Wednesday, January 20, 2016

Technical Evidence Indicates Major Price Movement Just Getting Started!

Stocks around the globe were pummeled again last week. This is no surprise to our subscribers as our predictive trend analytics model gave us clear technical evidence that important multi year highs had completed back in the middle of 2015. I continue to remain steadfastly bearish in my outlook for stocks.

Last Friday, January 15, 2016, the SPX broke below its Aug. 24, 2015 low, which is equivalent to a major sell signal if price closes the month below that level.

Last week, The Dow Jones Industrial Average slumped 511 points, or 3.1%, to 15,866, while the S&P 500 slid 64 points, or 3.4%, to 1,856.34, led by the financials, technology and energy sectors. The Nasdaq Composite tumbled 190 points, or 4.1%, to 4,424.35. Subscribers and I managed to catch a 33% quick intra-week bounce trading the SSO ETF and then got out of harm’s way as volatility took hold once again.

European stocks were unable to escape the downward trend from other markets, and the Stoxx Europe 600 index lost 2.8%. The dollar fell to a one-year low vs. the yen. Gold rose $22.40, or 2.1%, to $1,096.20 an ounce.

The SPX is currently testing major support. This is consistent with a “cycle low” that arrived over the weekend. Even though we are in a bear market, we should expect a “Bear Market Rally” sucking every last investor into long positions, before dropping much lower through previous support areas. This will be a very “short term bottom” this week.

We are in a long term downtrend now; it is not a “hiccup” as we experienced back in 2012.

If the stock market is going to stage a rally from here, this is a good time to start, right when everyone is jumping off the ship and the sentiment is so extremely negative. Just to give you a feel for the level of panic selling on Friday, my panic selling indicator which tells us when short term bottoms are likely to happen as everyone is running for the door, this contrarian indicator spiked to 50. Now any reading over 3 is panic in the market, and a reading of 9-18 is typically a multi week low. So you can see how 50 is VERY extreme.

Because we are entering a bear market and institutions will be unloading shares area record pace going forward, I feel this extreme level of panic selling (50) is only going to trigger a bounce lasting a week or so, then more distribution selling will take hold.

trap2
trap1


A slew of disappointing U.S. data shows that manufacturing and consumer spending are in trouble. Empire State factory index declined sharply this month to its lowest level since the recession. Retail sales declined by 0.1% in December 2015 and a report on industrial production compiled showed that activity declined for the third straight month.

The New Year is not off to good start. In fact, it may be the worst start ever of a New Year in many world stock indices. Instead off irrational exuberance that had previously been so evident, investors of world equity markets are clearly starting to panic. We all know things are not right. We know it hasn’t been okay since the 2008 financial crisis. The effort by the central banks to get over the hump has fueled an “Asset Bubble” in the stock markets.

This in turn should start to fuel safe haven buying in gold. Gold’s day in the sun is soon approaching. I believe this new year will prove to be a pivotal year for gold, silver and miners.

The “talking heads” tell us that the stock market is falling because energy prices are falling. We need higher energy (gasoline) prices. Really? They claim that energy companies are going out of business and that tens of thousands of people will lose jobs and unemployment will rise. Really? Didn’t the jobs numbers show hundreds of thousands of people getting new jobs – in fields outside of energy? Who are you going to believe?

Later this week I will be posting an exciting video show you how to make a fortune during this pending bear market and exactly how I did this in 2008 – 2012 to become financially free before I turned 30 years of age. Stay tuned and be sure to opt into my free email list if you want to see this exciting, inspiring and educational video!

Visit Here > www.Gold & Oil Guy.com 
Chris Vermeulen

Stock & ETF Trading Signals

Tuesday, January 12, 2016

Steve Swanson Shows Us How to Trade This Volatile Market


Steve Swanson's 4D technology [which you'll read about in a minute] predicted everything about January's sell off and subsequent rally way back in December. If you want to know the future too, just click on the video link below. An up to date chart of the S&P 500 Price/Time Continuum is posted below the video. See for yourself the precise day the next big rally will begin then use the profit magnifier detailed in this free eBook to earn 3 times more profits.

A revolutionary profit magnifier quietly introduced in November 2008 had the power to essentially change the fate of millions of beleaguered investors. Yet, to this day hardly anybody knows about it.  Do you? In his highly acclaimed new book, Steve Swanson [the brilliant trader and inventor who predicted every intermediate market top and bottom for more than two decades] reveals a safe and easy way for you to utilize the powerful Thanksgiving gift of 2008 to earn 3 times more money on every trade.  


This is something you really deserve to know about. And you can download his tell all new ebook this week for free. Just for starters, see how you can take that profit and triple it! See how this one simple change can earn you 3 times more money I was shocked. And I think you will be too when you see how ridiculously simple it is to make one minor change. Easy for anybody. And turn a boring 25% a year strategy into an exciting moneymaker that averages 108% a year with no compounding!

And that’s not all. When you download your FREE eBook, you’ll also gain instant access to Steve’s paradigm shifting video 

Steve Swanson actually invented a program that plots every intermediate market high and low. Past, present, and future on what’s called the “Price Time Continuum”. That’s how he’s been able to predict and profit from every market turning point for more than 2 decades. Some are calling Swanson’s 4th Dimension breakthrough the “Discovery of the Century”.  

So you might want to at least take a peek.  Click Here Now.

See you in the markets,
The Stock Market Club

P.S. As with most free things, Steve Swanson’s generous offer is limited.  So, even if you don’t have time to delve into anything new right now, I’d encourage you to grab your free ebook while you can.  That way you’ll have it to look through whenever you like. Click Here Now.



Stock & ETF Trading Signals

Tuesday, January 5, 2016

How Saudi Arabia and OPEC are Manipulating Oil Prices

About eighteen months ago the international price of WTI Crude Oil, at the close of June 2014, was $105.93 per barrel. Flash forward to today; the price of WTI Crude Oil was just holding above $38.00 per barrel, a drastic fall of more than 65% since June 2014. I will point out several reasons behind this sharp, sudden, and what now seems to be prolonged slump.
Chart 1

The Big Push

Despite a combination of factors triggering the fall in prices, the biggest push came from the U.S. Shale producers. From 2010 to 2014, oil production in the U.S. increased from 5,482,000 bpd to 8,663,000 (a 58% increase), making the U.S. the third largest oil-producing country in the world. The next big push came from Iraq whose production increased from 2,358,000 bpd in 2010 to 3,111,000 bpd in 2014 (a 32% increase), mostly resulting from the revival of its post war oil industry.
The country-wide financial crunch, and the need for the government to increasingly export more to pay foreign companies for their production contracts and continue the fight against militants in the country took production levels to the full of its current capacity. In addition; global demand remained flat, growing at just 1.1% and even declining for some regions during 2014. Demand for oil in the U.S. grew just 0.6% against production growth of 16% during 2014.
Europe registered extremely slow growth in demand, and Asia was plagued by a slowdown in China which registered the lowest growth in its demand for oil in the last five years. Consequently, a global surplus was created courtesy of excess supply and lack of demand, with the U.S. and Iraq contributing to it the most.

The Response

In response to the falling prices, OPEC members met in the November of 2014, in Vienna, to discuss the strategy forward. Advocated by Saudi Arabia, the most influential member of the cartel, along with support from other GCC countries in the OPEC, the cartel reluctantly agreed to maintain its current production levels. This sent WTI Crude Oil and Brent Oil prices below $70, much to the annoyance of Russia (non-OPEC), Nigeria and Venezuela, who desperately needed oil close to $90 to meet their then economic goals.
For Saudi Arabia, the strategy was to leverage their low cost of production advantage in the market and send prices falling beyond such levels so that high cost competitors (U.S. Shale producers are the highest cost producers in the market) are driven out and the market defines a higher equilibrium price from the resulting correction. The GCC region, with a combined $2.5 trillion in exchange reserves, braced itself for lower prices, even to the levels of $20per barrel.

The Knockout Punch

By the end of September 2014, according to data from Baker Hughes, U.S. Shale rigs registered their highest number in as many years at 1,931. However, they also registered their very first decline to 1,917 at the end of November 2014, following OPEC’s first meeting after price falls and its decision to maintain production levels. By June 2015, in time for the next OPEC meeting, U.S. Shale rigs had already declined to just 875 by the end of May; a 54% decline.
usshale
The Saudi Arabia strategy was spot on; a classic real-life example of predatory price tactics being used by a market leader, showing its dominant power in the form of deep foreign-exchange pockets and the low costs of production. Furthermore, on the week ending on the date of the most recent OPEC meeting held on December 4th, 2015, the U.S. rig count was down even more to only 737; a 62% decline. Despite increased pressure from the likes of Venezuela, the GCC lobby was able to ensure that production levels were maintained for the foreseeable future.

Now What?

Moving forward; the U.S. production will decline by 600,000 bpd, according to a forecast by the International Energy Agency. Furthermore, news from Iraq is that its production will also decline in 2016 as the battle with militants gets more expensive and foreign companies like British Petroleum have already cut operational budgets for next year, hinting production slowdowns. A few companies in the Kurdish region have even shut down all production, owing to outstanding dues on their contracts with the government.
Hence, for the coming year, global oil supply is very much likely to be curtailed. However, Iran’s recent disclosure of ambitions to double its output once sanctions are lifted next year, and call for $30 billion in investment in its oil and gas industry, is very much likely to spoil any case for a significant price rebound.
The same also led Saudi Arabia and its GCC partners to turn down any requests from other less-economically strong members of OPEC to cut production, in their December 2015, meeting. Under the current scenarios members like Venezuela, Algeria and Nigeria, given their dependence on oil revenues to run their economies, cannot afford to cut their own production but, as members of the cartel, can plea to cut its production share to make room for price improvements, which they can benefit from i.e. forego its market share.

It’s Not Over Until I’ve Won

With news coming from Iran, and the successful delivery of a knockout punch to a six-year shale boom in the U.S., Saudi Arabia feared it would lose share to Iran if it cut its own production. Oil prices will be influenced increasingly by the political scuffles between Saudi Arabia and its allies and Iran. The deadlock and increased uncertainty over Saudi Arabia and Iran’s ties have sent prices plunging further. The Global Hedge Fund industry is increasing its short position for the short-term, which stood at 154 million barrels on November 17th, 2015, when prices hit $40 per barrel; all of this indicating a prolonged bear market for oil.
One important factor that needs to be discussed is the $1+ trillions of junk bonds holding up the shale and other marginal producers. As you know, that has been teetering and looked like a crash not long ago. The pressure is still there. As the shale becomes more impaired, the probability of a high yield market crash looks very high. If that market crashes, what happens to oil?  Wouldn’t there be feedback effects between the oil and the crashing junk market, with a final sudden shutdown of marginal production? Could this be the catalyst for a quick reversal of oil price?
The strategic interests, primarily of the U.S. and Saudi Arabia; the Saudis have strategically decided to go all in to maintain their market share by maximizing oil production, even though the effect on prices is to drive them down even further. In the near term, they have substantial reserves to cover any budget shortfalls due to low prices. More importantly, in the intermediate term, they want to force marginal producers out of business and damage Iran’s hopes of reaping a windfall due to the lifting of sanctions. This is something they have in common with the strategic interests of the U.S. which also include damaging the capabilities of Russia and ISIS. It’s certainly complicated sorting out the projected knock-on effects, but no doubt they are there and very important.    

I’ll Show You How Great I Am

Moreover, despite a more than 50% decline in its oil revenues, the International Monetary Fund has maintained Saudi Arabia’s economy to grow at 3.5% for 2015, buoyed by increasing government spending and oil production. According to data by Deutsche Bank and IMF; in order to balance its fiscal books, Saudi Arabia needs an oil price of$105. But the petroleum sector only accounts for 45% of its GDP, and as of June 2015, according to the Saudi Arabian Monetary Agency, the country had combined foreign reserves of $650 billion. The only challenge for Saudi Arabia is to introduce slight taxes to balance its fiscal books. As for the balance of payments deficit; the country has asserted its will to depend on its reserves for the foreseeable future.

Conclusion

The above are some of the advantages which only Saudi Arabia and a couple of other GCC members in the OPEC enjoy, which will help them sustain their strategy even beyond 2016 if required. But I believe it won’t take that long. International pressure from other OPEC members, and even the global oil corporations’ lobby will push leaders on both sides to negotiate a deal to streamline prices.
With the U.S. players more or less out by the end of 2016, the OPEC will be in more control of price fluctuations and, therefore, in light of any deal between Iran and Saudi Arabia (both OPEC members) and even Russia (non-OPEC), will alter global supply for prices to rebound, thus controlling prices again.
What we see now in oil price manipulation is just the mid-way point. Lots of opportunity in oil and oil related companies will slowly start to present themselves over the next year which I will share my trades and long term investment pays with subscribers of my newsletter at The Gold & Oil Guy.com
Chris Vermeulen





Saturday, January 2, 2016

A Half Dozen 2016 Stock Market Poisons

By Tony Sagami

Most of the “adults” on Wall Street are on vacation this week, and trading volume shrivels up to a trickle. That low volume is exactly the environment that the momentum crowd uses to paint the tape green. I call it the financial version of Reindeer Games.

However, once the “adults” return, the stock market will need to pay attention to the actual economic fundamentals and deal with facts—like, 2015 being the first year since 2009 when S&P 500 profits declined for the year.


I expect that 2016 is going to be a very difficult year for the stock market. Why do I say that? For any number of reasons, such as:

Poison #1: The Strong US Dollar

The greenback has been red hot. The US dollar index is up 9% in 2015 after gaining 13% in 2014.
A strong dollar can have a dramatic (negative) impact on the earnings of companies that do a significant amount of business outside of the US—for example, Johnson & Johnson, Ford, Yum Brands, Tiffany’s, Procter & Gamble, and hundreds more.


Poison #2: Depressed Energy Prices

I don’t have to tell you that oil prices have fallen like a rock. That’s a blessing when you stop at a gas station, but the impact on the finances of petro dependent economies, including certain US states, has been devastating. Plunging energy prices are going to clobber everything from emerging markets to energy stocks, to states like North Dakota and Texas.


Poison #3: Junk Bond Implosion

You may not have noticed because the decline has been orderly, but the junk bond market is on the verge of a total meltdown.


Third Avenue Management unexpectedly halted redemption of its high-yield (junk) Focused Credit Fund. Investors who want their money… tough luck. The investors who placed $789 million in this junk bond fund are now “beneficiaries of the liquidating trust” without any idea of how much they will get back and or even when that money will be returned. Third Avenue admitted that it may take “up to a year” for investors to get their money back. Ouch!

The problem is that the bids of the junkiest part of the junk bond market have collapsed. For example, the bonds of iHeartCommunications and Claire’s Stores have dropped 54% and 55%, respectively, since June!
What the junk bond market is experiencing is a liquidity crunch, the financial equivalent of everybody trying to stampede through a fire exit at the same time. In fact, the International Monetary Fund (IMF) warned that blocking redemptions could lead to an increase in redemption requests at similar funds.


Poison #4: Rising Interest Rates

As expected, the Federal Reserve hiked interest rates at its last meeting. The reaction (so far) hasn’t been too negative; however, we may have several more interest rate hikes coming our way.


Every single one of the 17 Federal Reserve members expects the fed funds rate to increase by at least 50 bps before the end of 2016, and 10 of the 17 expect rates to rise at least 100 bps higher in the next 12 months. I doubt our already struggling economy could handle those increases.


Poison #5: Government Interference

Sure, 2016 is an election year, which brings uncertainty and possibly turmoil. But the Obama administration could shove several changes down America’s throat via executive action—such as higher minimum wage, limits on drug pricing, gun control, trade sanctions including tariffs, immigration, climate change, and increased business regulation.


I don’t give the Republican led Congress a free pass either, as I have no faith that it will put the best interests of the US ahead of its desire to fight Obama.


Poison #6: China Contagion

We do indeed live in a small, interconnected world, and it’s quite possible that something outside of the US could send our stock market tumbling. Middle East challenges notwithstanding, the one external shock I worry the most about is one coming from China. The sudden devaluation of the yuan and the significant easing of monetary policy by the People’s Bank of China are signs that trouble is brewing.


However, I think the biggest danger is an explosion of non-performing loans in China. Debt levels in China, both public and private, have exploded, and I continue to hear anecdotal evidence that default and non-performing loans are on the rise.


Conclusion

To be truthful, I have no idea which of the above or maybe even something completely out of left field will poison the stock market in 2016, but I am convinced that trouble is coming. Call me a pessimist, a bear, or an idiot… but my personal portfolio and that of my Rational Bear subscribers are prepared to profit from falling stock prices.
Tony Sagami
Tony Sagami
30 year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.



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