Bear Market to be Worse Than 2007 – 2009 – Everything is a LIE !

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,868
S&P 500: 3,257
Nasdaq: 9,092
Russell: 1,666
January 3, 2020      8:10 a.m. 

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
The market will try to shake off the killing of the Iranian General, but this market is more overvalued than at any time over the past 100 years except the dot-com bubble burst 1998 – 2000 which pounded the S&P 500 down 57% and Nasdaq 78%.
     I have urged readers to raise cash countless times before this, and have been wrong…….. but not unwise,  as time will tell after the market gets crushed by a 35% -48% drubbing.
Bull markets tend to feed on themselves as the Fed, Street, highly leveraged traders and incumbent administration want the party to continue.
Bull markets press on well beyond reasonable value in a state of vulnerability  until some event triggers a return to reason, a bear market.
A year ago, the Fed headed off a recession with a complete about face in policy featuring three cuts in its fed funds rate. It bought time, but did investors a great injustice – it  delayed the inevitable  – a recession and bear market.
Its hype claimed the “economy was in a good place” which was a lie, if it was in a good place why did the Fed cut its benchmark interest rate three times in six months ?

      On August 19, 2007,  I sensed our economy and stock market were  at risk of a severe  correction and wrote the following:

“The perfect storm in our financial markets

is looming….It will take a heroic effort internationally

 to avert a meltdown of  huge magnitude…Trading in

everything may have to be stopped until some sort of

sanity is restored…This can get real ugly…No one has

a handle on the leverage amassed in  derivatives  ..No

one has a true handle on how precarious the situation out

there is, and that uncertainty feeds on itself prompting

increased selling…With few buyers, stocks tank…

Only when a cauldron of fear begins to boil do you have

 a market that is reasonably safe to invest in.”

     Two, months later, the worst recession/bear market since the 1930s began taking the S&P 500 down 54%.

On March 10, 2009, with the DJIA at 6,800,  I went against  panic in the Street and issued a Special Bulletin “BUY,” one day after the actual bear market bottom, a bear market that took 50% off the S&P 500.
Like today, I had  alerted readers to an unprecedented buying opportunity for weeks before the bear market bottom. Bottoms are much easier to read than tops because the Street, Fed and  party in power don’t want a top to develop.
……………………………………….
TECHNICAL:
I expect a January correction as  the BIG money cashes out, investors put gains into 2020, when the  public rushes in.  Of course, news flow will have its say, and the Street will beat the drums for buyers to extend the bull run, but why over-stay a good thing.  January initially benefits from institutional buying of funds flowing in from client accounts and the re-investment of  proceeds from year-end sales.
…………………………………………………….
Minor Support: DJIA:28,487; S&P 500:3,228; Nasdaq Comp.:8,976
Minor Resistance: DJIA:28,627; S&P 500:3,238; Nasdaq Comp.:9,023
………………………………………………………….

Thursday January 2, 2020 “Bull Bubble Burst This Week”
Yes, the bubble inflates further, casting doubts on all warnings of overvaluation and sucking every prospective investor in with all the money they have left save those who borrow to buy even more stock.
Not much I can say except this is classic behavior of investors at market tops.
FYI: They  are equally feverish at market bottoms except they are then selling convinced the market is going lower.
This scenario has been written about hundreds of times over the years in how to invest successfully books, but greed and fear are a staple in human emotions and in all fairness no one can be blamed for being greedy when stocks are rising relentlessly, or being mortified by stocks that  plummet every day.
Memories of the carnage of the 1999/2000 bear market and the 2007/2009 bear market  are distant, in fact, I doubt many on the Street today were even employed in the business for the 1999-2000  bubble burst.
Futures trading indicate a big  jump at the open, and that should convince just about everyone that 2020 will be a banner year.
That’s unfortunate…very unfortunate.
………………………………………………………………………….
Tuesday December31, 2019 “2020 To Be Extremely Volatile”
I have been watching year-end activity and still expect an early January correction, which could become a bear market depending what hits it when it is about to rebound.
Fed hype and rate cuts, hype about trade pacts, and corporate buy-backs have kept the bull market intact in spite of slower earnings growth and a recession in manufacturing.
Yesterday’s selling (lack of buying) could be the beginning of what I expected for the first week of January, but volatility is what happens in the stock market in December.
No one wants the party to end.  The Fed will have a difficult time stopping a correction this time around like it did in Q4, 2018 when the S&P 500 plunged 20%.
It’s abrupt policy change to that of three successive rate cuts in the fed funds rate not only headed off a bear market, it extended the economic expansion.
All things considered, the market has outrun the looming negatives, political and economic  uncertainty, and investors who are ignoring reality that parties like this eventually do END.
Only contrarians can reject the urge to go all-in.
Like I have said many times the Street never thinks bull markets can ever end at market tops and never thinks bear markets will ever end at market bottoms.
As I  wrote above, this last leg up Dec. 2118 to Dec 2019 is all about Fed hype and rate cuts trade talk resolution,  and corporate buy-backs.  What can any one or all of these do with stock prices at all-time highs ?
At some point, buyers will vanish and sellers take over, the result another flash crash.
Friday December 27 “ Party Over – Last Call Jan 3
     Classic year-end rally. Expect sellers to show up to put gains into the 2020
tax year.  IMHO, early January will mark the end of the 10-year bull market as political uncertainties surface along with renewed worries about  a recession.
In a real world, these risks are worth considering. Maybe the Street thinks it can ride out a recession/bear market, but fear mounts as stocks slide and investors begin to panic. A 50% decline takes a double to recover, not to mention years.
To its credit, the abrupt change in Fed policy last January averted a recession, but temporarily.
       I am one of the few who believes Donald Trump will not run for the presidency next year, will resign for health reasons or otherwise.
I am most bullish when no one is bullish. Today, everyone is bullish – look at all the buying and at record highs !!!
While the S&P 500 appreciated 32% more under President Obama’s first 35 months in office, Wall Street has strongly endorsed Donald Trump’s election, and stands to be disappointed if he is not re-elected or doesn’t finish his first term.
I think the party is over.
…………………………………………………………………….
Monday  December 23 “ Bull Market Top January 3 ?”

No one believes that, but………….
    Most portfolios have been tweaked for tax purposes and to purge losers going into what is expected to be another good year.
This seems just a little too pat for me with some key indicators challenging all-time high levels.
The Shiller S&P 500  price/earnings ratio  of 30.9  has only been topped by the 1999 dot-com bull market top of 44.  While that leaves the current S&P room to rum, any duplication of that outlandish speculative binge of enormously overvalued dot-com stocks is more than a stretch.
Rising uncertainties as the November presidential elections approach are likely to put a lid on investor enthusiasm setting up  a strong possibility of a major sell-off in 2020, and I think that can start in early January starting as early as the 3rd or 6th.
       To its credit, the Fed prevented a recession from starting last year with its abrupt change in policy and three cuts in its fed funds rate.  Time will tell, whether a recession was avoided or just delayed.
Is it worth the risk of buying now after such a run and with so many uncertainties looming ?  I don’t think so. The downside risk far outweighs the upside potential.
………………………………………………………………..

Friday  December 20  “SELL ? You Kidding ? Life’s Good ! No One In Their Right The party is over, don’t stay for another drink …you’ll regret it tomorrow. ..People laughing at unfunny jokes, booze beginning to talk,  life’s good… didn’t someone tell that story before. . …This is beginning to sound like a Christmas letter.  Fruit cake ? – No thanks… I’ll take some Red Bull if you have it.  Who bought me another drink ?   Easy does it, I have to work tomorrow.
SELL ?  Me sell  ?   You kidding ?   Made a ton of money this year, next year will be better…. thinking of going on margin, a guy at the office told me that’s  a great way to leverage my winnings.
Hey, a drink for Smitty over there, starting to get my second wind.
Talk to who ?  No way, he’s bearish….yeah I know he isn’t always bearish, even called the bottom in 2009, but why sell ?  Interest rates are down, housing is strong, analysts are bullish on 2020….can’t wait for their best buys for the new year.  Nope, I’m in for the long haul , this is a new era, no way this market goes down.
………………………………………………………..

Thursday December 19  “ Street’s Algos Clueless – Not Programmed For This !”
  The President has been impeached, Wall Street has no reaction – what gives ?
The computer algos haven’t been programmed for impeachment, simple as that.  What else have the algos not been programmed for ?
How about the increasing possibility the Democrats gain control of the presidency, the Senate and the House next year, as well as a chunk of the 11 governorships up for grabs ?
As one of the few, I have contended in Folly Sci 20/20 that Trump will not run in November.
Does anyone think the algos are programmed for that ?
At the end of the day, week, month, CONFIDENCE is the real driver of stock prices, UNCERTAINTY the enemy.
What is happening before our eyes is confidence is beginning to vanish and uncertainty beginning to surface.
The algos and their ditto-heads are not ready for this, eventually leading to a sudden awareness that stock prices are based partly on earnings but mostly on  confidence in the future.
          The Street will get blindsided, waffled, crushed, hammered, clotheslined, woomfled by this wake-up call and the bear will hit so fast  no one can react, i.e. straight down 12%-18% followed by a fake-out rally then another downleg.
Those who got out and those who have a sizable cash reserve will not only preserve capital but will have a great opportunity to buy close to the bottom, one of the all-time GREATEST opportunities to buy.
Those who don’t, will have to wait for years to recoup losses. Investors who are old or need to raise money for college and other big expenses will suffer.
……………………………………………………………………
Wednesday December 18 “CONFIDENCE  in The Future Due To Take A HIT”
The Street remains unconcerned with impeachment proceedings. While a rebuke of the President may impair the Republican agenda from going forward in the future, it has gotten all it wants in the interim – a massive corporate tax cut and Fed-friendly decisions on interest rates.
Three cuts in the Fed’s benchmark fed funds interest rate
have averted a recession for now, though manufacturing remains in a recession of its own.
As noted numerous times, the stock market is historically overvalued. The question has always been,  how overvalued can it get before a correction sets in  ?           There is room to run if the dot-com bubble market (1999 – 2000 ) is to be rivaled, but that was a different bull market, driven by wild speculation in dot-com stocks.
We don’t have that here. While speculative fever can drive stocks higher in coming months, it is unlikely mostly because the political climate doesn’t fuel CONFIDENCE.
      Uncertainty is on the increase as the November elections draw closer.
For this reason, I am warning readers of the strong possibility of a major correction starting in early January especially if the market closes 2019 on a string note.  Whether that turns into a bear market depends on news flow.
Decisions to buy and occasionally sell on the Street are mostly based on computer algorithms.  Obviously, they are tilted to the buy side. Should they be tweaked to reflect uncertainty or a recession, all algos will signal sell at about the same time and we would get a 12% – 18% straight down plunge.
……………………………………………………………
Tuesday December 17 “Major Correction Starting First QWeek January Could Become Bear Market”
Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
……………………………………………………..

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing.
……………………………………………………..
                                                                                                                      
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 Bubble Burst This Week ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,538
S&P 500: 3,230
Nasdaq: 8,972
Russell: 1,668
January 2, 2020      9:07 a.m. 

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
Yes, the bubble inflates further, casting doubts on all warnings of overvaluation and sucking every prospective investor in with all the money they have left save those who borrow to buy even more stock.
Not much I can say except this is classic behavior of investors at market tops.
FYI: They  are equally feverish at market bottoms except they are then selling convinced the market is going lower.
This scenario has been written about hundreds of times over the years in how to invest successfully books, but greed and fear are a staple in human emotions and in all fairness no one can be blamed for being greedy when stocks are rising relentlessly, or being mortified by stocks that  plummet every day.
Memories of the carnage of the 1999/2000 bear market and the 2007/2009 bear market  are distant, in fact, I doubt many on the Street today were even employed in the business for the 1999-2000  bubble burst.
Futures trading indicate a big  jump at the open, and that should convince just about everyone that 2020 will be a banner year.
That’s unfortunate…very unfortunate.
        ……………………………………….
TECHNICAL:
I expect a January correction as  the BIG money cashes out, investors put gains into 2020, when the  public rushes in.  Of course, news flow will have its say, and the Street will beat the drums for buyers to extend the bull run, but why over-stay a good thing.
…………………………………………………….
Minor Support: DJIA:28,521; S&P 500:3,228; Nasdaq Comp.:8,961
Minor Resistance: DJIA:28,710; S&P 500:3,247; Nasdaq Comp.:9,021
………………………………………………………….

I have been watching year-end activity and still expect an early January correction, which could become a bear market depending what hits it when it is about to rebound.
Fed hype and rate cuts, hype about trade pacts, and corporate buy-backs have kept the bull market intact in spite of slower earnings growth and a recession in manufacturing.
Yesterday’s selling (lack of buying) could be the beginning of what I expected for the first week of January, but volatility is what happens in the stock market in December.
No one wants the party to end.  The Fed will have a difficult time stopping a correction this time around like it did in Q4, 2018 when the S&P 500 plunged 20%.
It’s abrupt policy change to that of three successive rate cuts in the fed funds rate not only headed off a bear market, it extended the economic expansion.
All things considered, the market has outrun the looming negatives, political and economic  uncertainty, and investors who are ignoring reality that parties like this eventually do END.
Only contrarians can reject the urge to go all-in.
Like I have said many times the Street never thinks bull markets can ever end at market tops and never thinks bear markets will ever end at market bottoms.
As I  wrote above, this last leg up Dec. 2118 to Dec 2019 is all about Fed hype and rate cuts trade talk resolution,  and corporate buy-backs.  What can any one or all of these do with stock prices at all-time highs ?
At some point, buyers will vanish and sellers take over, the result another flash crash.

 

Friday December 27 “ Party Over – Last Call Jan 3
     Classic year-end rally. Expect sellers to show up to put gains into the 2020
tax year.  IMHO, early January will mark the end of the 10-year bull market as political uncertainties surface along with renewed worries about  a recession.
In a real world, these risks are worth considering. Maybe the Street thinks it can ride out a recession/bear market, but fear mounts as stocks slide and investors begin to panic. A 50% decline takes a double to recover, not to mention years.
To its credit, the abrupt change in Fed policy last January averted a recession, but temporarily.
       I am one of the few who believes Donald Trump will not run for the presidency next year, will resign for health reasons or otherwise.
I am most bullish when no one is bullish. Today, everyone is bullish – look at all the buying and at record highs !!!
While the S&P 500 appreciated 32% more under President Obama’s first 35 months in office, Wall Street has strongly endorsed Donald Trump’s election, and stands to be disappointed if he is not re-elected or doesn’t finish his first term.
I think the party is over.
…………………………………………………………………….
Monday  December 23 “ Bull Market Top January 3 ?”

No one believes that, but………….
    Most portfolios have been tweaked for tax purposes and to purge losers going into what is expected to be another good year.
This seems just a little too pat for me with some key indicators challenging all-time high levels.
The Shiller S&P 500  price/earnings ratio  of 30.9  has only been topped by the 1999 dot-com bull market top of 44.  While that leaves the current S&P room to rum, any duplication of that outlandish speculative binge of enormously overvalued dot-com stocks is more than a stretch.
Rising uncertainties as the November presidential elections approach are likely to put a lid on investor enthusiasm setting up  a strong possibility of a major sell-off in 2020, and I think that can start in early January starting as early as the 3rd or 6th.
       To its credit, the Fed prevented a recession from starting last year with its abrupt change in policy and three cuts in its fed funds rate.  Time will tell, whether a recession was avoided or just delayed.
Is it worth the risk of buying now after such a run and with so many uncertainties looming ?  I don’t think so. The downside risk far outweighs the upside potential.
………………………………………………………………..

Friday  December 20  “SELL ? You Kidding ? Life’s Good ! No One In Their Right The party is over, don’t stay for another drink …you’ll regret it tomorrow. ..People laughing at unfunny jokes, booze beginning to talk,  life’s good… didn’t someone tell that story before. . …This is beginning to sound like a Christmas letter.  Fruit cake ? – No thanks… I’ll take some Red Bull if you have it.  Who bought me another drink ?   Easy does it, I have to work tomorrow.
SELL ?  Me sell  ?   You kidding ?   Made a ton of money this year, next year will be better…. thinking of going on margin, a guy at the office told me that’s  a great way to leverage my winnings.
Hey, a drink for Smitty over there, starting to get my second wind.
Talk to who ?  No way, he’s bearish….yeah I know he isn’t always bearish, even called the bottom in 2009, but why sell ?  Interest rates are down, housing is strong, analysts are bullish on 2020….can’t wait for their best buys for the new year.  Nope, I’m in for the long haul , this is a new era, no way this market goes down.
………………………………………………………..

Thursday December 19  “ Street’s Algos Clueless – Not Programmed For This !”
  The President has been impeached, Wall Street has no reaction – what gives ?
The computer algos haven’t been programmed for impeachment, simple as that.  What else have the algos not been programmed for ?
How about the increasing possibility the Democrats gain control of the presidency, the Senate and the House next year, as well as a chunk of the 11 governorships up for grabs ?
As one of the few, I have contended in Folly Sci 20/20 that Trump will not run in November.
Does anyone think the algos are programmed for that ?
At the end of the day, week, month, CONFIDENCE is the real driver of stock prices, UNCERTAINTY the enemy.
What is happening before our eyes is confidence is beginning to vanish and uncertainty beginning to surface.
The algos and their ditto-heads are not ready for this, eventually leading to a sudden awareness that stock prices are based partly on earnings but mostly on  confidence in the future.
          The Street will get blindsided, waffled, crushed, hammered, clotheslined, woomfled by this wake-up call and the bear will hit so fast  no one can react, i.e. straight down 12%-18% followed by a fake-out rally then another downleg.
Those who got out and those who have a sizable cash reserve will not only preserve capital but will have a great opportunity to buy close to the bottom, one of the all-time GREATEST opportunities to buy.
Those who don’t, will have to wait for years to recoup losses. Investors who are old or need to raise money for college and other big expenses will suffer.
……………………………………………………………………
Wednesday December 18 “CONFIDENCE  in The Future Due To Take A HIT”
The Street remains unconcerned with impeachment proceedings. While a rebuke of the President may impair the Republican agenda from going forward in the future, it has gotten all it wants in the interim – a massive corporate tax cut and Fed-friendly decisions on interest rates.
Three cuts in the Fed’s benchmark fed funds interest rate
have averted a recession for now, though manufacturing remains in a recession of its own.
As noted numerous times, the stock market is historically overvalued. The question has always been,  how overvalued can it get before a correction sets in  ?           There is room to run if the dot-com bubble market (1999 – 2000 ) is to be rivaled, but that was a different bull market, driven by wild speculation in dot-com stocks.
We don’t have that here. While speculative fever can drive stocks higher in coming months, it is unlikely mostly because the political climate doesn’t fuel CONFIDENCE.
      Uncertainty is on the increase as the November elections draw closer.
For this reason, I am warning readers of the strong possibility of a major correction starting in early January especially if the market closes 2019 on a string note.  Whether that turns into a bear market depends on news flow.
Decisions to buy and occasionally sell on the Street are mostly based on computer algorithms.  Obviously, they are tilted to the buy side. Should they be tweaked to reflect uncertainty or a recession, all algos will signal sell at about the same time and we would get a 12% – 18% straight down plunge.
……………………………………………………………
Tuesday December 17 “Major Correction Starting First QWeek January Could Become Bear Market”
Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
……………………………………………………..

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing.
……………………………………………………..
                                                                                                                       
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.

 

 

 

 

 

 

2020 To Be Very Volatile

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,462
S&P 500: 3,221
Nasdaq: 8,945
Russell: 1,664
Tuesday  December 31,  2019
     9:09 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
I have been watching year-end activity and still expect an early January correction, which could become a bear market depending what hits it when it is about to rebound.
Fed hype and rate cuts, hype about trade pacts, and corporate buy-backs have kept the bull market intact in spite of slower earnings growth and a recession in manufacturing.
Yesterday’s selling (lack of buying) could be the beginning of what I expected for the first week of January, but volatility is what happens in the stock market in December.
No one wants the party to end.  The Fed will have a difficult time stopping a correction this time around like it did in Q4, 2018 when the S&P 500 plunged 20%.
It’s abrupt policy change to that of three successive rate cuts in the fed funds rate not only headed off a bear market, it extended the economic expansion.
All things considered, the market has outrun the looming negatives, political and economic  uncertainty, and investors who are ignoring reality that parties like this eventually do END.
Only contrarians can reject the urge to go all-in.
Like I have said many times the Street never thinks bull markets can ever end at market tops and never thinks bear markets will ever end at market bottoms.
As I  wrote above, this last leg up Dec. 2118 to Dec 2019 is all about Fed hype and rate cuts trade talk resolution,  and corporate buy-backs.  What can any one or all of these do with stock prices at all-time highs ?
At some point, buyers will vanish and sellers take over, the result another flash crash.

……………………………………….
TECHNICAL:
I expect a January correction as  the BIG money cashes out, investors put gains into 2020, when the  public rushes in.  Of course, news flow will have its say, and the Street will beat the drums for buyers to extend the bull run, but why over-stay a good thing.
…………………………………………………….
Minor Support: DJIA:28,428; S&P 500:3,217; Nasdaq Comp.:8,903
Minor Resistance: DJIA:28,487; S&P 500:3,239; Nasdaq Comp.:9,001
………………………………………………………….

Friday December 27 “ Party Over – Last Call Jan 3
     Classic year-end rally. Expect sellers to show up to put gains into the 2020
tax year.  IMHO, early January will mark the end of the 10-year bull market as political uncertainties surface along with renewed worries about  a recession.
In a real world, these risks are worth considering. Maybe the Street thinks it can ride out a recession/bear market, but fear mounts as stocks slide and investors begin to panic. A 50% decline takes a double to recover, not to mention years.
To its credit, the abrupt change in Fed policy last January averted a recession, but temporarily.
       I am one of the few who believes Donald Trump will not run for the presidency next year, will resign for health reasons or otherwise.
I am most bullish when no one is bullish. Today, everyone is bullish – look at all the buying and at record highs !!!
While the S&P 500 appreciated 32% more under President Obama’s first 35 months in office, Wall Street has strongly endorsed Donald Trump’s election, and stands to be disappointed if he is not re-elected or doesn’t finish his first term.
I think the party is over.
…………………………………………………………………….
Monday  December 23 “ Bull Market Top January 3 ?”

No one believes that, but………….
    Most portfolios have been tweaked for tax purposes and to purge losers going into what is expected to be another good year.
This seems just a little too pat for me with some key indicators challenging all-time high levels.
The Shiller S&P 500  price/earnings ratio  of 30.9  has only been topped by the 1999 dot-com bull market top of 44.  While that leaves the current S&P room to rum, any duplication of that outlandish speculative binge of enormously overvalued dot-com stocks is more than a stretch.
Rising uncertainties as the November presidential elections approach are likely to put a lid on investor enthusiasm setting up  a strong possibility of a major sell-off in 2020, and I think that can start in early January starting as early as the 3rd or 6th.
       To its credit, the Fed prevented a recession from starting last year with its abrupt change in policy and three cuts in its fed funds rate.  Time will tell, whether a recession was avoided or just delayed.
Is it worth the risk of buying now after such a run and with so many uncertainties looming ?  I don’t think so. The downside risk far outweighs the upside potential.
………………………………………………………………..

Friday  December 20  “SELL ? You Kidding ? Life’s Good ! No One In Their Right The party is over, don’t stay for another drink …you’ll regret it tomorrow. ..People laughing at unfunny jokes, booze beginning to talk,  life’s good… didn’t someone tell that story before. . …This is beginning to sound like a Christmas letter.  Fruit cake ? – No thanks… I’ll take some Red Bull if you have it.  Who bought me another drink ?   Easy does it, I have to work tomorrow.
SELL ?  Me sell  ?   You kidding ?   Made a ton of money this year, next year will be better…. thinking of going on margin, a guy at the office told me that’s  a great way to leverage my winnings.
Hey, a drink for Smitty over there, starting to get my second wind.
Talk to who ?  No way, he’s bearish….yeah I know he isn’t always bearish, even called the bottom in 2009, but why sell ?  Interest rates are down, housing is strong, analysts are bullish on 2020….can’t wait for their best buys for the new year.  Nope, I’m in for the long haul , this is a new era, no way this market goes down.
………………………………………………………..

Thursday December 19  “ Street’s Algos Clueless – Not Programmed For This !”
  The President has been impeached, Wall Street has no reaction – what gives ?
The computer algos haven’t been programmed for impeachment, simple as that.  What else have the algos not been programmed for ?
How about the increasing possibility the Democrats gain control of the presidency, the Senate and the House next year, as well as a chunk of the 11 governorships up for grabs ?
As one of the few, I have contended in Folly Sci 20/20 that Trump will not run in November.
Does anyone think the algos are programmed for that ?
At the end of the day, week, month, CONFIDENCE is the real driver of stock prices, UNCERTAINTY the enemy.
What is happening before our eyes is confidence is beginning to vanish and uncertainty beginning to surface.
The algos and their ditto-heads are not ready for this, eventually leading to a sudden awareness that stock prices are based partly on earnings but mostly on  confidence in the future.
          The Street will get blindsided, waffled, crushed, hammered, clotheslined, woomfled by this wake-up call and the bear will hit so fast  no one can react, i.e. straight down 12%-18% followed by a fake-out rally then another downleg.
Those who got out and those who have a sizable cash reserve will not only preserve capital but will have a great opportunity to buy close to the bottom, one of the all-time GREATEST opportunities to buy.
Those who don’t, will have to wait for years to recoup losses. Investors who are old or need to raise money for college and other big expenses will suffer.
……………………………………………………………………
Wednesday December 18 “CONFIDENCE  in The Future Due To Take A HIT”
The Street remains unconcerned with impeachment proceedings. While a rebuke of the President may impair the Republican agenda from going forward in the future, it has gotten all it wants in the interim – a massive corporate tax cut and Fed-friendly decisions on interest rates.
Three cuts in the Fed’s benchmark fed funds interest rate
have averted a recession for now, though manufacturing remains in a recession of its own.
As noted numerous times, the stock market is historically overvalued. The question has always been,  how overvalued can it get before a correction sets in  ?           There is room to run if the dot-com bubble market (1999 – 2000 ) is to be rivaled, but that was a different bull market, driven by wild speculation in dot-com stocks.
We don’t have that here. While speculative fever can drive stocks higher in coming months, it is unlikely mostly because the political climate doesn’t fuel CONFIDENCE.
      Uncertainty is on the increase as the November elections draw closer.
For this reason, I am warning readers of the strong possibility of a major correction starting in early January especially if the market closes 2019 on a string note.  Whether that turns into a bear market depends on news flow.
Decisions to buy and occasionally sell on the Street are mostly based on computer algorithms.  Obviously, they are tilted to the buy side. Should they be tweaked to reflect uncertainty or a recession, all algos will signal sell at about the same time and we would get a 12% – 18% straight down plunge.
……………………………………………………………
Tuesday December 17 “Major Correction Starting First QWeek January Could Become Bear Market”
Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
……………………………………………………..

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing.
……………………………………………………..
                                                                                                                      
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.

 

 

 

 

 

Party Over – Last Call Jan 3

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,621
S&P 500: 3,239
Nasdaq: 9,022
Russell: 1,677
Friday  December 27,  2019
     9:22 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
Classic year-end rally. Expect sellers to show up to put gains into the 2020
tax year.  IMHO, early January will mark the end of the 10-year bull market as political uncertainties surface along with renewed worries about  a recession.
In a real world, these risks are worth considering. Maybe the Street thinks it can ride out a recession/bear market, but fear mounts as stocks slide and investors begin to panic. A 50% decline takes a double to recover, not to mention years.
To its credit, the abrupt change in Fed policy last January averted a recession, but temporarily.
       I am one of the few who believes Donald Trump will not run for the presidency next year, will resign for health reasons or otherwise.
I am most bullish when no one is bullish. Today, everyone is bullish – look at all the buying and at record highs !!!
While the S&P 500 appreciated 32% more under President Obama’s first 35 months in office, Wall Street has strongly endorsed Donald Trump’s election, and stands to be disappointed if he is not re-elected or doesn’t finish his first term.
I think the party is over.
……………………………………….
TECHNICAL:
A year-end rally would lead to a correction in early January as gravity takes hold and the BIG money cashes out, investors put gains into 2020, when the  public rushes in.  Of course, news flow will have its say, and the Street will beat the drums for buyers to extend the bull run, but why over-stay a good thing.
…………………………………………………….
Minor Support: DJIA:28,617; S&P 500:3,237; Nasdaq Comp.:9,007
Minor Resistance: DJIA:28,746; S&P 500:3,253; Nasdaq Comp.:9,058
………………………………………………………….

Monday  December 23 “ Bull Market Top January 3 ?”

No one believes that, but………….
    Most portfolios have been tweaked for tax purposes and to purge losers going into what is expected to be another good year.
This seems just a little too pat for me with some key indicators challenging all-time high levels.
The Shiller S&P 500  price/earnings ratio  of 30.9  has only been topped by the 1999 dot-com bull market top of 44.  While that leaves the current S&P room to rum, any duplication of that outlandish speculative binge of enormously overvalued dot-com stocks is more than a stretch.
Rising uncertainties as the November presidential elections approach are likely to put a lid on investor enthusiasm setting up  a strong possibility of a major sell-off in 2020, and I think that can start in early January starting as early as the 3rd or 6th.
       To its credit, the Fed prevented a recession from starting last year with its abrupt change in policy and three cuts in its fed funds rate.  Time will tell, whether a recession was avoided or just delayed.
Is it worth the risk of buying now after such a run and with so many uncertainties looming ?  I don’t think so. The downside risk far outweighs the upside potential.
………………………………………………………………..

Friday  December 20  “SELL ? You Kidding ? Life’s Good ! No One In Their Right The party is over, don’t stay for another drink …you’ll regret it tomorrow. ..People laughing at unfunny jokes, booze beginning to talk,  life’s good… didn’t someone tell that story before. . …This is beginning to sound like a Christmas letter.  Fruit cake ? – No thanks… I’ll take some Red Bull if you have it.  Who bought me another drink ?   Easy does it, I have to work tomorrow.
SELL ?  Me sell  ?   You kidding ?   Made a ton of money this year, next year will be better…. thinking of going on margin, a guy at the office told me that’s  a great way to leverage my winnings.
Hey, a drink for Smitty over there, starting to get my second wind.
Talk to who ?  No way, he’s bearish….yeah I know he isn’t always bearish, even called the bottom in 2009, but why sell ?  Interest rates are down, housing is strong, analysts are bullish on 2020….can’t wait for their best buys for the new year.  Nope, I’m in for the long haul , this is a new era, no way this market goes down.
………………………………………………………..

Thursday December 19  “ Street’s Algos Clueless – Not Programmed For This !”
  The President has been impeached, Wall Street has no reaction – what gives ?
The computer algos haven’t been programmed for impeachment, simple as that.  What else have the algos not been programmed for ?
How about the increasing possibility the Democrats gain control of the presidency, the Senate and the House next year, as well as a chunk of the 11 governorships up for grabs ?
As one of the few, I have contended in Folly Sci 20/20 that Trump will not run in November.
Does anyone think the algos are programmed for that ?
At the end of the day, week, month, CONFIDENCE is the real driver of stock prices, UNCERTAINTY the enemy.
What is happening before our eyes is confidence is beginning to vanish and uncertainty beginning to surface.
The algos and their ditto-heads are not ready for this, eventually leading to a sudden awareness that stock prices are based partly on earnings but mostly on  confidence in the future.
          The Street will get blindsided, waffled, crushed, hammered, clotheslined, woomfled by this wake-up call and the bear will hit so fast  no one can react, i.e. straight down 12%-18% followed by a fake-out rally then another downleg.
Those who got out and those who have a sizable cash reserve will not only preserve capital but will have a great opportunity to buy close to the bottom, one of the all-time GREATEST opportunities to buy.
Those who don’t, will have to wait for years to recoup losses. Investors who are old or need to raise money for college and other big expenses will suffer.
……………………………………………………………………
Wednesday December 18 “CONFIDENCE  in The Future Due To Take A HIT”
The Street remains unconcerned with impeachment proceedings. While a rebuke of the President may impair the Republican agenda from going forward in the future, it has gotten all it wants in the interim – a massive corporate tax cut and Fed-friendly decisions on interest rates.
Three cuts in the Fed’s benchmark fed funds interest rate
have averted a recession for now, though manufacturing remains in a recession of its own.
As noted numerous times, the stock market is historically overvalued. The question has always been,  how overvalued can it get before a correction sets in  ?           There is room to run if the dot-com bubble market (1999 – 2000 ) is to be rivaled, but that was a different bull market, driven by wild speculation in dot-com stocks.
We don’t have that here. While speculative fever can drive stocks higher in coming months, it is unlikely mostly because the political climate doesn’t fuel CONFIDENCE.
      Uncertainty is on the increase as the November elections draw closer.
For this reason, I am warning readers of the strong possibility of a major correction starting in early January especially if the market closes 2019 on a string note.  Whether that turns into a bear market depends on news flow.
Decisions to buy and occasionally sell on the Street are mostly based on computer algorithms.  Obviously, they are tilted to the buy side. Should they be tweaked to reflect uncertainty or a recession, all algos will signal sell at about the same time and we would get a 12% – 18% straight down plunge.
……………………………………………………………
Tuesday December 17 “Major Correction Starting First QWeek January Could Become Bear Market”
Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
……………………………………………………..

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing.
……………………………………………………..
                                                                                                                      
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.

 

 

 

 

 

 

 

 

 

 

A Bull Market Top on January 3

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,455
S&P 500: 3,221
Nasdaq: 8,924
Russell: 1,668
Monday  December 23,  2019
     9:22 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
No one believes that, but………….
    Most portfolios have been tweaked for tax purposes and to purge losers going into what is expected to be another good year.
This seems just a little too pat for me with some key indicators challenging all-time high levels.
The Shiller S&P 500  price/earnings ratio  of 30.9  has only been topped by the 1999 dot-com bull market top of 44.  While that leaves the current S&P room to rum, any duplication of that outlandish speculative binge of enormously overvalued dot-com stocks is more than a stretch.
Rising uncertainties as the November presidential elections approach are likely to put a lid on investor enthusiasm setting up  a strong possibility of a major sell-off in 2020, and I think that can start in early January starting as early as the 3rd or 6th.
       To its credit, the Fed prevented a recession from starting last year with its abrupt change in policy and three cuts in its fed funds rate.  Time will tell, whether a recession was avoided or just delayed.
Is it worth the risk of buying now after such a run and with so many uncertainties looming ?  I don’t think so. The downside risk far outweighs the upside potential.

……………………………………….
TECHNICAL:
A year-end rally would lead to a correction in early January as gravity takes hold and the BIG money cashes out when the  public rushes in.  Of course, news flow will have its say, and the Street will beat the drums for buyers to extend the bull run, but why over-stay a good thing.
…………………………………………………….
Minor Support: DJIA:28,397; S&P 500:3,209; Nasdaq Comp.:8,897
Minor Resistance: DJIA:28,328; S&P 500:3,202; Nasdaq Comp.:8,881
………………………………………………………….

Friday  December 20  “SELL ? You Kidding ? Life’s Good ! No One In Their Right The party is over, don’t stay for another drink …you’ll regret it tomorrow. ..People laughing at unfunny jokes, booze beginning to talk,  life’s good… didn’t someone tell that story before. . …This is beginning to sound like a Christmas letter.  Fruit cake ? – No thanks… I’ll take some Red Bull if you have it.  Who bought me another drink ?   Easy does it, I have to work tomorrow.
SELL ?  Me sell  ?   You kidding ?   Made a ton of money this year, next year will be better…. thinking of going on margin, a guy at the office told me that’s  a great way to leverage my winnings.
Hey, a drink for Smitty over there, starting to get my second wind.
Talk to who ?  No way, he’s bearish….yeah I know he isn’t always bearish, even called the bottom in 2009, but why sell ?  Interest rates are down, housing is strong, analysts are bullish on 2020….can’t wait for their best buys for the new year.  Nope, I’m in for the long haul , this is a new era, no way this market goes down.
Mind Would Sell This Market”

 

Thursday December 19  “ Street’s Algos Clueless – Not Programmed For This !”
  The President has been impeached, Wall Street has no reaction – what gives ?
The computer algos haven’t been programmed for impeachment, simple as that.  What else have the algos not been programmed for ?
How about the increasing possibility the Democrats gain control of the presidency, the Senate and the House next year, as well as a chunk of the 11 governorships up for grabs ?
As one of the few, I have contended in Folly Sci 20/20 that Trump will not run in November.
Does anyone think the algos are programmed for that ?
At the end of the day, week, month, CONFIDENCE is the real driver of stock prices, UNCERTAINTY the enemy.
What is happening before our eyes is confidence is beginning to vanish and uncertainty beginning to surface.
The algos and their ditto-heads are not ready for this, eventually leading to a sudden awareness that stock prices are based partly on earnings but mostly on  confidence in the future.
          The Street will get blindsided, waffled, crushed, hammered, clotheslined, woomfled by this wake-up call and the bear will hit so fast  no one can react, i.e. straight down 12%-18% followed by a fake-out rally then another downleg.
Those who got out and those who have a sizable cash reserve will not only preserve capital but will have a great opportunity to buy close to the bottom, one of the all-time GREATEST opportunities to buy.
Those who don’t, will have to wait for years to recoup losses. Investors who are old or need to raise money for college and other big expenses will suffer.
……………………………………………………………………
Wednesday December 18 “CONFIDENCE  in The Future Due To Take A HIT”
The Street remains unconcerned with impeachment proceedings. While a rebuke of the President may impair the Republican agenda from going forward in the future, it has gotten all it wants in the interim – a massive corporate tax cut and Fed-friendly decisions on interest rates.
Three cuts in the Fed’s benchmark fed funds interest rate
have averted a recession for now, though manufacturing remains in a recession of its own.
As noted numerous times, the stock market is historically overvalued. The question has always been,  how overvalued can it get before a correction sets in  ?           There is room to run if the dot-com bubble market (1999 – 2000 ) is to be rivaled, but that was a different bull market, driven by wild speculation in dot-com stocks.
We don’t have that here. While speculative fever can drive stocks higher in coming months, it is unlikely mostly because the political climate doesn’t fuel CONFIDENCE.
      Uncertainty is on the increase as the November elections draw closer.
For this reason, I am warning readers of the strong possibility of a major correction starting in early January especially if the market closes 2019 on a string note.  Whether that turns into a bear market depends on news flow.
Decisions to buy and occasionally sell on the Street are mostly based on computer algorithms.  Obviously, they are tilted to the buy side. Should they be tweaked to reflect uncertainty or a recession, all algos will signal sell at about the same time and we would get a 12% – 18% straight down plunge.
……………………………………………………………
Tuesday December 17 “Major Correction Starting First QWeek January Could Become Bear Market”
Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
……………………………………………………..

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing !
…………………………………………………………
Friday  December 13,   “RISK Level High – Will Trade News Disappoint ?” ”Yesterday’s blog noted a “USMC trade deal may be announced in coming days, but may already be priced into the market.  Expect it to be followed by optimistic news on the U.S./China trade negotiations most likely a postponement of the December 15 date for new tariffs on $160 billion of Chinese goods.”
That’s pretty much what has happened, though the possibility exists that there my be a rollback of some existing tariffs.
The market celebrated the news with a 200-point jump in the DJIA yesterday, but traders may be selling into the news today.
The risk of jumping in today is that the market’s high valuation has discounted a lot of trade progress expectations, then too, promises like this have led to disappointment so often in the past.
        Even so, humans being human, the temptation to jump in is hard to resist.  All this will combine with a host of forecasts by the Street about 2020.
Risk level – very high.
……………………………………………………..
                                                                                                                      
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.

 

 

 

 

 

 

 

 

SELL ? You Kidding ? LIfe’s Good ! No One In Their Right Mind Would Sell This Market

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,876
S&P 500: 3,205
Nasdaq: 8,887
Russell: 1,667
Friday  December 20,  2019
     8:52 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
      The party is over, don’t stay for another drink …you’ll regret it tomorrow. ..People laughing at unfunny jokes, booze beginning to talk,  life’s good… didn’t someone tell that story before. . …This is beginning to sound like a Christmas letter.  Fruit cake ? – No thanks… I’ll take some Red Bull if you have it.  Who bought me another drink ?   Easy does it, I have to work tomorrow.
SELL ?  Me sell  ?   You kidding ?   Made a ton of money this year, next year will be better…. thinking of going on margin, a guy at the office told me that’s  a great way to leverage my winnings.
Hey, a drink for Smitty over there, starting to get my second wind.
Talk to who ?  No way, he’s bearish….yeah I know he isn’t always bearish, even called the bottom in 2009, but why sell ?  Interest rates are down, housing is strong, analysts are bullish on 2020….can’t wait the their best buys for the new year.  Nope, I’m in for the long haul , this is a new era, no way this market goes down.
………………………………………….
TECHNICAL:
A year-end rally would lead to a correction in early January as gravity takes hold and the BIG money cashes out when the  public rushes in.  Of course, news flow will have its say, and the Street will beat the drums for buyers to extend the bull run, but why over-stay a good thing.
…………………………………………………….
Minor Support: DJIA:28,397; S&P 500:3,209; Nasdaq Comp.:8,897
Minor Resistance: DJIA:28,328; S&P 500:3,202; Nasdaq Comp.:8,881
………………………………………………………….

Thursday December 19  “ Street’s Algos Clueless – Not Programmed For This !”
  The President has been impeached, Wall Street has no reaction – what gives ?
The computer algos haven’t been programmed for impeachment, simple as that.  What else have the algos not been programmed for ?
How about the increasing possibility the Democrats gain control of the presidency, the Senate and the House next year, as well as a chunk of the 11 governorships up for grabs ?
As one of the few, I have contended in Folly Sci 20/20 that Trump will not run in November.
Does anyone think the algos are programmed for that ?
At the end of the day, week, month, CONFIDENCE is the real driver of stock prices, UNCERTAINTY the enemy.
What is happening before our eyes is confidence is beginning to vanish and uncertainty beginning to surface.
The algos and their ditto-heads are not ready for this, eventually leading to a sudden awareness that stock prices are based partly on earnings but mostly on  confidence in the future.
          The Street will get blindsided, waffled, crushed, hammered, clotheslined, woomfled by this wake-up call and the bear will hit so fast  no one can react, i.e. straight down 12%-18% followed by a fake-out rally then another downleg.
Those who got out and those who have a sizable cash reserve will not only preserve capital but will have a great opportunity to buy close to the bottom, one of the all-time GREATEST opportunities to buy.
Those who don’t, will have to wait for years to recoup losses. Investors who are old or need to raise money for college and other big expenses will suffer.
……………………………………………………………………
Wednesday December 18 “CONFIDENCE  in The Future Due To Take A HIT”
The Street remains unconcerned with impeachment proceedings. While a rebuke of the President may impair the Republican agenda from going forward in the future, it has gotten all it wants in the interim – a massive corporate tax cut and Fed-friendly decisions on interest rates.
Three cuts in the Fed’s benchmark fed funds interest rate
have averted a recession for now, though manufacturing remains in a recession of its own.
As noted numerous times, the stock market is historically overvalued. The question has always been,  how overvalued can it get before a correction sets in  ?           There is room to run if the dot-com bubble market (1999 – 2000 ) is to be rivaled, but that was a different bull market, driven by wild speculation in dot-com stocks.
We don’t have that here. While speculative fever can drive stocks higher in coming months, it is unlikely mostly because the political climate doesn’t fuel CONFIDENCE.
      Uncertainty is on the increase as the November elections draw closer.
For this reason, I am warning readers of the strong possibility of a major correction starting in early January especially if the market closes 2019 on a string note.  Whether that turns into a bear market depends on news flow.
Decisions to buy and occasionally sell on the Street are mostly based on computer algorithms.  Obviously, they are tilted to the buy side. Should they be tweaked to reflect uncertainty or a recession, all algos will signal sell at about the same time and we would get a 12% – 18% straight down plunge.
……………………………………………………………
Tuesday December 17 “Major Correction Starting First QWeek January Could Become Bear Market”
Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
……………………………………………………..

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing !
…………………………………………………………

 

Friday  December 13,   “RISK Level High – Will Trade News Disappoint ?” ”Yesterday’s blog noted a “USMC trade deal may be announced in coming days, but may already be priced into the market.  Expect it to be followed by optimistic news on the U.S./China trade negotiations most likely a postponement of the December 15 date for new tariffs on $160 billion of Chinese goods.”
That’s pretty much what has happened, though the possibility exists that there my be a rollback of some existing tariffs.
The market celebrated the news with a 200-point jump in the DJIA yesterday, but traders may be selling into the news today.
The risk of jumping in today is that the market’s high valuation has discounted a lot of trade progress expectations, then too, promises like this have led to disappointment so often in the past.
        Even so, humans being human, the temptation to jump in is hard to resist.  All this will combine with a host of forecasts by the Street about 2020.
Risk level – very high.
……………………………………………………..
Thursday December 12 “No More Cuts in Interest Rates”
       Yesterday, the Fed announced it will hold interest rates at the current level (1.50-1.75), which surprised no one.
It has achieved its goal, delaying the inevitable,  a recession after 10.5 years of economic expansion.
What hasn’t changed is the fact the stock market remains historically overvalued.  But, it can become more overvalued as it did in the dot-com bubble bull that ran from September 1998 to January 2000 when the bubble burst hammering the S&P 500 down more than 50% and the Nasdaq Comp. down 78%.
The entire bull market has been driven in a big way by corporations buying back their own stock, putting a floor under any attempts to move downward and pressing stocks upward providing  a major benefit to top management where shareholdings are the largest and options reward management.
Strangely, in face of a generally buoyant market, the Wall Street Journal just reported that private investors have  withdrawn $220.8 billion from stock mutual funds and invested the proceeds in money market funds and bond funds.
In his “Great Stuff” newsletter, Banyan Hill alerts readers to the Fed’s flooding of  the repo market with billions of dollars, warning if the repo market dries up, there is no lender of last resort for institutions, hedge funds,  and Real Estate Investment Trusts, adding that something is decidedly wrong, a large financial institution, a large bank or hedge fund or more are in trouble.
Wednesday December 11 “Stock Market Will Tell Us When we Are in Recession”
     
In addition to news flow from the Fed, Administration hype, trade, impeachment, and pundit projections on the economy and stock market, the market will be buffeted by year-end tax selling and institutional portfolio switches to dress up year-end reports for clients.
If the Street appears to ignore this news flow, some of which should not be ignored, it is because computer algorithms are calling the shots and events have to stray far from the base to rattle the cage.
Right now the economy is on the threshold of recession with manufacturing well into recession but housing and services hanging tough.
Those who thought a recession would hit by now (myself included) have been wrong which does not mean investors should be sure the coast is clear to load up on debt and stocks.
Recessions happen, and there has never been a recession without a bear market, the latter starting several months before the former starts.
Generally, it is thought that a recession is marked by two consecutive declines in GDP. That may be most of the time, but the real scorekeeper for the start and end of recessions in the National Bureau  of Economic Research and they dbase decisions on a lot of factors beyond the GDP alone.
What’s more, they don’t render a decision that a recession started or ended until months after the fact.
BOTTOM LINE:  The stock market will tell us when we are in a recession. A rally after the initial decline will fail to follow through, yielding to yet another decline, and so on in spite of what the Fed, the Administration and the Street pundits say.
By then the market will be down 30%,  and it will be too late for investors to do much but ride it out. That’s why, so late in the game, it is smart to have a healthy cash reserve.
……………………………………………………………………………………….                                                                                                                       
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’s Algos Clueless – Not Programmed for This !

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,239
S&P 500: 3,191
Nasdaq: 8,827
Russell: 1,661
Thursday  December 19,  2019
     9:13 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The President has been impeached, Wall Street has no reaction – what gives ?
The computer algos haven’t been programmed for impeachment, simple as that.  What else have the algos not been programmed for ?
How about the increasing possibility the Democrats gain control of the presidency, the Senate and the House next year, as well as a chunk of the 11 governorships up for grabs ?
As one of the few, I have contended in Folly Sci 20/20 that Trump will not run in November.
Does anyone think the algos are programmed for that ?
At the end of the day, week, month, CONFIDENCE is the real driver of stock prices, UNCERTAINTY the enemy.
What is happening before our eyes is confidence is beginning to vanish and uncertainty beginning to surface.
The algos and their ditto-heads are not ready for this, eventually leading to a sudden awareness that stock prices are based partly on earnings but mostly on  confidence in the future.
          The Street will get blindsided, waffled, crushed, hammered, clotheslined, woomfled by this wake-up call and the bear will hit so fast  no one can react, i.e. straight down 12%-18% followed by a fake-out rally then another downleg.
Those who got out and those who have a sizable cash reserve will not only preserve capital but will have a great opportunity to buy close to the bottom, one of the all-time GREATEST opportunities to buy.
Those who don’t, will have to wait for years to recoup losses. Investors who are old or need to raise money for college and other big expenses will suffer.

George Brooks
………………………………………….
TECHNICAL:
Minor Support: DJIA:28,067; S&P 500:3,171; Nasdaq Comp.:8,763
Minor Resistance: DJIA:28,251; S&P 500:3,194; Nasdaq Comp.:8,834
………………………………………………………….

Wednesday December 18 “CONFIDENCE  in The Future Due To Take A HIT”
The Street remains unconcerned with impeachment proceedings. While a rebuke of the President may impair the Republican agenda from going forward in the future, it has gotten all it wants in the interim – a massive corporate tax cut and Fed-friendly decisions on interest rates.
Three cuts in the Fed’s benchmark fed funds interest rate
have averted a recession for now, though manufacturing remains in a recession of its own.
As noted numerous times, the stock market is historically overvalued. The question has always been,  how overvalued can it get before a correction sets in  ?           There is room to run if the dot-com bubble market (1999 – 2000 ) is to be rivaled, but that was a different bull market, driven by wild speculation in dot-com stocks.
We don’t have that here. While speculative fever can drive stocks higher in coming months, it is unlikely mostly because the political climate doesn’t fuel CONFIDENCE.
      Uncertainty is on the increase as the November elections draw closer.
For this reason, I am warning readers of the strong possibility of a major correction starting in early January especially if the market closes 2019 on a string note.  Whether that turns into a bear market depends on news flow.
Decisions to buy and occasionally sell on the Street are mostly based on computer algorithms.  Obviously, they are tilted to the buy side. Should they be tweaked to reflect uncertainty or a recession, all algos will signal sell at about the same time and we would get a 12% – 18% straight down plunge.
……………………………………………………………
Tuesday December 17 “Major Correction Starting First QWeek January Could Become Bear Market”
Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
……………………………………………………..

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing !
…………………………………………………………

 

Friday  December 13,   “RISK Level High – Will Trade News Disappoint ?” ”Yesterday’s blog noted a “USMC trade deal may be announced in coming days, but may already be priced into the market.  Expect it to be followed by optimistic news on the U.S./China trade negotiations most likely a postponement of the December 15 date for new tariffs on $160 billion of Chinese goods.”
That’s pretty much what has happened, though the possibility exists that there my be a rollback of some existing tariffs.
The market celebrated the news with a 200-point jump in the DJIA yesterday, but traders may be selling into the news today.
The risk of jumping in today is that the market’s high valuation has discounted a lot of trade progress expectations, then too, promises like this have led to disappointment so often in the past.
        Even so, humans being human, the temptation to jump in is hard to resist.  All this will combine with a host of forecasts by the Street about 2020.
Risk level – very high.
……………………………………………………..
Thursday December 12 “No More Cuts in Interest Rates”
       Yesterday, the Fed announced it will hold interest rates at the current level (1.50-1.75), which surprised no one.
It has achieved its goal, delaying the inevitable,  a recession after 10.5 years of economic expansion.
What hasn’t changed is the fact the stock market remains historically overvalued.  But, it can become more overvalued as it did in the dot-com bubble bull that ran from September 1998 to January 2000 when the bubble burst hammering the S&P 500 down more than 50% and the Nasdaq Comp. down 78%.
The entire bull market has been driven in a big way by corporations buying back their own stock, putting a floor under any attempts to move downward and pressing stocks upward providing  a major benefit to top management where shareholdings are the largest and options reward management.
Strangely, in face of a generally buoyant market, the Wall Street Journal just reported that private investors have  withdrawn $220.8 billion from stock mutual funds and invested the proceeds in money market funds and bond funds.
In his “Great Stuff” newsletter, Banyan Hill alerts readers to the Fed’s flooding of  the repo market with billions of dollars, warning if the repo market dries up, there is no lender of last resort for institutions, hedge funds,  and Real Estate Investment Trusts, adding that something is decidedly wrong, a large financial institution, a large bank or hedge fund or more are in trouble.
Wednesday December 11 “Stock Market Will Tell Us When we Are in Recession”
     
In addition to news flow from the Fed, Administration hype, trade, impeachment, and pundit projections on the economy and stock market, the market will be buffeted by year-end tax selling and institutional portfolio switches to dress up year-end reports for clients.
If the Street appears to ignore this news flow, some of which should not be ignored, it is because computer algorithms are calling the shots and events have to stray far from the base to rattle the cage.
Right now the economy is on the threshold of recession with manufacturing well into recession but housing and services hanging tough.
Those who thought a recession would hit by now (myself included) have been wrong which does not mean investors should be sure the coast is clear to load up on debt and stocks.
Recessions happen, and there has never been a recession without a bear market, the latter starting several months before the former starts.
Generally, it is thought that a recession is marked by two consecutive declines in GDP. That may be most of the time, but the real scorekeeper for the start and end of recessions in the National Bureau  of Economic Research and they dbase decisions on a lot of factors beyond the GDP alone.
What’s more, they don’t render a decision that a recession started or ended until months after the fact.
BOTTOM LINE:  The stock market will tell us when we are in a recession. A rally after the initial decline will fail to follow through, yielding to yet another decline, and so on in spite of what the Fed, the Administration and the Street pundits say.
By then the market will be down 30%,  and it will be too late for investors to do much but ride it out. That’s why, so late in the game, it is smart to have a healthy cash reserve.
……………………………………………………………………………………….                                                                                                                       
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.

 

 

 

 

 

CONFIDENCE in Future Due To Take a HIT

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,267
S&P 500: 3,192
Nasdaq: 8,823
Russell: 1,657
Wednesday  December 18,  2019
     9:13 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
       The Street remains unconcerned with impeachment proceedings. While a rebuke of the President may impair the Republican agenda from going forward in the future, it has gotten all it wants in the interim – a massive corporate tax cut and Fed-friendly decisions on interest rates.
Three cuts in the Fed’s benchmark fed funds interest rate
have averted a recession for now, though manufacturing remains in a recession of its own.
As noted numerous times, the stock market is historically overvalued. The question has always been,  how overvalued can it get before a correction sets in  ?           There is room to run if the dot-com bubble market (1999 – 2000 ) is to be rivaled, but that was a different bull market, driven by wild speculation in dot-com stocks.
We don’t have that here. While speculative fever can drive stocks higher in coming months, it is unlikely mostly because the political climate doesn’t fuel CONFIDENCE.
      Uncertainty is on the increase as the November elections draw closer.
For this reason, I am warning readers of the strong possibility of a major correction starting in early January especially if the market closes 2019 on a string note.  Whether that turns into a bear market depends on news flow.
Decisions to buy and occasionally sell on the Street are mostly based on computer algorithms.  Obviously, they are tilted to the buy side. Should they be tweaked to reflect uncertainty or a recession, all algos will signal sell at about the same time and we would get a 12% – 18% straight down plunge.
………………………………………….
TECHNICAL:
Minor Support: DJIA:28,203; S&P 500:3,184; Nasdaq Comp.:8,808
Minor Resistance: DJIA:28,296; S&P 500:3,194; Nasdaq Comp.:8,821
………………………………………………………….

Tuesday December 17 “Major Correction Starting First QWeek January Could Become Bear Market”
Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
……………………………………………………..

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing !
…………………………………………………………

 

Friday  December 13,   “RISK Level High – Will Trade News Disappoint ?” ”Yesterday’s blog noted a “USMC trade deal may be announced in coming days, but may already be priced into the market.  Expect it to be followed by optimistic news on the U.S./China trade negotiations most likely a postponement of the December 15 date for new tariffs on $160 billion of Chinese goods.”
That’s pretty much what has happened, though the possibility exists that there my be a rollback of some existing tariffs.
The market celebrated the news with a 200-point jump in the DJIA yesterday, but traders may be selling into the news today.
The risk of jumping in today is that the market’s high valuation has discounted a lot of trade progress expectations, then too, promises like this have led to disappointment so often in the past.
        Even so, humans being human, the temptation to jump in is hard to resist.  All this will combine with a host of forecasts by the Street about 2020.
Risk level – very high.
……………………………………………………..
Thursday December 12 “No More Cuts in Interest Rates”
       Yesterday, the Fed announced it will hold interest rates at the current level (1.50-1.75), which surprised no one.
It has achieved its goal, delaying the inevitable,  a recession after 10.5 years of economic expansion.
What hasn’t changed is the fact the stock market remains historically overvalued.  But, it can become more overvalued as it did in the dot-com bubble bull that ran from September 1998 to January 2000 when the bubble burst hammering the S&P 500 down more than 50% and the Nasdaq Comp. down 78%.
The entire bull market has been driven in a big way by corporations buying back their own stock, putting a floor under any attempts to move downward and pressing stocks upward providing  a major benefit to top management where shareholdings are the largest and options reward management.
Strangely, in face of a generally buoyant market, the Wall Street Journal just reported that private investors have  withdrawn $220.8 billion from stock mutual funds and invested the proceeds in money market funds and bond funds.
In his “Great Stuff” newsletter, Banyan Hill alerts readers to the Fed’s flooding of  the repo market with billions of dollars, warning if the repo market dries up, there is no lender of last resort for institutions, hedge funds,  and Real Estate Investment Trusts, adding that something is decidedly wrong, a large financial institution, a large bank or hedge fund or more are in trouble.
Wednesday December 11 “Stock Market Will Tell Us When we Are in Recession”
     
In addition to news flow from the Fed, Administration hype, trade, impeachment, and pundit projections on the economy and stock market, the market will be buffeted by year-end tax selling and institutional portfolio switches to dress up year-end reports for clients.
If the Street appears to ignore this news flow, some of which should not be ignored, it is because computer algorithms are calling the shots and events have to stray far from the base to rattle the cage.
Right now the economy is on the threshold of recession with manufacturing well into recession but housing and services hanging tough.
Those who thought a recession would hit by now (myself included) have been wrong which does not mean investors should be sure the coast is clear to load up on debt and stocks.
Recessions happen, and there has never been a recession without a bear market, the latter starting several months before the former starts.
Generally, it is thought that a recession is marked by two consecutive declines in GDP. That may be most of the time, but the real scorekeeper for the start and end of recessions in the National Bureau  of Economic Research and they dbase decisions on a lot of factors beyond the GDP alone.
What’s more, they don’t render a decision that a recession started or ended until months after the fact.
BOTTOM LINE:  The stock market will tell us when we are in a recession. A rally after the initial decline will fail to follow through, yielding to yet another decline, and so on in spite of what the Fed, the Administration and the Street pundits say.
By then the market will be down 30%,  and it will be too late for investors to do much but ride it out. That’s why, so late in the game, it is smart to have a healthy cash reserve.
………………………………………………..
Tuesday December 11 “Street Not Sure Which Path to Take Path – Most or Least Travelled”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The Federal Open Market Committee (FOMC) meets today with a report forthcoming tomorrow  by Fed Chief Jerome Powell.
I expect he will hedge his position saying it will lower rates if the economy falters, but stop short of saying it will raise  rates if the economy heats up.
As usual, he will say the economy is in “a good place,” even though the Fed has raised rates three times since August.
The Street is not sure what to do. The market is pricey, so buying carries above average risk especially with the market so news sensitive.
Democrats and Republicans appear to be ready to pass  the U.S. -Mexico-Canada Agreement (USMCA) on trade  with an announcement coming as early as next week.  Additionally, I expect the Administration to announce the postponement of new  tariffs  of 15% on $156 billion  on electronics, phones and toys scheduled to take effect December 15. Anything to the contrary would hit the market.
Finally, it is the year end when stocks trade irregularly as institutions and investors make portfolio changes looking ahead to a new year.
……………………………………………………………………………………….                                                                                                                      
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.

 

 

 

 

 

 

 

 

 

Major Correction Starting First Week January Could Become Bear Market

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,235
S&P 500: 3,191
Nasdaq: 8,814
Russell: 1,649
Tuesday  December 17,  2019
     9:22 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
     Just how much of  the news of the USMC trade deal and phase one of the U.S./China trade deal is priced into a historically overvalued stock market will be known within a month (IMHO).
The Fed has no more goose juice to prop and propel stocks upward, so where do the bulls get help ?   Corporate earnings going  forward are questionable, whether the economy eventually slips into a recession  is anyone’s guess since we Are halfway there now.
I thought this party was over two years ago before the Fed reversed policy and initiated three cuts in their benchmark fed funds rate all the while claiming the economy was in a good place.
It wasn’t,
that’s why the Fed changed policy. To its credit, the economy didn’t tank.  Thanks to lower interest rates, the home building binge continued and consumer sentiments rebounded enough to head off a recession – for now.
Enough for that.
Readers here care more about insight on where the market goes from here.
I honestly don’t know what 2020 brings – too many unknowns.
The Shiller price/earnings ratio of the S&P 500 is more overvalued than the bull market top in 2007 prior to the Great Recession.  However, at 30.6 it is not as overvalued as in late 1999 when it hit 43.8 powered by dot-com stocks, prior to a 50.5% drop in the S&P 500 (78% drop Nasdaq).
       I continue to expect the beginning of a major correction in the first week of January. Whether that turns into a bear market depends on what hits it when the market is down 15% to 18% in that correction which will be straight down.
 ………………………………………….
TECHNICAL:
Minor Support: DJIA:28,187; S&P 500:3,187; Nasdaq Comp.:8,797
Minor Resistance: DJIA:28,297; S&P 500:3,193; Nasdaq Comp.:8,337
………………………………………………………….

Monday Dec 16   Please – Watch Your Back ! Risk Rising !

The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing !
…………………………………………………………

 

Friday  December 13,   “RISK Level High – Will Trade News Disappoint ?” ”Yesterday’s blog noted a “USMC trade deal may be announced in coming days, but may already be priced into the market.  Expect it to be followed by optimistic news on the U.S./China trade negotiations most likely a postponement of the December 15 date for new tariffs on $160 billion of Chinese goods.”
That’s pretty much what has happened, though the possibility exists that there my be a rollback of some existing tariffs.
The market celebrated the news with a 200-point jump in the DJIA yesterday, but traders may be selling into the news today.
The risk of jumping in today is that the market’s high valuation has discounted a lot of trade progress expectations, then too, promises like this have led to disappointment so often in the past.
        Even so, humans being human, the temptation to jump in is hard to resist.  All this will combine with a host of forecasts by the Street about 2020.
Risk level – very high.
……………………………………………………..
Thursday December 12 “No More Cuts in Interest Rates”
       Yesterday, the Fed announced it will hold interest rates at the current level (1.50-1.75), which surprised no one.
It has achieved its goal, delaying the inevitable,  a recession after 10.5 years of economic expansion.
What hasn’t changed is the fact the stock market remains historically overvalued.  But, it can become more overvalued as it did in the dot-com bubble bull that ran from September 1998 to January 2000 when the bubble burst hammering the S&P 500 down more than 50% and the Nasdaq Comp. down 78%.
The entire bull market has been driven in a big way by corporations buying back their own stock, putting a floor under any attempts to move downward and pressing stocks upward providing  a major benefit to top management where shareholdings are the largest and options reward management.
Strangely, in face of a generally buoyant market, the Wall Street Journal just reported that private investors have  withdrawn $220.8 billion from stock mutual funds and invested the proceeds in money market funds and bond funds.
In his “Great Stuff” newsletter, Banyan Hill alerts readers to the Fed’s flooding of  the repo market with billions of dollars, warning if the repo market dries up, there is no lender of last resort for institutions, hedge funds,  and Real Estate Investment Trusts, adding that something is decidedly wrong, a large financial institution, a large bank or hedge fund or more are in trouble.
Wednesday December 11 “Stock Market Will Tell Us When we Are in Recession”
     
In addition to news flow from the Fed, Administration hype, trade, impeachment, and pundit projections on the economy and stock market, the market will be buffeted by year-end tax selling and institutional portfolio switches to dress up year-end reports for clients.
If the Street appears to ignore this news flow, some of which should not be ignored, it is because computer algorithms are calling the shots and events have to stray far from the base to rattle the cage.
Right now the economy is on the threshold of recession with manufacturing well into recession but housing and services hanging tough.
Those who thought a recession would hit by now (myself included) have been wrong which does not mean investors should be sure the coast is clear to load up on debt and stocks.
Recessions happen, and there has never been a recession without a bear market, the latter starting several months before the former starts.
Generally, it is thought that a recession is marked by two consecutive declines in GDP. That may be most of the time, but the real scorekeeper for the start and end of recessions in the National Bureau  of Economic Research and they dbase decisions on a lot of factors beyond the GDP alone.
What’s more, they don’t render a decision that a recession started or ended until months after the fact.
BOTTOM LINE:  The stock market will tell us when we are in a recession. A rally after the initial decline will fail to follow through, yielding to yet another decline, and so on in spite of what the Fed, the Administration and the Street pundits say.
By then the market will be down 30%,  and it will be too late for investors to do much but ride it out. That’s why, so late in the game, it is smart to have a healthy cash reserve.
………………………………………………..
Tuesday December 11 “Street Not Sure Which Path to Take Path – Most or Least Travelled”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The Federal Open Market Committee (FOMC) meets today with a report forthcoming tomorrow  by Fed Chief Jerome Powell.
I expect he will hedge his position saying it will lower rates if the economy falters, but stop short of saying it will raise  rates if the economy heats up.
As usual, he will say the economy is in “a good place,” even though the Fed has raised rates three times since August.
The Street is not sure what to do. The market is pricey, so buying carries above average risk especially with the market so news sensitive.
Democrats and Republicans appear to be ready to pass  the U.S. -Mexico-Canada Agreement (USMCA) on trade  with an announcement coming as early as next week.  Additionally, I expect the Administration to announce the postponement of new  tariffs  of 15% on $156 billion  on electronics, phones and toys scheduled to take effect December 15. Anything to the contrary would hit the market.
Finally, it is the year end when stocks trade irregularly as institutions and investors make portfolio changes looking ahead to a new year.
……………………………………………………………………………………….                                                                                                                      
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.

 

 

 

 

 

 

 

 

Please – Watch Your Back ! Risk Rising !

INVESTOR’S first read.com – Daily edge before the open
DJIA: 23,135
S&P 500: 3,168
Nasdaq: 8,734
Russell: 1,687
Monday  December 16,  2019
     9:22 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
    The market will celebrate the prospect of  trade deals (USMC , China phase One).  Can we believe it ?  U.S. trade representative, Robert Lighthizer insists it is a done deal.
While some industry analysts doubt it, the Street is a believer. China will buy $40 billion of U.S. farm products over 2 years and not require U.S. companies to reveal patent secrets in exchange for access to Chinese markets, U.S. concessions to be announced.
      We have been here before. The timing is questionable in light of fact the U.S. House votes on impeachment this week.
The market will get more overvalued each day it rises in response to comments by the Fed or Administration regarding the economy or trade.
But the Street wants the party to continue just like it did before the bubble burst in 2000.  The problem will be, no one will believe it is last call until after the fact when it is too late to avoid serious portfolio damage.
Bull market tops and bear market bottoms always trace out similar emotional patterns. Amazing !
………………………………………….
TECHNICAL:
Minor Support: DJIA:28,135; S&P 500:3,168; Nasdaq Comp.:8,734
Minor Resistance: DJIA:28,028; S&P 500:3,182; Nasdaq Comp.:8,607
………………………………………………………….

Friday  December 13,   “RISK Level High – Will Trade News Disappoint ?” ”Yesterday’s blog noted a “USMC trade deal may be announced in coming days, but may already be priced into the market.  Expect it to be followed by optimistic news on the U.S./China trade negotiations most likely a postponement of the December 15 date for new tariffs on $160 billion of Chinese goods.”
That’s pretty much what has happened, though the possibility exists that there my be a rollback of some existing tariffs.
The market celebrated the news with a 200-point jump in the DJIA yesterday, but traders may be selling into the news today.
The risk of jumping in today is that the market’s high valuation has discounted a lot of trade progress expectations, then too, promises like this have led to disappointment so often in the past.
        Even so, humans being human, the temptation to jump in is hard to resist.  All this will combine with a host of forecasts by the Street about 2020.
Risk level – very high.
……………………………………………………..
Thursday December 12 “No More Cuts in Interest Rates”
       Yesterday, the Fed announced it will hold interest rates at the current level (1.50-1.75), which surprised no one.
It has achieved its goal, delaying the inevitable,  a recession after 10.5 years of economic expansion.
What hasn’t changed is the fact the stock market remains historically overvalued.  But, it can become more overvalued as it did in the dot-com bubble bull that ran from September 1998 to January 2000 when the bubble burst hammering the S&P 500 down more than 50% and the Nasdaq Comp. down 78%.
The entire bull market has been driven in a big way by corporations buying back their own stock, putting a floor under any attempts to move downward and pressing stocks upward providing  a major benefit to top management where shareholdings are the largest and options reward management.
Strangely, in face of a generally buoyant market, the Wall Street Journal just reported that private investors have  withdrawn $220.8 billion from stock mutual funds and invested the proceeds in money market funds and bond funds.
In his “Great Stuff” newsletter, Banyan Hill alerts readers to the Fed’s flooding of  the repo market with billions of dollars, warning if the repo market dries up, there is no lender of last resort for institutions, hedge funds,  and Real Estate Investment Trusts, adding that something is decidedly wrong, a large financial institution, a large bank or hedge fund or more are in trouble.
TECHNICAL
Expect a lot of volatility between now and year-end as institutions adjust portfolios for what they expect in 2020. …………………………………………………………

Minor Support: DJIA:28,267; S&P 500:3,177; Nasdaq Comp.:8,757
Minor Resistance: DJIA:28,057; S&P 500:3,121; Nasdaq Comp.:8,719
………………………………………………………….

 

Wednesday December 11 “Stock Market Will Tell Us When we Are in Recession”
      In addition to news flow from the Fed, Administration hype, trade, impeachment, and pundit projections on the economy and stock market, the market will be buffeted by year-end tax selling and institutional portfolio switches to dress up year-end reports for clients.
If the Street appears to ignore this news flow, some of which should not be ignored, it is because computer algorithms are calling the shots and events have to stray far from the base to rattle the cage.
Right now the economy is on the threshold of recession with manufacturing well into recession but housing and services hanging tough.
Those who thought a recession would hit by now (myself included) have been wrong which does not mean investors should be sure the coast is clear to load up on debt and stocks.
Recessions happen, and there has never been a recession without a bear market, the latter starting several months before the former starts.
Generally, it is thought that a recession is marked by two consecutive declines in GDP. That may be most of the time, but the real scorekeeper for the start and end of recessions in the National Bureau  of Economic Research and they dbase decisions on a lot of factors beyond the GDP alone.
What’s more, they don’t render a decision that a recession started or ended until months after the fact.
BOTTOM LINE:  The stock market will tell us when we are in a recession. A rally after the initial decline will fail to follow through, yielding to yet another decline, and so on in spite of what the Fed, the Administration and the Street pundits say.
By then the market will be down 30%,  and it will be too late for investors to do much but ride it out. That’s why, so late in the game, it is smart to have a healthy cash reserve.
………………………………………………..
Tuesday December 11 “Street Not Sure Which Path to Take Path – Most or Least Travelled”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The Federal Open Market Committee (FOMC) meets today with a report forthcoming tomorrow  by Fed Chief Jerome Powell.
I expect he will hedge his position saying it will lower rates if the economy falters, but stop short of saying it will raise  rates if the economy heats up.
As usual, he will say the economy is in “a good place,” even though the Fed has raised rates three times since August.
The Street is not sure what to do. The market is pricey, so buying carries above average risk especially with the market so news sensitive.
Democrats and Republicans appear to be ready to pass  the U.S. -Mexico-Canada Agreement (USMCA) on trade  with an announcement coming as early as next week.  Additionally, I expect the Administration to announce the postponement of new  tariffs  of 15% on $156 billion  on electronics, phones and toys scheduled to take effect December 15. Anything to the contrary would hit the market.
Finally, it is the year end when stocks trade irregularly as institutions and investors make portfolio changes looking ahead to a new year.
……………………………………………………………………………………….

Monday December 9 “Lot of Balls Up In the Air, Any One of Which Could Come Down…”

Projecting the direction of the stock has always been complicated by the fact there are always several balls up in the air any one of which can come down to change the picture, sometimes dramatically, or so I have written often.
Today more than any time in memory, that is true.
One week our economy looks like it will plunge into recession, the next like the economic expansion that started more than 10 years ago will continue though irregularly for months on end.
Tariffs and trade policies continue to baffle strategists, one day the Trump administration says  a deal should wait until after next year’s election, the next day it says a deal is close.
More recently, the rumors are that with last week’s blow-out jobs report, the U.S. can walk away from any deal with China, the latter feeling pain from a decline in exports.
Until a month ago, the stock market declined and rose sharply no less than seven times over 24 months before resolving the pattern on the upside mostly in response to Fed policy and hopes for a resolution of a deal on trade that would remove the tariffs that are beginning to hurt economies globally.
Manufacturing has been in a recession for four months, but services and homebuilding are still buoyant. The Fed has cut interest rates three time this year, but without more damage to the economy will not cut rates further.
It’s anyone’s guess what will happen on trade. My guess is a postponement of the December hike by the U.S. in tariffs until next year.
So far, the Street could care less about impeachment, even more than the presidency is at risk. That’s an arrogant way to deal with something that could have far-reaching consequences, but 10 years of economic prosperity and bull market tends to create a tunnel vision that obscures perspective.
Buying here is risky, but I can understand why that is hard to accept, with speculative fever rising.
A bubble ?   Yes, however it’s a matter of how much it inflates until it pops.
One thing I am sure of, it will burst when just about everyone is bullish, when a “new era” in economic expansion and Dow 50,000 is universally accepted.
……………………………………………………….

Friday, December 6 “Recession ? Not Yet  However Market Fully Priced
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
Yesterday, I quoted Moody’s Chief Economist Mark Zandi as seeing trouble in the  jobs  market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
But the BLS Employment Situation report today tells a different story reporting  266,000 were added in November well above  the projected 187,000.
While the BLS report also includes government jobs added, as well as Gm employees returning from a strike, the conclusion has to be the jobs sector is still strong assuming there was no distortion in the numbers and a revision downward in December.
While manufacturing  is in its fourth month of contraction, the economy must be considered as struggling, but not down for a ten-count, not even an eight-count.
We may be on the threshold of recession, but are not there yet. Historically, the stock market tops out ahead of the beginning of recessions. We will have to let that one play out.
Credit the Fed’s three cuts in interest rates this year for extending the 10 year old economic expansion.
       As for stocks, they are still very historically  overpriced with hopes that a trade deal will prevent a major correction/bear market. Corporations will still goose their own stocks (and the market averages) with buybacks.
Good  news, or lack of bad news suggests the Fed will not be cutting rates further any time soon, though the White House is pressuring it to do so.
What to do:
Investors without a sizable cash reserve should raise one in line with their tolerance for risk.
………………………………………………………………………………
Thursday December 5 “Puppets on Wall Street Whipsawed Again By the Puppeteer”
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
…………………………………………………………..
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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