Monthly Archives: April 2019

The Great Tech Bubble Indicator

The PHLX semi-conductor sector index has always been the great tech bubble indicator since the advent of the semi-conductor sector.  Every tech bubble was led by the semi-conductor sector.  The present stock market rally has all the hallmarks of a pending tech bubble.  So we went back to look for a time when PHLX semi index made an all time high.From the October 1998 four-year cycle bottom, the PHLX semi index rallied 134.47% in 15 weeks.  It only took 7 weeks from the October 98 bottom to take out the all time high that was previously made in August 1997.  From the weekly cycle top in January 1999, it only corrected 19.22% to make the weekly cycle bottom in March 1999.  From the March 1999 bottom, it traded sideways for 12 weeks, then it blew up 294% to make the dotcom top in March 2000.

The present rally in PHLX semi index took out the all time high that was made in March 2018 in the week of 04/05/2019.  It only took 14 weeks from the December 2018 bottom to make that high.  So there are plenty of similarities between this rally and the October 1998 rally.  We don’t know with certainty that if we are going to have a dotcom 2.0, but we do know something is up.  Despite the warnings from Texas Instrument and Intel about the weak fundamentals in the semi-conductor sector, the market is fully discounting the warnings.

On the political front, we can’t ignore the repeated messages from the White House about the need to lower interest rates.  The administration is working very hard at ramping up the stock market to gain advantages in the coming re-election.  All factors considered, you just have to follow the flow and buy all the dips.

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Sell in May and Go Away

2019 is on target to be the fifth best year-to-date performance through April since World War II.  There has been a trend since World War II that a best performing first four months may presage the “sell in May and go away” phenomenon. This coming week is the busiest week for earnings report.  The earnings data

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Top is Made When You Can’t Take It Anymore

It has been 74 trading days since the December 2018 bottom.  The sheer amount of bullishness in the market is unrelenting, even the speculative asset Bitcoin rose over 30% in the last few weeks.  It seems like the investors are rotating into any asset classes that have been left behind the rally. 

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Racing for the October 2018 High

The relentless market has surprised a lot of people on the upside.  The December selloff was painful, the rise out of the low has been equally painful.  It has caught a lot of professional speculators such as the hedge funds unprepared.  Normally the market bases for a period of time around the low, seldom it pivots so quickly that produces a V-shaped bottom.

Indeed we have a V-shaped low and it is racing to take out the October 2018 high.  The October 2018 high is a 4-year cycle high, once this high is taken out, the previous 4-year cycle low is confirmed and the new 4-year cycle low to high rising phase will last at least until November 2020.  As we blogged before, we are currently in the middle of a 17-year cycle that is similar to the period of 1982-2000.  This December 2018 low is a 4-year cycle (February 2016-December 2018)  low and a half cycle low of the 17-year cycle (2009-2026).  We have steadfastly maintained a long term bullish outlook.  We have been looking very hard for entry points to deploy fresh capital for investment opportunities.  The indices continue to blow out resistance levels and now are marching for the old high.

It is 14 weeks into the current weekly cycle and it is very close to the old October 2018 high.  We still maintain the stance that the market is not going to breakout from here and enter a point of no return zone.  It will encounter resistance at the old high and enter a correction to reach below for the 200-day moving average. Back in October 1998, it made a 22.45% correction in 11 weeks to produce a 4-year cycle low, then it only took 7 weeks to take out the old July 1998 high, which was  a 4-year cycle high then.  The October 1998 4-year cycle low was confirmed in 7 weeks.  It then entered a point of no return zone to create the dotcom bubble.  This time it has spent 14 weeks already and it still hasn’t taken out the October 2018 high yet, and we are not foreseeing a dotcom bubble in the next two years, therefore this December 2018 low is very similar to the March 2009 and February 2016 lows.  It will experience a correction to provide entry points.

We have identified a few growth oriented investing ideas that are still in the early investing cycle.  We have conviction in these three companies that will be disruptive forces in the coming 4-year cycle.

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