Category Archives: Member Only

The Unusual Madness

The stock market usually is chaotic and full of madness.  This time with a Twitter happy President, we have had unusual amount of madness that can make anyone dizzy.  The President’s economic policies are totally geared toward manipulating the stock market with the end goal of re-election in 2020.

This is evident with the passage of the Tax Cuts and Jobs Act of 2017 in December 2017.  Normally a fiscal stimulus is not deployed after an extended period of easy money policy, it is reserved for bad economic times to save the day.  The market was anticipating the good news in 2017, therefore it didn’t even have a 5% dip throughout 2017, which is quite unusual.  The equities surge in January 2018 promptly produced a two-year cycle top.  The market was sucker punched between the trade war and rate hike in 2018. Therefore the 2nd half of the four-year cycle was cut short, it couldn’t surpass the first two-year cycle high and only lasted seven months from February to September 2018.  The four-cycle that started in February 2016 ended in December 2018 with a total of 34 months.  The presidential economic policies definitely shaped how the four-year cycle played out.  It produced a rare four-year cycle bottom in December which is totally against seasonal tendencies.

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Get Ready for A Tough Summer

Since the beginning of the breakdown of the trade war negotiation, the S&P 500 index only suffered a decline of 5.17% from high to low.  Despite the severity of the consequences of a prolonged trade war, the investors refused to believe the reality.  The S&P 500 made a temporary bottom around 2801 level on Monday May 13th,

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Embrace The Much Needed Correction

The market has been so bullish since the December bottom that even with the worst kind of announcement about the trade war, it refused to believe that the reality is finally here.  The major indices suffered only minor damages.  Last Friday the market had an intraday bullish reversal indicating it should go higher on Monday.

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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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