Could Generational Cycles Play A Major Role In Our Immediate Future?

Over the past many years, we have been highlighting one concept that many people fail to understand and utilize – the longer term Generational Cycle.  This is important because of two reasons; first, it has been in place and accurate for over 400 years and, second, it identifies events, opportunities and Archetypes that we should be aware of.  Are you ready to learn about these massive cycles and how they relate to the markets and how they create massive opportunities?

Where are we currently in this cycle process?  What can we learn from the past and what can we do to prepare for the future?

This chart below shows the share of total US income represented by the Top 1% of all earners.  As you can see, current levels (as of 2015) are near 22% and are near the highest levels over the past 80+ years.  When the Top 1% earn more than 16~17% of all income, there is a disparity in income opportunity across all levels of income and, as history has shown, an economic or social even may be eminent to restore some opportunity to the lower income levels.

The general principle of the Generational Cycle is that 50 to 85 years after a major social, economic or geopolitical event, society (meaning the general populous) has forgotten the lessons learned from that event and is somewhat destined to repeat it (in some form).  The last massive social, economic and geopolitical event on record, which is also the last known “Crisis Cycle” was the 1926 to 1949 span that included the end of the Roaring 20s, the Great Depression, Pearl Harbor, World War II, A US Banking Crisis, Atomic Weapons, NATO created.  This cycle event is known for the upheaval that is created by a destruction of fundamental pillars of society and economic success found within the previous 50+ years.

 

The next cycle event that follows the Crisis Cycle is the “Rebirthing Cycle”.  Historically, this cycle executed from 1950 to 1972 and was a time where society pulled together from the previous cycle event, developed new foundations and developed opportunities from technology, infrastructure and strengths that were fostered from the Crisis Cycle.  As you can probably imagine, the events of the Crisis Cycle had a lasting result for generations to come.  The Rebirthing Cycle was a result of the chaos and uncertainty of the previous cycle and the people alive at the time were cautious and calculated in their planning.

 

The next cycle event is the High Cycle.  Historically, this cycle executed from 1972 to 1995 and was a time of accelerated success, prosperity and excess.  The High Cycle is when nearly every aspect of the Rebirthing Cycle is firing on all cylinders – the economy is good, housing is good, there is plenty of excess for everyone.  Governments feel they can do no wrong and spending is through the roof..  What could go wrong – right?  This cycle is like a perpetual high that creates wealth and prosperity while creating massive debt loads for some.

Then comes the Unraveling Cycle.  By our estimates, we’ve just completed the Unraveling Cycle between 1996 to 2017~18.  The Unraveling Cycle is when the structures, foundations and pillars that society built after the last Crisis Cycle begin to crumble.  Financial systems start to collapse with debt (pensions, state and local governments, entitlements, global governments).  Unique sectors of the global markets start to appear fragile, debt-laden and mismanaged.  Remember, the previous cycle event, the High Cycle, was a period of time when everything was super, one could do not wrong and growth would continue forever…. but now, things seem different..  not so super..  and maybe not keep growing forever.  I equate the Unraveling Cycle to your car’s engine starting to fall apart.  As long as you keep gassing it (QE and bailouts) with Ether, you can probably keep it running for a while longer – but eventually it will completely die and require a complete rebuild or replacement.

 

So, now that you have been briefed regarding the massive Generational Cycles, how do you profit from these future events?  That answer is simple, prepare yourself and your investments for the potential that we could be entering a time of great upheaval and repositioning.  Find partners, like TheTechnicalTraders.com, that can assist you in identifying key market rotations, opportunities and help you stay out of trouble.  Remember, just like in the 30s and 40s, the markets continue to move, there are still opportunities to invest and there are still opportunities to profit. One just has to be aware of where the opportunities will be presented and what to watch out for while navigating these tricky waters.

 

While we are watching the global markets for signs of weakness and further signs of any potential correction, we want you to understand that Technical Traders Ltd., and all of our resources, are here to assist you and help you navigate this once in a lifetime opportunity.  We urge you to consider joining  www.TheMarketTrendForecast.com or www.ActiveTradingPartners.com as two unique sources that will keep you aware of these cycle events, find opportunities for you and help you understand the markets, trends and provide detailed forecasts of future trends.

 

Remember, these cycle events are opportunities for you to prepare, plan and execute for success.  IN many cases, these are once in a lifetime event that can provide nearly unlimited opportunities for success.  Make sure you have the right partners to assist you in executing for profits.

 

Chris Vermeulen
www.TheTechnicalTraders.com

Signs That This Bull Market Is On Its Last Leg – Part II

In this post we want to share two interesting sets of data that we find are interesting and add to the case of a stock market top is highly likely to take place in 2018. Be sure to read Part I “How to Know When A Bull Market Is About to End”.

 

First, let’s take a look at the “Hindenburg Omen” which was developed by Jim Miekka as an early warning of a stock market correction. While it’s not super effective in terms of timing market turns it can be very useful in assessing the overall strength of an uptrend.

 

The current indicator shows a number of these omens triggered on both the NYSE and the NASDAQ. While the indexes and many of their components have been reaching new highs, an equally large number of components have been making new lows, as well. This suggests that the market is indecisive and probably at a turning point ( the hallmark of a major market peak). Of course, a similar scenario can occur during a falling market when new lows are numerous but new highs begin to rise rapidly. The latter condition would suggest that such market indecision could be an early buy signal in a falling market.

 

HINDENBURG OMENS CHART

This chart shows a running total of these omens on the S&P 500 index chart. It is fairly clear that when these flames start rising to levels like they are now, it’s time to start worrying about a correction in the stock market. This indicator does tell us that a bear market is starting by any means, it simply warns us that we should see a decent pulling in price to cleanse/resent the market internals, and investors sentiment.

 

Our second data set we find interesting as it suggests the stock market may be setting up to repeat history in an odd and dangerous manner. As market technicians, part of our job is to work with numbers, find patterns and attempt to predict future price moves in US and Global markets. As you can imagine, it is not always easy to accurately predict the future.

We’ll start by looking at the price activity leading up to the 2000 DOT COM bubble burst. Our analysis focuses on the similarities in price action setting up this price move.

We will let the charts do all the talking as they show the picture clearly.

2000 DOT COM – XCI INDEX CHART

 

2017 DOT COM – XCI INDEX CHART

We have been watching for sings and patiently waiting for the next major market top for over a year. Why? Because once a market top looks to have formed, we must adjust all our long-term portfolio holdings into different asset classes with cash holdings being a huge position.

Stock prices typically fall 7 times faster than they rise so just imagine being properly positioned for a bear market with a portion of your position knowing you could make 7 years of slow painful growth in only 8-14 months when the bear market starts. I recently did a seminar talking about his and how one can use inverse ETF’s and short selling to profit from the next financial downturn, which will eventually happen, and we will be ready for it.

In fact, Bank of America said: “End of bull market coming in 2018”

Bank of America sees a scary good news-bad news scenario unfolding in 2018 with a strong rally higher in the first half of the year followed by all sorts of potential trouble after.

The S&P 500 may top around 2,850 assuming three things: the “last vestiges” of stimulus from the Fed and other central banks, the passage of tax reform in Congress, and “full investor capitulation into risk assets” on better than expected corporate earnings.

After that, things get considerably sketchy as the second-longest bull market in history starts to run into trouble.

“We believe the air in risk assets is getting thinner and thinner, but the Big Top in price is still ahead of us,”  Michael Hartnett – Bank of America

 

CONCLUSION:

In short, investors continue to pile into equities and buying into every little dip I price that takes place. Its just a matter of time now before the majority of investors have placed all their extra capital into the stock market, and once the level is reached, is when the market will put in a top and hurt the greatest number of investors possible, just like it has done with every other bull and bear market cycle in history.

There will be several great trading opportunities for both short-term traders and long-term investors, which we will share with our subscribers as the market evolves and new strategies must be implemented.

Take advantage of 53+ years of combined trading experience and follow our trades and investment portfolios today!

Chris Vermeulen
www.TheTechnicalTraders.com

Capital Repositioning Driving Volatility Higher

Recent moves in the FANG stocks shows that capital is starting to reposition within the global market.  As the end of the year approaches, expect more of this type of capital control to drive greater volatility within the markets.  At this time of year, especially after such a fantastic bullish run, it is not uncommon to see capital move out of high flying equities and into cash or other investments.

The recent move lower in the NQ has taken many by surprise, but the bullish run in the FANG stocks has been tremendous.  Facebook was higher +59% for 2017 (600% 2016 levels).  Amazon was up +61% for 2017 (550% 2016 levels).  Netflix was up +64.75% for 2017 (600% 2016 levels) and Google was higher by +37% for 2017 (1000% 2016 levels).  These are huge increases in capital valuation.

In early 2017, we authored an article about how capital works and always seeks out the best returns in any environment.  It was obvious from the moves this year that capital rushed into the US markets with the President Trump’s win and is now concerned that the end of the year may be cause to pull away from the current environment.

The current decline in the NQ, -2.25% so far, is not a huge decline in price yet.  Lower price support is found near the $6000 level.  Should this “Price Flight” continue in the NASDAQ, we could be looking at a 6~8% decline, or greater, going into the end of this year.

The price swing, this week, was very fast and aggressive.  In terms of capital, this was a massive price rotation away from Technology.  While the S&P and DOW Industrials continue higher, this presents a cause for concern with regards to the end of year expectations.

Will capital continue to rush into the US markets and specifically Technology stocks?  Or will capital rush out of these equities and into other sources of “safety” as technology melts down into the end of 2017?  Has the 40~60%+ price rally of 2017 been enough for investors to take their profits and run?

It is quite possible that capital will move to the sidelines through the end of this year and reenter the markets early next year as investors find a better footing for the markets.  The facts are, currently, that financials and transportation seem to be doing much better than the FANG stocks.  If this continues, we could be looking at a broader shift in the global markets – almost like a second technology bubble burst.

If you want to learn more about how we can assist you with your investment needs, visit www.TheTechnicalTraders.com to learn more.  Our researchers are dedicated to assisting you and in helping you learn to profit from these moves.  2018 is certain to be a dynamic trading year – so don’t miss out.

Dividends Attracting People to Energy Stocks

Investors in Wonderland – Euphoria Psychology

One of the most pressing and urgent questions in most investors minds is “how and when will this move end?”.  Many analysts and researchers have postulated the end of this move and we’ve event attempted to time it to some degree.  Picking tops and bottoms is always a risky process.  It is rarely an exact science and often leaves many variables unanswered.

 

Today’s ActivetradingPartners.com article is based on the “Wonderland” concept of debt driven US Fed and Central Bank policies as well as recent news items.  The biggest being that China shocked the world with slower growth recently and that GE’s earnings announcement opened up a “shadow accountability” issues with many.  Additionally, recent news has mentioned that the US markets are outperforming nearly all other markets by multiple metrics.

 

A few months back, we discussed Capital as being a living and breathing entity that continually sources the best environments for growth and opportunity (ROI).  We strongly believe the US market, in addition to a few others like Canada and Australia, may have been a euphoric, central bank fueled, goofy and hallucinogenic world of debt driven capital advancement over the past 8+ years.  The concerted efforts to “save the world” from capital contagion has allowed central banks and governments to inject nearly $20+ Trillion USD into the global markets and has resulted in asset growth metrics that far exceed anything we have ever seen in the most recent 60+ years.  Is this a wonderland of limitless central bank debt and an endless bull-run where consumers will continue to gobble up anything and everything at any price?

 

Evidence of this Wonderland can be found from many sources.  This, the CAPE/VIX Ratio chart, clearly shows the extended levels of asset valuations in relation to previous bubble economies. The expansion of this ration from the 2009 lows is massive.

CAPE-VIX_F

 

Additionally, this expansion correlates directly with the US Fed’s QE and easing activities.  We can see that a majority of this move has been backed by Fed policies to drive economic and asset valuation levels higher resulting in what could possibly be one of the biggest bubble economies ever created.

 

QEchart

 

The most interesting component of this last chart is the move higher after the US Elections.  This move was made without a Fed based QE effort and we believe it was the optimism of a “change” that created this economic “relief rally”.  By comparing this recent move to the previous chart, you will see the increase in the CAPE/VIX Ratio also shot higher after the US elections.

 

In other words, we don’t expect anything massive to disrupt this rally currently, but we are cautious and urge all investors to remain cautious.  When something massive, be it the consumers, corporations, global economic events or other massive events (like war) happen, all bets are off.  This market appears to be in a EUPHORIC “wonderland” moment driven by the fact that the global central banks have created a waterfall event of cheap money that is driving all of this asset valuation recovery.  And, as capital is continually searching for the best environment for ROI, it is consolidating into the best areas of the global economy for survival purposes.

 

psychology

 

What does this mean for investors and global markets?  In our opinion, it means that optimism is outpacing actual production on a global basis and when reality hits, we may be in for a bumpy ride.  Until then, we should continue to be very cautiously bullish and try to ride this out as long as it continues.  We can’t stand in front of a freight train and expect to stop it.  This move may continue for another few weeks or months, but at some point it will “pop” when realty does not match expectations – hence the “Wonderland” reference.

 

Lastly, this graph of the CPI Mean Rate shows that the entire economic recovery has, for the length of the recovery, failed to result in mean CPI levels reaching above 2%.  In previous economic advancements, the mean CPI levels have continued to rotate to levels above 2% while recessions have shown dramatic and extended drops in the CPI ratio.  Yet, the current recovery, briefly, rose above 2% after bottoming and has rotated below 2% for the last 6+ years.  Even though global Central Banks and the US Fed has injected trillions of dollars of capital in an attempt to create inflation, the markets are simply not responding.  The only things that are responding to this effort is the creation of debt (student loans, auto loans, residential and commercial RE loans and corporate financing debt).  The actual consumer economy has been on life support for nearly 8+ years.

 

fredgraph_TrimdMeanCPE_F

 

The Wonderland economy we are witnessing may be the biggest shell game since the South Sea Company collapse near 1720. I would suggest all investors do a little research into this event and the processes that were in place to all it to happen (bribery, collusion, criminal activities and governmental cooperation).  Interesting facts in history are often relived at some points in the future.

 

In short, as long as the capital continues to flow into the strongest and most dynamic economies, those economies will likely continue to see growth and rallies related to this capital activity.  Still, stay cautious because when the markets turn, it could be very quick and violent.  Additionally, as we’ve shown with these charts and graphs today, we are entering a frothy period in the markets and I would urge all investors to be critically aware of the risks involved in being blind to these facets of the current bubble.

 

ActiveTradingPartners.com is dedicated to assisting traders in understanding and profiting from market moves.  We provide detailed trading signals, timely and accurate market research, daily market updates and more.  We focus on attempting to keep our members aware of key market events and attempting to identify accurate and successful trading signals for them each week and month.  If you like this type of research, then visit www.ActiveTradingPartners.com to learn how you can benefit from our services.

 

Chris Vermeulen

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