Saturday, May 9, 2015

Wedbush: Stock market is at a major top

If you’re an individual investor, it’s time to steer clear of the market warns the Head of equity trading at Wedbush Securities, Ian Winer.

“Ultimately, there’s a real issue going on in the market place” said Winer - “so people need to be very careful here and look in their portfolios and know what they own and why they own it.”

This is a tough time for investors with the S&P 500 stock index (^GSPC) having nearly tripled since tanking during the financial crisis in March 2009.

Federal Reserve Chairwoman Janet Yellen chiming in saying stock valuations “generally are quite high” added to jitters. Debt market investors also experienced a volatile ride when bond yields in Germany shot higher Thursday before retracting.

What Yellen says matters a lot when the markets have held up, largely in part by liquidity generated by central banks.

Winer referenced BlackRock’s CEO Larry Fink’s remarks on companies spending on their own businesses - ”what we’ve seen is a lot of financial engineering, a lot of liquidity from central banks and ultimately, it hasn’t equated to any earnings growth this year.”

Winer is convinced stocks will drift lower this year, “we’ve entered the possibility that 2015 S&P earnings are going to be below 2014 S&P earnings.” He’s forecasting the S&P 500 at 1800-1900 by the end of the year saying “we are at a major top.”  (video)

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Canadian and Australian Dollars Look Bullish. David Gurwitz – May 6, 2015

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Peter Eliades & Chris Waltzek on GoldSeek Radio – May 7, 2015

by Chris Waltzek
GoldSeek Radio

Peter Eliades of Stockmarket Cycles, presents an intriguing scientific discovery – his work has uncovered a formula that appears to govern financial market mechanics, in particular, the US equities market. According to the findings, a particular angle of ascent or slope has lead to a market zenith for nearly 14 consecutive years. He presents the precise slope angle and a simple means to calculate the trendline (slope = 68.3 / 238 days = 0.28584) for virtually any forecasting chart. Since 2002, the market has failed to close over 1.1% beyond the trendline and then subsequently declined sharply. On Monday, May 4th, the model registered a key stock market top, with the proviso that no construct is perfect.
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Stock Market Analysis

The major trend line on the chart below must be broken in a big way before a full blown bear market will be confirmed. This is still months away at best so do not worry. The AlgoTrades INNER-Market Analysis will get us positioned when the time is right and enable us to profit as the stock market falls in value.
Your long term equity investments can continue to be held at this point. Speculative and momentum stocks (Russell 2K index) continue to show weakness, so I would stay away from them. Large cap stocks will likely be in favor as the safe haven “blue chip” stocks, but when the market is ready to roll over, all stocks will fall. The safe haven plays should be bonds, gold, and inverse ETF funds.
We do fear a US dollar currency crisis, and if so investors will be moving away from US investments and the massive bond bubble may burst. But at this time, it is not a concern.

S&P 500 Quarterly Chart – BIGGER PICTURE

This chart I feel provides a great perspective on the overall market trend and price patterns. This is the 70 year prospective. I hope something like this unfolds. Fingers crossed to a 12 month correction/bear market. This will build the new base for the next super cycle.
US Dollar has now reached the upper resistance trend line… we could see weakness in the dollar going forward…

The Risk-Off Trade Is Slowly Unfolding

The S&P 500 index is losing its momentum. Money has been rotating into Bonds and global markets for a year in anticipation of the stock market correcting.
With six months of the SP500 index trading sideways we have had to focus on some other areas to find opportunities. Some recent winners have been long oil with UCO, long live cattle with COW, long Russia via RSX, and long Japan with EWJ.

The Fear Index & Big Trend Analysis

The VIX index has been trading at low levels for a few years. This suggests that fear is low, complacency is high, and that SP500 is becoming vulnerable to a stock market correction.
In the chart below, I have placed the VIX index above the stocks trading above the 200 day moving average. As the number of stocks trading above the 200 day moving average falls it’s telling us that fewer stocks are moving up in value while the broad market climbs. This is bearish.
This provides a great visual of how falling markets correlate with investor fears. While overall market breadth remains strong, a change in the VIX often provides an early warning sign of potential danger.
“When The VIX Is Low Its Time to Go, When The VIX Is High Its Time To Buy”

Stock Market Rises with Fewer Stocks – RED FLAG

Since mid 2014 the US stock market has become move volatile. Fewer stocks participating in the markets move up. This can be seen by comparing the percent of stocks trading above their 200 day moving average and the S&P 500 index.
When a stock market stalls, which is what it appears to be doing, the movement is comparable to that of how an aircraft stalls. It slowly continues to rise, things become choppy/unstable, then it drops and picks up speed trying to regain stability and control.
Once the stock market or an aircraft come to a complete stall they both end with a violent drop. While I am not calling a top yet, understand each month we are getting closer.
An analyst and trader I respect talked about how the Dow Jones is flat for the the year, yet investors think big profits are bing made. But in reality we have not seen real gains and the broad market expand in months. More investors are bullish now than we have almost ever seen according to Investors Intelligence Survey with a whopping 57% of investors bullish on stocks.
The CEO of Ameritrade said that almost all of their 6 million traders/investor account are completely invested in stocks, and are leveraged using margin also. This is the ultimate contrarian warning sign of a bear market should begin over the next few months.

INNER-Investor Monthly Conclusion:

The great thing about being an investor is that the analysis and trends move relatively slow. We do not buy at the dead low, nor do we exit at the high, and sometimes we get shaken up during tough phases in the market like the second half of 2014 and first half of 2015.
I’ll be honest, the second half of 2014 and first portion of 2015 has been exceptionally tough to generate profits.
Winning streaks, and losing streaks are just part of investing and it happens to everyone and every strategy as the market has difference market phases and characteristics.
I believe the second half 2015 is will provide great opportunities and we will close the year out with decent gains.
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AvalonBay Communities Inc (NYSE: AVB)

AvalonBay Communities, Inc. engages in the development, redevelopment, acquisition, ownership, and operation of multifamily communities in the United States. As of January 31, 2009, the company owned or held a direct or indirect ownership interest in 164 operating apartment communities comprising 45,728 apartment homes in 10 states and the District of Columbia. It also held a direct or indirect ownership interest in 14 communities under construction, as well as held rights to develop an additional 27 communities. The company’s markets are located in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Midwest, the Pacific Northwest, and the Northern and Southern California regions of the United States. AvalonBay Communities has elected to be taxed as a real estate investment trust and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders.
Take a look at the 1-year chart of Avalonbay (NYSE: AVB) with the added notations:
1-year chart of Avalonbay (NYSE: AVB)
AVB may be forming a bearish chart pattern known as a double top. Double tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T).
AVB appears to have formed the double top price pattern (blue) over the last 3 months. As with any price pattern, a confirmation of the pattern is needed. AVB would confirm its pattern by breaking the $163 support (red) that was created by the double top pattern.

The Tale of the Tape: AVB has formed a potential double top. A short trade could be made on a break of the $163 level. Since there is no guarantee of a breakdown, a long trade could be made at $163 if a trader is willing to disregard the pattern.
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Catherine Austin Fitts - Major Turning Point Comes This Fall

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Rising Crude Hitting Market Resistance – Chris Vermeulen – May 6, 2015

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