Warning Signs 01 (Oct 08 - Feb 15)

[winston]

What did the years 1987, 2000, and 2007 have in common with 2014? by Chris Kimble

Click on chart to enlarge

It usually takes an extended bull market to push “monthly momentum” to lofty levels.

The above 2-pack looks at the S&P 500 and the Dow Jones Transports on a monthly basis, back to the early 1980′s. The upper lines represent monthly momentum.

As you can see momentum reached lofty levels back in 1987, 2000, and 2007, before turning lower in the months to come. The rally off the 2009 lows in price and momentum now has reached levels not seen too many times on a monthly basis over the past 30-years!

At the same time momentum is high, both indexes are near some resistance that could become influential to buyers and sellers.

In my humble opinion, monthly momentum is NOT a very good “timing” tool, as momentum can stay high for a period of time… but it can give you an idea of when investments are getting a little “long in the tooth” on a long-term basis.

Knowing this can be very beneficial when it comes to portfolio positioning for long-term monies.

Source: Kimble Charting Solutions

http://thecrux.com/stock-market-alert-t ... again-now/

[investar]

Google searches can predict stock market crashes: Study



http://www.dailymail.co.uk/sciencetech/ ... appen.html

...

'Our results are in line with the hypothesis that increases in searches relating to both politics and business could be a sign of concern about the state of the economy, which may lead to decreased confidence in the value of stocks, resulting in transactions at lower prices.

Associate Professor of Behavioural Science and Finance Tobias Preis added 'the strength of this relationship, using this very simple weekly trading strategy, has diminished in recent years.

'This potentially reflects the increasing incorporation of Internet data into automated trading strategies, and highlights that more advanced strategies are now needed to fully exploit online data in financial trading.”

[winston]

A massive “triple top” could be forming. Keep an eye on this chart. by Chris Kimble

CLICK ON CHART TO ENLARGE

“Triple Top” in this Value Index, followed by a break of support?

“It’s not the odds of an event coming true that are important… it’s the impact if it does!!!”

The odds may be low this is a triple top (nothing proven at this time)… yet if it is, the impact could become important.

Stay tuned to see where this Value Line Index heads from here!

Source: Yahoo! Finance

http://thecrux.com/trader-alert-a-massi ... ming-here/

[winston]

This Signal Just Turneed Red by Christopher Rowe

This is an indication of elevated risk to bulls, as supply has taken control of the intermediate term.

The change occurred because a large number of stocks moved below key support levels, which takes a serious commitment of institutional investment capital. And when institutions make such an important decision, it's vital to know what's happening.

This doesn't mean it's time to bail out. It just means we must be more selective about our positions and take a closer look at which ones haven't been working during market rallies.

Source: Investment U

http://www.investmentu.com/article/deta ... -dVjaM0OZQ

[winston]

Bears are Capitulating in Droves by Harry Dent Jr

Lately, when I appear on CNBC and Fox Business, I seem to face an increasing number of bulls who claim we’re not in a bubble and that we could see the markets explode upwards in the weeks and months ahead. And they can list countless reasons for their view.

What I’m seeing less and less of are those pundits willing to be bearish… and those who have amended their point of view. “If we get a correction,” they say, “it will be minor… 10% or so.”

Does this mean the bulls are right and the bears should crawl back into their cave?

Absolutely not!

In fact, it means the complete opposite. The fact that bears are capitulating left, right, and center is a very bearish sign!

You see, it’s hard to fight a bull market being driven by endless Fed and central bank money printing. And it’s even harder to fight the U.S. stock market, especially when it’s become the only place left to find decent yields and enjoy gains.

But it’s when more and more people get sucked into the euphoria that you know we’re reaching the peak of the bubble. When even the die-hards begin to doubt themselves, that’s when the situation is the most dangerous.

So let’s look at who’s turned tail…

The first uber-bear to don horns was Meredith Whitney in March of 2013 when she claimed she was more bullish on U.S. equities than at any time in her career. This coming from the most prominent forecaster of the crisis at Citicorp, and in the banking sector, in October 2007. She also predicted a major wave of muni defaults in 2010 that didn’t come to pass.

Next was Noriel Roubini, who also warned about the banking crisis before it occurred in 2008. He turned bullish on U.S. equities at the very end of 2013. However, unlike Whitney, he’s still warning of weaknesses and headwinds especially in Europe. (Roubini forecast a painful deleveraging in 2013 that never happened.)

John Thomas, of The Mad Hedge Fund Trader, was clearly bearish between 2008 and 2011. I debated him at a luncheon in Australia in February and he now says we’re on the verge of the next “Roaring 20s” economy.

Now that’s a position I would bet my grandma’s dentures against!

There’s no way such a boom will happen, not least because of the extreme debt levels around the world and the worsening demographic trends ahead.

Ralph Acampora, one of the most prominent technical analysts, turned bearish on U.S. stocks in August of 2013, just after the Dow had hit 15,800. Before that, he called for a 20% correction. The markets dipped lightly, then headed up again and Acampora threw in the towel.

I tell you all of this not to mock these people — I respect each and every one of them — but to highlight two important principles of bubbles (I cover all 10 in Chapter 5 of The Demographic Cliff, page 146).

Principle #7 states: Bubbles become so attractive that they eventually suck in the skeptics.

Principle #8 states: No one wants the “high” and easy gains to end, so we go into denial as the bubble evolves, especially in its latter stages.

So what we have now is almost all economists and analysts, including those who were once bearish, mulling around in the bull pen. And like I said, that’s exactly what you would expect to see in the very latest stages of a bubble.

That’s why it’s so important you stay as objective as possible. Don’t let public opinion sway you.

We could reach the top of this bubble as soon as late-August. The potential gains still available to you are now only about 2% to 4% while the potential downside is approaching 65% or more.

This is not a time to invest blindly. Finding and sticking with a good investment strategy is the only way to go… especially now.

Remember, if it looks like a bubble, walks like a bubble, and quacks like a bubble… it’s a bubble.

Source: Economy & Markets

[winston]

Buffett’s Market Indicator Flashes Red, Prepare To Sell

By David Sterman

1. Some investors like to compare the dividend yield on the S&P 500 to federal fund rates. The current dividend yield stands at around 2%, higher than short-term interest rates. Still an eventual upward move in short rates will pressure this valuation gauge.

2. Other investors like to see how stocks are trading in relation to their private market value (i.e. what they would likely fetch in a buyout). Private equity historically acquires mature business at 4-to-6 times trailing cash flow, and growth businesses at a somewhat higher multiple. Fully 83% of the companies in the S&P 500 are trading for more than eight times trailing cash flow.

3. Other investors like to focus on EPS growth. Per share profits have been enhanced in recent years by massive share buybacks — a trend that may not last. If buyback activity cools, underlying net profit growth will come into greater focus. Many companies in the S&P 500 are seeing profit growth slow to less than 10% as the low-hanging fruit of streamlining efforts disappear.

4. Warren Buffett thinks that the combined value of all stocks — as measured by the Wilshire 5000 Total Market Index — should be worth less than the Gross Domestic Product (GDP) of the U.S. economy. And this ratio has typically generated a sell signal whenever it gets out of whack. It happened in 2000 and again in 2007, and though the market marched higher after crossing that threshold, the 12-to-18 month outcome was fairly bleak.

Unfortunately, we’re back into the danger zone. The stock market’s total value surpassed GDP in March 2013, and is already beyond the point it stood in early 2008, just before the last major market pullback.

As this chart from financial blogger Doug Short shows, the market is now more than 15% overvalued, at least according to Buffett’s gauge. This gauge actually rose above 135% in 2000, and the dot-com melt up turned out to be a painful experience for most investors.

Source: StreetAuthority

http://www.thetradingreport.com/2014/09 ... e-to-sell/

[winston]

Warning Flag: Signs of a Top are Building by Harry Dent Jr

The best analogy I’ve heard for bubbles and why they ultimately burst, is the example of dropping grains of sand that build a mound. It gets steeper and steeper until one grain of sand causes an avalanche.

You can clearly see when the mound is getting steep, but no one knows when the final grain will set it all into motion. I’m seeing growing signs from several angles that an avalanche is about to occur.

Adam is heavily monitoring small-cap stocks as they continue to underperform the large caps as investors get more selective toward large caps at almost every major top — especially bubbles.

Take a look at Alibaba — the greatest IPO in history that buried Facebook’s performance of a few years ago. That event can be compared to the cities with accelerated growth constructing the tallest buildings in the world just as real estate and major economic tops occur…

The examples are many: the Empire State Building in 1930, the World Trade Towers in 1972, the Petronas Towers in Kuala Lumpur in 1997 before the Southeast Asia crash, and now, the Freedom Tower in New York. The Shanghai Tower was just completed and of course, there’s the Burj Khalifa in Dubai.

Margin debt and speculation are at record highs, greater than in early 2000 or late 2007 when the last two bubbles peaked. The Dow Megaphone pattern with higher highs and lower lows is reaching its likely final E-wave peak around 17,300 as I’ve been forecasting for the past two years.

Markets can continue to edge up, but with likely very little gains unless they break decisively above this upper trend line. This very ominous pattern makes me think that it’s not likely.

See larger image

The Dow went up 33% from late 2012 into the end of 2013, in just 13.5 months. But this year, the Dow is only up 4.2% in nine months. This is another warning and vindication of the megaphone pattern thus far.

I wrote an article last week about massive denial from economists and analysts alike; who come on one after another and declare this isn’t a bubble because… stocks aren’t that overvalued compared to past major peaks.

Okay, here’s my question — what major peaks? We’re at levels that compare with most major peaks in history in price-to-earnings ratios (P/E). Robert Shiller has the better indicator and it takes the cyclicality out of the earnings and shows that we’re above peaks dating back to 1902 and all the way up to 1987. We’re closest to 2007’s peak. Only the extreme bubbles with the best demographic and geopolitical cycles in 1929 and early 2000 are higher.

But you can’t compare today with the massive geopolitical risks and rapidly declining demographic trends with 1929 or 2000 when such trends were the most positive!

Buying power has been sluggish as occurs in major tops as measured by Lowry’s and selling pressure is starting to rise, but there’s a huge factor missing so far… an accelerated rise in selling pressure.

I think that is due to investors coming to the ominous conclusion that the Fed just won’t allow the economy or markets to go down much. In other words, have no fear.

That’s definitely not a good sign!

No fear is another major sign of overvaluation, but then when the first sign appears of something going wrong, it creates a major shock and reality reset. Our demographic and geopolitical indicators strongly suggest things are going to go wrong ahead — as do our boom/bust sunspot cycles turning down in 2014 for the first time since early 2000.

Add to this scenario that economists and analysts continue to cite the rises in earnings, GDP and jobs growth as the reasons that the economy is doing fine and there won’t be a recession or downturn ahead.

I’m listening to Jeremy Siegel as I write this and his view is that stocks are not overvalued and will continue to go up for years as there is no recession in sight. I would ask if a recession was insight when stocks topped in early October 2007?

I love academics and Siegel is loveable… but don’t listen to him.

Good trends always occur into major tops. How did Japan look in late 1989? How did the U.S. look in late 1929 or early 2000 or even in late 2007, for that matter? The good trends don’t necessarily mean a downturn or crash is imminent… but looking back at history, they’re clearly not a reason to say that a downturn can’t happen.

You’ll rarely see major tops by looking at short-term economic indicators.

Normally the smart money is the first sign that a major top is happening as they sell into tops and buy into bottoms. There are initial signs of that with buying power waning and small caps underperforming, but not as clear as in past tops.

More affluent households who are larger investors have the same affliction as the smart money — no fear due to faith in the Fed and artificially rising markets that have made them richer than ever.

I think that most Homer Simpsons may be better off than the smart money here — as they don’t see a real recovery in the first place.

That’s why selling pressure is not as high as it could be here in the final stages of this great bubble. This could be the secret indicator that does not flash as clear or bright a sell signal. Even the smart money tends to miss it at first. We’ll see.

So, we advise you to sell stocks on every rally in the weeks and months ahead in your 401(k) and passive investment models. For those following Adam O’Dell’s active strategies in Boom & Bust and Cycle 9 Alert, stick to his game plan. He’ll make tactical adjustments as they become necessary and he is increasingly on alert.

We don’t know when that final grain of sand will drop — but it’ll create an avalanche when it does drop. Bubbles don’t correct, they crash!

We continue to advise that it’s better to get out a bit early than too late. I still see very little upside from here and a huge downside of a possible 65% drop on this Megaphone Pattern.

Be warned and have the courage to act decisively… protect your assets!

Source: Economy & Targets

[winston]

These 4 Stock Charts Say You Should Worry About a Market Crash

It may not be the beginning of a bear market, but this growing weakness isn't anything to dismiss

By James Brumley

Bottom Line for Current Stock Charts

There’s never a guarantee of how a single stock — or the entire market — will move tomorrow. But trading is about reading the clues and weighing the odds.

Unbiased technical analysis of all the major stock charts says the market has most likely gotten itself into a pullback that now has to fully play out with more of a correction than we’ve seen thus far.

It may not be a true bear market, but it’s certainly nothing that’s going to go unnoticed by any type of trader or investor.

Source: InvestorPlace

http://investorplace.com/2014/10/stock- ... C8mm1c0-hU

[winston]

Three Bear Market Signals Triggered by Mike Turner

ONE: The market’s daily swings have become more pronounced.

TWO: These large movements are becoming more frequent.

THREE: Small-cap stocks are getting hammered.

Source: Signal Investor

[winston]

Five of the world’s biggest markets are breaking down now by Chris Kimble

This morning the IMF lowered its forecast for global growth.

Are they attempting to lower the bar on expectations going forward? Do they know something we don’t? Should one pay attention to forecasts or prices?

CLICK ON CHART TO ENLARGE

The above six-pack looks at a few key global stock markets. As you can see, five of the six are breaking support lines. At this time, the S&P 500 remains above support. Will it be able to “buck the global trend?”

The S&P 500 and the DAX index have been the strongest of these six over the past few years, keep a close eye on what they do in the upcoming weeks!

Source: Kimble Charting Solutions

http://thecrux.com/trader-alert-five-of ... 37gMXBU%3D