  in recurring technical patterns and seasonality.
The good news is, it is power-packed with daily, weekly, monthly savvy. The bad news is, once you start reading, all else takes a back seat. Son Jeffrey has taken it over and adds a whole lot more each year plus frequent follow-ups  to this treasure trove of timely information. Contact: 978-750-8400.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
THE MARKET:
The Street is in a quandary, the market is seriously overvalued on a historical basis, unless corporate earnings find a way to rebound.   That is generally expected to happen next year but that is  where a problem exists.  If earnings DON’T rebound, the Street will have to revise them downward, which with an overvalued market spells bear market.
        I believe they will be revised downward, as a recession looms  in spite of the Fed’s efforts to prop the economy until the 2020 elections are over.
        Is the Fed politically biased ? It looks like it, but for whom ? Yes, delaying would help Trump – if he runs.( I don’t think so, I sense Nikki Haley will be their candidate).  If the Fed feels the  need for a change, they may want to make sure the recession/bear market is in full swing by mid 2020. They have the power. It would be nice if they understood the need for stock prices to find a level that discounts reality rather than trying to micro-manage levels, which the tend to screw up on a regular basis.   Bankers !
Don’t take impeachment proceedings lights whatever your political preferences.  This process could expose a whole lot more than expected. Loss of the Presidency, Senate, House  and more changes stock market dynamics, bad initially, good long-term.
…………………………………………………………

Thursday  November 7  “Trade Breakthrough  ?    Careful !

The market will get a boost today from news that China says a deal would result in the United States rolling back tariffs. At this time, it looks like progress would be pursued  step by step  as points are negotiated.
     But one reason stocks are hitting new highs is just that – perceived progress.
We already know everything appears to be pushed into December as the two countries haggle over a location to have talks.
Even so, stocks need some tangible news on trade before doubts set in “again.”
This is so classic with dominating issues between countries – On again, off, again, on again……
The announcement takes the heat off both leaders and gives them a better chance  at negotiating small concession rather than one big all encompassing  solution.

Obviously, a disappointment in U.S./China trade talks would whack stocks at this pricey level
But the real sleeper would be any significant downgrade in 2020 earnings.  That is not expected  at this time based on what I see on FactSet and  searches on Google.
As noted often, the Street is unconcerned (clueless) about impeachment proceedings  launched against President Trump. It is serious as it stands.  What is more serious is, where this can go.  It may be just the beginning.
 That is another thing the Street hasn’t taken time to consider…. That is what a Fed micro-managed bull market can do to sensitivity. The stock market is no place for delusion….for long.
Conclusion: Favorable trade news out of China, how about the United States ?  Does it go along or have a different solution. Failure to go along kills a rally from lofty levels.  Agreement with China’s concept  is worth more upside.
………………………………………………………………………………………..
Wednesday  Nov. 6  “Street in Denial – Economy, Trade, Impeachment”

After Reuters reported progress in U.S./China trade talks and a likely delay in U.S. tariffs on European autos, the stock market cannot afford any disappointments.
       In fact, at these levels, the stock market is vulnerable, and unless news gets much better from here, the stock market is fully priced.
In November 2016, the Street  celebrated the election of Donald Trump with a strong rally in the stock market.
But the Street has not given consideration to his removal from office via resignation, impeachment/conviction, or defeat in 2020.
With impeachment proceedings well underway, it is likely it will begin to think about alternatives.
A 10-year old bull market wipes out memories of the  most recent bear market (2007 – 2009) where the S&P 500 dropped 57%. At the time the world looked like it was ending, and without gallant efforts by the Bush and Obama administrations and the Fed, we would still be recovering from a global meltdown.
I think tops are tougher to call than bottoms. No one wants bull markets to end, everyone wants bear markets to.  Unless a bear market is triggered by dramatic news, tops take longer to develop as the market begins to sense worsening economic news. However, investors are usually in a state of denial trying to eke out one more big score, and with prodding by the pros in the Street, they keep buying.
Bottoms tend to develop faster, as mounting fear convinces investors prices will continue to fall, and they better sell out completely, resulting in one or more selling climaxes until there are no sellers left.
So, where am I going with all this ?

The end will come when it is least expected, and the outcome will be ugly. Be sure to have a cash reserve and sit close to the exits with the restyou’re your holdings.
…………………………………………………….

Tuesday Nov. 5, 2019 “Bubble  Expands Further”
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”
…………………………………………………………………..
Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.
………………………………………………………………………….

Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”

The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
………………………………………………..

Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.
…………………………………………………….

Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
…………………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

Impeachment Proceedings Could Crunch Stocks

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,681
S&P 500: 3,093
Nasdaq: 8,475
Russell: 1,598
Monday November 11, 2019
 9:25 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
This will be a light week for reports on the economy.  The main focus will be on U.S. House impeachment hearings, which will go public this week.
That could put a lid on stock prices as uncertainty builds, but  the debate will be along party lines with conviction of President Trump by the Republican  Senate doubtful.
Nevertheless, the process will adversely impact confidence and concern for the Republicans that they may lose control of the presidency and both houses of Congress next year if this plays out poorly.
Risk of downside is heightened by the fact the market averages are trading near all-time highs.
So far, the Street has ignored the impeachment process – not a good idea.  Perhaps that’s the kind of bulletproof mentality that accompanies an  economic expansion/bull market after 10years.
I don’t believe in “new eras.”  Bear markets have a way of showing up when least expected.   Careful.

TECHNICAL
Off and on, I have referred to this as a bubble that will burst when least expected. When that happens, the market will plunge so sharply, investors will have no time to protect their portfolio from nasty losses.
The key here is, how much of  the positives ( rate cut, better than expected Q3 earnings, trade talk progress) have been discounted at these lofty levels.

Minor Support:DJIA:27,587; S&P 500:3,089:; Nasdaq Comp.:8,404
Minor Resistance: DJIA:27,723; S&P 500:3,197; Nasdaq Comp.:8,489
………………………………………………………….
Friday November 9 “At an Intersection Waiting for the Light to Change”

Let me open with a pitch for the annual Stock Trader’s Almanac, just out. Purchase is accompanied by frequent market analysis to keep it current.
I purchased the first Almanac in 1968, Its founder/publisher, Yale Hirsch, is a legend in the investment analysis/publishing business with many groundbreaking stock market discoveries  in recurring technical patterns and seasonality.
The good news is, it is power-packed with daily, weekly, monthly savvy. The bad news is, once you start reading, all else takes a back seat. Son Jeffrey has taken it over and adds a whole lot more each year plus frequent follow-ups  to this treasure trove of timely information. Contact: 978-750-8400.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
THE MARKET:
The Street is in a quandary, the market is seriously overvalued on a historical basis, unless corporate earnings find a way to rebound.   That is generally expected to happen next year but that is  where a problem exists.  If earnings DON’T rebound, the Street will have to revise them downward, which with an overvalued market spells bear market.
        I believe they will be revised downward, as a recession looms  in spite of the Fed’s efforts to prop the economy until the 2020 elections are over.
        Is the Fed politically biased ? It looks like it, but for whom ? Yes, delaying would help Trump – if he runs.( I don’t think so, I sense Nikki Haley will be their candidate).  If the Fed feels the  need for a change, they may want to make sure the recession/bear market is in full swing by mid 2020. They have the power. It would be nice if they understood the need for stock prices to find a level that discounts reality rather than trying to micro-manage levels, which the tend to screw up on a regular basis.   Bankers !
Don’t take impeachment proceedings lights whatever your political preferences.  This process could expose a whole lot more than expected. Loss of the Presidency, Senate, House  and more changes stock market dynamics, bad initially, good long-term.
…………………………………………………………

Thursday  November 7  “Trade Breakthrough  ?    Careful !

The market will get a boost today from news that China says a deal would result in the United States rolling back tariffs. At this time, it looks like progress would be pursued  step by step  as points are negotiated.
     But one reason stocks are hitting new highs is just that – perceived progress.
We already know everything appears to be pushed into December as the two countries haggle over a location to have talks.
Even so, stocks need some tangible news on trade before doubts set in “again.”
This is so classic with dominating issues between countries – On again, off, again, on again……
The announcement takes the heat off both leaders and gives them a better chance  at negotiating small concession rather than one big all encompassing  solution.

Obviously, a disappointment in U.S./China trade talks would whack stocks at this pricey level
But the real sleeper would be any significant downgrade in 2020 earnings.  That is not expected  at this time based on what I see on FactSet and  searches on Google.
As noted often, the Street is unconcerned (clueless) about impeachment proceedings  launched against President Trump. It is serious as it stands.  What is more serious is, where this can go.  It may be just the beginning.
 That is another thing the Street hasn’t taken time to consider…. That is what a Fed micro-managed bull market can do to sensitivity. The stock market is no place for delusion….for long.
Conclusion: Favorable trade news out of China, how about the United States ?  Does it go along or have a different solution. Failure to go along kills a rally from lofty levels.  Agreement with China’s concept  is worth more upside.
………………………………………………………………………………………..
Wednesday  Nov. 6  “Street in Denial – Economy, Trade, Impeachment”

After Reuters reported progress in U.S./China trade talks and a likely delay in U.S. tariffs on European autos, the stock market cannot afford any disappointments.
       In fact, at these levels, the stock market is vulnerable, and unless news gets much better from here, the stock market is fully priced.
In November 2016, the Street  celebrated the election of Donald Trump with a strong rally in the stock market.
But the Street has not given consideration to his removal from office via resignation, impeachment/conviction, or defeat in 2020.
With impeachment proceedings well underway, it is likely it will begin to think about alternatives.
A 10-year old bull market wipes out memories of the  most recent bear market (2007 – 2009) where the S&P 500 dropped 57%. At the time the world looked like it was ending, and without gallant efforts by the Bush and Obama administrations and the Fed, we would still be recovering from a global meltdown.
I think tops are tougher to call than bottoms. No one wants bull markets to end, everyone wants bear markets to.  Unless a bear market is triggered by dramatic news, tops take longer to develop as the market begins to sense worsening economic news. However, investors are usually in a state of denial trying to eke out one more big score, and with prodding by the pros in the Street, they keep buying.
Bottoms tend to develop faster, as mounting fear convinces investors prices will continue to fall, and they better sell out completely, resulting in one or more selling climaxes until there are no sellers left.
So, where am I going with all this ?

The end will come when it is least expected, and the outcome will be ugly. Be sure to have a cash reserve and sit close to the exits with the restyou’re your holdings.
…………………………………………………….

Tuesday Nov. 5, 2019 “Bubble  Expands Further”
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”
…………………………………………………………………..
Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.
………………………………………………………………………….

Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”

The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
………………………………………………..

Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.
…………………………………………………….

Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
…………………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

At an Intersection Waiting For The Light to Change

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,674
S&P 500: 3,085
Nasdaq: 8454
Russell: 1,593
Friday   November 8, 2019
 9:15 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Let me open with a pitch for the annual Stock Trader’s Almanac, just out. Purchase is accompanied by frequent market analysis to keep it current.
I purchased the first Almanac in 1968, Its founder/publisher, Yale Hirsch, is a legend in the investment analysis/publishing business with many groundbreaking stock market discoveries  in recurring technical patterns and seasonality.
The good news is, it is power-packed with daily, weekly, monthly savvy. The bad news is, once you start reading, all else takes a back seat. Son Jeffrey has taken it over and adds a whole lot more each year plus frequent follow-ups  to this treasure trove of timely information. Contact: 978-750-8400.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
THE MARKET:
The Street is in a quandary, the market is seriously overvalued on a historical basis, unless corporate earnings find a way to rebound.   That is generally expected to happen next year but that is  where a problem exists.  If earnings DON’T rebound, the Street will have to revise them downward, which with an overvalued market spells bear market.
        I believe they will be revised downward, as a recession looms  in spite of the Fed’s efforts to prop the economy until the 2020 elections are over.
        Is the Fed politically biased ? It looks like it, but for whom ? Yes, delaying would help Trump – if he runs.( I don’t think so, I sense Nikki Haley will be their candidate).  If the Fed feels the  need for a change, they may want to make sure the recession/bear market is in full swing by mid 2020. They have the power. It would be nice if they understood the need for stock prices to find a level that discounts reality rather than trying to micro-manage levels, which the tend to screw up on a regular basis.   Bankers !
Don’t take impeachment proceedings lights whatever your political preferences.  This process could expose a whole lot more than expected. Loss of the Presidency, Senate, House  and more changes stock market dynamics, bad initially, good long-term.
TECHNICAL
Off and on, I have referred to this as a bubble that will burst when least expected. When that happens, the market will plunge so sharply, investors will have no time to protect their portfolio from nasty losses.
The key here is, how much of  the positives ( rate cut, better than expected Q3 earnings, trade talk progress) have been discounted at these lofty levels.

Minor Support:DJIA:27,651; S&P 500:3,104:3,076 ; Nasdaq Comp.:8,427
Minor Resistance: DJIA:27,741; S&P 500:3,087; Nasdaq Comp.:8,497
………………………………………………………….

Thursday  November 7  “Trade Breakthrough  ?    Careful !

The market will get a boost today from news that China says a deal would result in the United States rolling back tariffs. At this time, it looks like progress would be pursued  step by step  as points are negotiated.
     But one reason stocks are hitting new highs is just that – perceived progress.
We already know everything appears to be pushed into December as the two countries haggle over a location to have talks.
Even so, stocks need some tangible news on trade before doubts set in “again.”
This is so classic with dominating issues between countries – On again, off, again, on again……
The announcement takes the heat off both leaders and gives them a better chance  at negotiating small concession rather than one big all encompassing  solution.

Obviously, a disappointment in U.S./China trade talks would whack stocks at this pricey level
But the real sleeper would be any significant downgrade in 2020 earnings.  That is not expected  at this time based on what I see on FactSet and  searches on Google.
As noted often, the Street is unconcerned (clueless) about impeachment proceedings  launched against President Trump. It is serious as it stands.  What is more serious is, where this can go.  It may be just the beginning.
 That is another thing the Street hasn’t taken time to consider…. That is what a Fed micro-managed bull market can do to sensitivity. The stock market is no place for delusion….for long.
Conclusion: Favorable trade news out of China, how about the United States ?  Does it go along or have a different solution. Failure to go along kills a rally from lofty levels.  Agreement with China’s concept  is worth more upside.
………………………………………………………………………………………..
Wednesday  Nov. 6  “Street in Denial – Economy, Trade, Impeachment”

After Reuters reported progress in U.S./China trade talks and a likely delay in U.S. tariffs on European autos, the stock market cannot afford any disappointments.
       In fact, at these levels, the stock market is vulnerable, and unless news gets much better from here, the stock market is fully priced.
In November 2016, the Street  celebrated the election of Donald Trump with a strong rally in the stock market.
But the Street has not given consideration to his removal from office via resignation, impeachment/conviction, or defeat in 2020.
With impeachment proceedings well underway, it is likely it will begin to think about alternatives.
A 10-year old bull market wipes out memories of the  most recent bear market (2007 – 2009) where the S&P 500 dropped 57%. At the time the world looked like it was ending, and without gallant efforts by the Bush and Obama administrations and the Fed, we would still be recovering from a global meltdown.
I think tops are tougher to call than bottoms. No one wants bull markets to end, everyone wants bear markets to.  Unless a bear market is triggered by dramatic news, tops take longer to develop as the market begins to sense worsening economic news. However, investors are usually in a state of denial trying to eke out one more big score, and with prodding by the pros in the Street, they keep buying.
Bottoms tend to develop faster, as mounting fear convinces investors prices will continue to fall, and they better sell out completely, resulting in one or more selling climaxes until there are no sellers left.
So, where am I going with all this ?

The end will come when it is least expected, and the outcome will be ugly. Be sure to have a cash reserve and sit close to the exits with the restyou’re your holdings.
…………………………………………………….

Tuesday Nov. 5, 2019 “Bubble  Expands Further”
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”
…………………………………………………………………..
Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.
………………………………………………………………………….

Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”

The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
………………………………………………..

Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.
…………………………………………………….

Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
…………………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

Trade Breakthrough ? Careful !

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,492
S&P 500: 3,076
Nasdaq: 8,420
Russell: 1,589
Thursday November 7, 2019
 9:01 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The market will get a boost today from news that China says a deal would result in the United States rolling back tariffs. At this time, it looks like progress would be pursued  step by step  as points are negotiated.
     But one reason stocks are hitting new highs is just that – perceived progress.
We already know everything appears to be pushed into December as the two countries haggle over a location to have talks.
Even so, stocks need some tangible news on trade before doubts set in “again.”
This is so classic with dominating issues between countries – On again, off, again, on again……
The announcement takes the heat off both leaders and gives them a better chance  at negotiating small concession rather than one big all encompassing  solution.

Obviously, a disappointment in U.S./China trade talks would whack stocks at this pricey level
But the real sleeper would be any significant downgrade in 2020 earnings.  That is not expected  at this time based on what I see on FactSet and  searches on Google.
As noted often, the Street is unconcerned (clueless) about impeachment proceedings  launched against President Trump. It is serious as it stands.  What is more serious is, where this can go.  It may be just the beginning.
 That is another thing the Street hasn’t taken time to consider…. That is what a Fed micro-managed bull market can do to sensitivity. The stock market is no place for delusion….for long.
Conclusion: Favorable trade news out of China, how about the United States ?  Does it go along or have a different solution. Failure to go along kills a rally from lofty levels.  Agreement with China’s concept  is worth more upside.   
TECHNICAL

Off and on, I have referred to this as a bubble that will burst when least expected. When that happens, the market will plunge so sharply, investors will have no time to protect their portfolio from nasty losses.
The key here is, how much of  the positives ( rate cut, better than expected Q3 earnings, trade talk progress) have been discounted at these lofty levels.

Minor Support:DJIA:27,748; S&P 500:3,104: 3,132; Nasdaq Comp.:8,532
Minor Resistance: DJIA:27,431; S&P 500:3,073; Nasdaq Comp.:8,407
………………………………………………………….

Wednesday  Nov. 6  “Street in Denial – Economy, Trade, Impeachment”

After Reuters reported progress in U.S./China trade talks and a likely delay in U.S. tariffs on European autos, the stock market cannot afford any disappointments.
       In fact, at these levels, the stock market is vulnerable, and unless news gets much better from here, the stock market is fully priced.
In November 2016, the Street  celebrated the election of Donald Trump with a strong rally in the stock market.
But the Street has not given consideration to his removal from office via resignation, impeachment/conviction, or defeat in 2020.
With impeachment proceedings well underway, it is likely it will begin to think about alternatives.
A 10-year old bull market wipes out memories of the  most recent bear market (2007 – 2009) where the S&P 500 dropped 57%. At the time the world looked like it was ending, and without gallant efforts by the Bush and Obama administrations and the Fed, we would still be recovering from a global meltdown.
I think tops are tougher to call than bottoms. No one wants bull markets to end, everyone wants bear markets to.  Unless a bear market is triggered by dramatic news, tops take longer to develop as the market begins to sense worsening economic news. However, investors are usually in a state of denial trying to eke out one more big score, and with prodding by the pros in the Street, they keep buying.
Bottoms tend to develop faster, as mounting fear convinces investors prices will continue to fall, and they better sell out completely, resulting in one or more selling climaxes until there are no sellers left.
So, where am I going with all this ?

The end will come when it is least expected, and the outcome will be ugly. Be sure to have a cash reserve and sit close to the exits with the restyou’re your holdings.
…………………………………………………….

Tuesday Nov. 5, 2019 “Bubble  Expands Further”
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”
…………………………………………………………………..
Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.
………………………………………………………………………….

Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”

The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
………………………………………………..

Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.
…………………………………………………….

Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
…………………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

Street in Denial – Economy, Impeachment, Trade

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,492
S&P 500: 3,074
Nasdaq: 8,434
Russell: 1,599
Wednesday November 6, 2019
 9:01 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
After Reuters reported progress in U.S./China trade talks and a likely delay in U.S. tariffs on European autos, the stock market cannot afford any disappointments.
       In fact, at these levels, the stock market is vulnerable, and unless news gets much better from here, the stock market is fully priced.
In November 2016, the Street  celebrated the election of Donald Trump with a strong rally in the stock market.
But the Street has not given consideration to his removal from office via resignation, impeachment/conviction, or defeat in 2020.
With impeachment proceedings well underway, it is likely it will begin to think about alternatives.
A 10-year old bull market wipes out memories of the  most recent bear market (2007 – 2009) where the S&P 500 dropped 57%. At the time the world looked like it was ending, and without gallant efforts by the Bush and Obama administrations and the Fed, we would still be recovering from a global meltdown.
I think tops are tougher to call than bottoms. No one wants bull markets to end, everyone wants bear markets to.  Unless a bear market is triggered by dramatic news, tops take longer to develop as the market begins to sense worsening economic news. However, investors are usually in a state of denial trying to eke out one more big score, and with prodding by the pros in the Street, they keep buying.
Bottoms tend to develop faster, as mounting fear convinces investors prices will continue to fall, and they better sell out completely, resulting in one or more selling climaxes until there are no sellers left.
So, where am I going with all this ?

The end will come when it is least expected, and the outcome will be ugly. Be sure to have a cash reserve and sit close to the exits with the restyou’re your holdings.

 …………………………………………………………
TECHNICAL

Off and on, I have referred to this as a bubble that will burst when least expected. When that happens, the market will plunge so sharply, investors will have no time to protect their portfolio from nasty losses.
The key here is, how much of  the positives ( rate cut, better than expected Q3 earnings, trade talk progress) have been discounted at these lofty levels.

Minor Support:DJIA:27,387; S&P 500:3,066; Nasdaq Comp.:8,417
Minor Resistance: DJIA:27,521; S&P 500:3,077; Nasdaq Comp.:8,441
………………………………………………………….

Tuesday Nov. 5, 2019 “Bubble  Expands Further”
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”

Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.

Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”
The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
………………………………………………..

Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.

Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
……………………………………………………
Tuesday Oct. 29 “Big Economic News Coming – GDP – Jobs”
The S&P 500 broke out to new highs  yesterday on better than expected Q3 earnings, trade hopes and expectations of a Fed rate cut, but there was not the big follow through that normally accompanies a breakout.
The DJIA and Nasdaq Comp.
That can still happen, since the Street often takes a day or two to decide if overhead supply  has lifted.  This is the third attempt since July to break out of this general area.
BUT, what if all these goodies have been discounted at these levels, which are in fact very pricey, so much so, you have to go back to the 1999 – 2000 dot-com blow off to find the market so overvalued.
As noted yesterday, this is a big week for economic reports, especially Q3 GDP (Wed 8:30) which is estimated to drop to an annual rate of 1.8 percent from 2.0 percent in Q2 and 3.1 percent in Q1, as well as the Employment Situation report (Fri. 8:30) estimated to show 93,000 new hires in October  vs. 135,000 in September.
The week got off to a bad start with the September Chicago Fed  National Activity index  report dropping sharply  to -0.45 from +o.10 and the October Dallas Fed Mfg. Survey index dropping  to 4.5 from13.9.
……………………………………………………
Monday Oct. 28  “Buying Breakout to New Highs – Risky”
     Big week  for economic reports – Q3 GDP comes at 8:30 Wednesday, the Employment Situation on Friday at 8:30.
Both have a bearing on whether the economy is near or in a recession.
The Fed Open Market Committee (FOMC) meets Tuesday and Wednesday with an announcement of the third rate cut in less than a year. expected on Wednesday, though no press conference is scheduled.
No FOMC meeting is scheduled for November, so the next meeting is not until December 10.
Three things are driving stock prices: a cut in the fed funds interest rate; better than expected Q3 earnings; progress in the U.S./China trade  talks.
Conclusion: This market is pricey at these levels, in fact, historically very overpriced, but the Street thinks it can run the table anyway, so expect new highs today and all the press hoopla that goes with it.
Negatives: 1) the Fed does not cut rates this time. 2) trade talks disappoint. 3) GDP signals a recession, as well as other economic indicators announced this week, primarily  Consumer Confidence (Tues. 10 a.m.) Employment Situation (Fri. 9:30).
This is a very dangerous market to chase. It is next to impossible to resist doing so, but all things considered, the downside risk far exceeds the upside potential.  Many on the Street have no idea how ugly a bear market can get, therefore very few are bearish enough to be selling.
That in itself is bearish, but until several big institutions cut and run, the market will hold the line with short-lived corrections along the way.
……………………………………………………………………..

Friday Oct. 25  “Big Move Looms as Street Decides on Earnings”

The market needs some volatility and I think we are about to get it.
Q3 earnings are hitting the Street. Some are better than expected, some disappointing, and the Street is about to decide what to do – Buy…or Sell !
      The technical picture (price action) is slightly upbeat, which I think can be credited to hopes for progress on trade and a Fed rate cut plus QE.    It’s really hard to tell now how the Street is factoring earnings into its equation.
New highs would be easy to hit (DJIA: 27,398; S&P 500:3,028). The S&P hit 3,016 yesterday.
New highs by the S&P would trigger news headlines and rush to buy.
However, with the markets as historically overpriced as it is now, a recession looming, and the uncertainty of a presidential impeachment process underway, a sustainable surge from these levels stands to be short lived.

Thursday, Oct. 24  “Watching and Waiting….for a signal”
Street is watching and waiting for a signal on trade and earnings, not just Q3 but guidance and projections for 2020, which has so far been projected to be better than this year.
If the Fed cannot head off a recession, the Street will be slashing 2020 earnings projections which would  adversely impact an overvalued market.
Odds are good we already are in a recession, so the Fed has its work cut out for it.  The Fed is cutting rates and employing a variation of QE, so I don’t know what it can do if we get into a severe recession.
These are strange times.
But a Fed rate cut is built into current pricing and much of expected progress on trade.
Failure to cut rates and/or failure to make progress on trade would hammer prices.
I think the market has a shot at new highs, which would be accompanied by a lot of press, Administration and Street hoopla, driving the market up temporarily and maybe into early January before a major correction develops.
Playing that move by buying the breakout would be a challenge for all but the nimble and quick.
…………………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

The Bubble Continues to Expand

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,46.2
S&P 500: 3,078
Nasdaq: 8,433
Russell: 1,537
Tuesday November 5, 2019
 8:54 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The next  12 months will be wild as impeachment proceedings move forward, trade talks stir anxiety, and the U.S. economic numbers flow in indicating recession or a pause before a recession.
So far, the Street has a single focus – BUY regardless of any outcome. Most of these decisions are computer based, with human tweaks now and then. That is the primary reason that the Street ignores looming negatives.
Expect “DOW 30,000” to be hyped, as well an economy that is finally recession-free.
What I am reading suggests otherwise, but investors don’t want to hear that in bull markets, and that is why they get hurt in bear markets.
Some investors will think they can sell near the top but not until they make some more money before then.  Some are sure they can ride out a recession/bear market over 6 to 15 months then start making money all over again for the next two to four years.
The problem with that logic is after a 30% plunge in prices the news environment becomes so negative that investors begin to fear that  lower prices are inevitable and the safe thing to do is “sell” with losses big enough it takes years to recoup the damage done by the bear market.
The Fed has decided it will micro-manage the economy and stock market. I don’t think Fed Chief Jerome Powell is smart enough to do that. To his credit though, I don’t think anyone is smart enough to micro manage anything so huge and unpredictable.
You see, there are always several balls up in the air in that business any one of which can come down when least expected and change to situation.
One of those balls already came down – impeachment. The other is the Feds attempt to goose the economy and stock market when the latter is already significantly over valued based on prior valuations.
Another ball that can come down is global depression. I don’t expect that, no one does, and that is why it can happen. This would feature economic stagnation at zero growth levels and a stock market that after a 50% decline has no more bounce than a soggy playground soft ball.
Yet another ball that can come down is one that no one on earth suspects !!
Be very careful here.  With a new market high hyped whether it is a fraction of a point or many points, the urge to go all-in surges.  It’s called a “BUBBLE.”
 …………………………………………………………
TECHNICAL

Off and on, I have referred to this as a bubble that will burst when least expected. When that happens, the market will plunge so sharply, investors will have no time to protect their portfolio from nasty losses.
The key here is, how much of  the positives ( rate cut, better than expected Q3 earnings, trade talk progress) have been discounted at these lofty levels.

Minor Support:DJIA:27,417; S&P 500:3,071; Nasdaq Comp.:8,417
Minor Resistance: DJIA:27,531; S&P 500:3,084; Nasdaq Comp.:8,458
………………………………………………………….

Monday Nov 4  “I Am Wrong….so far   Bubble Still Bubbling – Careful
OMG !   The bubble of all bubbles.  Why is the Fed doing this ? Three rate cuts in less than a year.

It’s like the alternative is unthinkable……NO ! what the Fed is doing is unthinkable !

With their rhetoric, the Fed is sucking investors into the market as the major averages are hitting all-time  highs.  This is what the Fed normally does in recessions when stocks are plummeting.

The Shiller price/earnings ratio is higher than the 1987 Black Tuesday crunch (down 36%), than 2007 Great Bear market ( down 50%), but still below the 2000 dot-com bubble burst ( down 57%).

The DJIA is set to  follow the S&P 500 and Nasdaq Composite with a breakout of the trading range that has constrained it for two years. The NYSE Composite still has a way to go.

Axios points out that the S&P 500 is up 4% since optimism was announced October 11 about phase one of the U.S./China trade talks.  Odds favor more announcements of progress on trade coming out of the White House as impeachment proceedings move forward.

Bottom line:
I have been wrong  here with my warnings about the direction of stock prices. I expected a bull market top which historically occurs months ahead of a recession.  According the A. Gary Shilling’s November “INSIGHT,” we are in a recession, and he backs his conclusion with facts and reason, referring to the consumer as the “last straw.”
There is no sanity in the expansion of bubbles, they have to run their course.
The danger is they are irresistible for investors who are drawn in deeper and deeper until the inevitable burst and plunge.  Adding to investors’ demise is they are drawn in even more so by the initial plunge, thinking this is a “gift.”
It is a ride that is moving too fast for anyone to get off. Besides, humans being human make it impossible even if they saw the break coming.

Friday  Nov. 1  “Fed’s Bold Gamble…Just That ….. a Gamble”
The market will just  have to digest what is going on, including corporate earnings, conflicting economic reports, stock market seasonal tendencies (Best Six Months), Fed policy panic, and impeachment procedures.
The latter is the wild card, the only known is that it will be divisive in a political environment that is already divisive.
So far, the Street couldn’t care less  – NOT smart !   Confidence, or a dearth of it, rules in the end as far as stock prices are concerned.
But decisions on Wall Street are so “algoized” it’s hard to tell when a change in analyst/money manager marching orders will occur, but any change from the automatic buy at any price mentality to defer purchase or “sell” will have an immediate, profound impact on the market.
Obviously, the Fed has ramped up its quest to micro-manage the economy and stock market – BIG mistake !
Hands off,  at least as far as the stock market is concerned. Let it find a level that discounts known and prospective conditions and events.
Fed policy is now what it would normally be, after a recession and bear market are already well on their way, so what will the Fed do if this effort to head off a recession/bear market fails ?   Uncharted waters.
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Thursday  Oct. 31  “Fed PANIC !   Begs the Question – Why ?”
      Fed Chief Jerome Powell had this to say at his post-FOMC press conference yesterday. “There’s plenty of risk left, but I have to say the risks seem to have subsided.”
Really ?   Why then, did the Fed decide to cut interest rates for the third time in less than a year ?
Powell has  to stop sugar-coating the situation. If the economy is bad enough to cut rates three times in less than a year, the Fed is doing investors a huge disservice by sucking them in at all-time market highs where the S&P 500 is more overpriced than any time in history except the 1999-2000 dot-com bull market highs which preceded a 50.5% drop in the S&P 500 and 78% drop in the Nasdaq Comp.
      As I see it, the Fed is panicking in the face of a global recession and a presidential election next year.
Some progress is expected on the U.S./China trade front – both countries are feeling the pain of tariffs and the damage it is doing to corporate decision making.
Trump needs a win during impeachment proceedings, so he will do his best to ensure some progress.  Xi Jinping, China’s president, will likewise make concessions unless he decides to play hardball with Trump under pressure from within his own country.
Bottom line: The Fed is doing now what it normally does after a recession is well underway when the stock market is down sharply, not historically overvalued.
If it fails to head off a recession, it will have little firepower to prevent the recession from getting worse and lasting longer.

Wednesday Oct. 30 “Street Worried About Fed Rate Cut Today ?”
     The first of three estimates of Q3 GDP came in today at annual rate of  1.9%, better than the Street’s 1.6%, a positive  unless the Fed decides not to announce a  cut in its fed funds rate today.  While the Q3 GDP is better than expected, it is lower than Q2’s  growth rate of 2.1% and  Q1’s 3.1%.  The next key report will be the Employment Situation report  at 8:30 Friday.
While this market is overvalued historically, one more push up is possible in response to better than expected Q3 GDP and Q3 earnings that so far are above expectations though  projected from intentionally low-balled levels.
The stock market bubble continues to deflate then inflate, chasing investors out only to suck them back in – a highly risky situation.
No one want to miss out on an opportunity to make more money. That has to be weighed against one’s tolerance for risk if  the next move is down 35%-45%.
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Tuesday Oct. 29 “Big Economic News Coming – GDP – Jobs”
The S&P 500 broke out to new highs  yesterday on better than expected Q3 earnings, trade hopes and expectations of a Fed rate cut, but there was not the big follow through that normally accompanies a breakout.
The DJIA and Nasdaq Comp.
That can still happen, since the Street often takes a day or two to decide if overhead supply  has lifted.  This is the third attempt since July to break out of this general area.
BUT, what if all these goodies have been discounted at these levels, which are in fact very pricey, so much so, you have to go back to the 1999 – 2000 dot-com blow off to find the market so overvalued.
As noted yesterday, this is a big week for economic reports, especially Q3 GDP (Wed 8:30) which is estimated to drop to an annual rate of 1.8 percent from 2.0 percent in Q2 and 3.1 percent in Q1, as well as the Employment Situation report (Fri. 8:30) estimated to show 93,000 new hires in October  vs. 135,000 in September.
The week got off to a bad start with the September Chicago Fed  National Activity index  report dropping sharply  to -0.45 from +o.10 and the October Dallas Fed Mfg. Survey index dropping  to 4.5 from13.9.
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Monday Oct. 28  “Buying Breakout to New Highs – Risky”
     Big week  for economic reports – Q3 GDP comes at 8:30 Wednesday, the Employment Situation on Friday at 8:30.
Both have a bearing on whether the economy is near or in a recession.
The Fed Open Market Committee (FOMC) meets Tuesday and Wednesday with an announcement of the third rate cut in less than a year. expected on Wednesday, though no press conference is scheduled.
No FOMC meeting is scheduled for November, so the next meeting is not until December 10.
Three things are driving stock prices: a cut in the fed funds interest rate; better than expected Q3 earnings; progress in the U.S./China trade  talks.
Conclusion: This market is pricey at these levels, in fact, historically very overpriced, but the Street thinks it can run the table anyway, so expect new highs today and all the press hoopla that goes with it.
Negatives: 1) the Fed does not cut rates this time. 2) trade talks disappoint. 3) GDP signals a recession, as well as other economic indicators announced this week, primarily  Consumer Confidence (Tues. 10 a.m.) Employment Situation (Fri. 9:30).
This is a very dangerous market to chase. It is next to impossible to resist doing so, but all things considered, the downside risk far exceeds the upside potential.  Many on the Street have no idea how ugly a bear market can get, therefore very few are bearish enough to be selling.
That in itself is bearish, but until several big institutions cut and run, the market will hold the line with short-lived corrections along the way.
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Friday Oct. 25  “Big Move Looms as Street Decides on Earnings”

The market needs some volatility and I think we are about to get it.
Q3 earnings are hitting the Street. Some are better than expected, some disappointing, and the Street is about to decide what to do – Buy…or Sell !
      The technical picture (price action) is slightly upbeat, which I think can be credited to hopes for progress on trade and a Fed rate cut plus QE.    It’s really hard to tell now how the Street is factoring earnings into its equation.
New highs would be easy to hit (DJIA: 27,398; S&P 500:3,028). The S&P hit 3,016 yesterday.
New highs by the S&P would trigger news headlines and rush to buy.
However, with the markets as historically overpriced as it is now, a recession looming, and the uncertainty of a presidential impeachment process underway, a sustainable surge from these levels stands to be short lived.

Thursday, Oct. 24  “Watching and Waiting….for a signal”
Street is watching and waiting for a signal on trade and earnings, not just Q3 but guidance and projections for 2020, which has so far been projected to be better than this year.
If the Fed cannot head off a recession, the Street will be slashing 2020 earnings projections which would  adversely impact an overvalued market.
Odds are good we already are in a recession, so the Fed has its work cut out for it.  The Fed is cutting rates and employing a variation of QE, so I don’t know what it can do if we get into a severe recession.
These are strange times.
But a Fed rate cut is built into current pricing and much of expected progress on trade.
Failure to cut rates and/or failure to make progress on trade would hammer prices.
I think the market has a shot at new highs, which would be accompanied by a lot of press, Administration and Street hoopla, driving the market up temporarily and maybe into early January before a major correction develops.
Playing that move by buying the breakout would be a challenge for all but the nimble and quick.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
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George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.