Thursday, December 14, 2017

Waiting for the new tax year

Once the new capital gains rate is in for 2018, no one has any incentive to hold stocks at these elevated bubble levels.


The top of the terminal wedge is at 2715 on December 27th.  I want to propose now that the Fed will pull their strategy to shrink the balance sheet at the July-Aug meeting.  This will stabilize the situation until the end of the year.

SPX May 2018 crash

51 comments:

T.Berry said...
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T.Berry said...
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Kevin Wilde said...

That fits my view of one more week of rally to complete wave 2 for the semis before the crash, though Martin Armstrong thinks we have to complete a larger blow-off before we reach the grand reset phase
https://www.armstrongeconomics.com/markets-by-sector/stock-indicies/dow-jones/the-dow-trump-tax-reform/

Hugh Jazole said...

"Once the new capital gains rate is in for 2018, no one has any incentive to hold stocks at these elevated bubble levels" Most of my trading is done with 401K money.

Hugh Jazole said...

Oh man, UVXY. Under 10 by early 18?

Christian Gustafson said...

What you want to see in UVXY now, Hugh, is vol being bought as we make our way to the top -- 2715?

Hugh Jazole said...

I'm keeping a very close eye on it. I've avoided it like the plague so far, but it's slowly becoming a near sure thing short term.

Bryan Franco said...

High yield hasn't made new highs with market in a while. Some important divergences setting in. Small caps lagging again. Now we need CG's vol buy and KW's semiconductor wave 2 up completion.

Christian Gustafson said...

We are at a dicey little moment for "headline risk" as well.

Can any coven of Senators still kill the tax cut plan?

T.Berry said...

my take on tax cuts, they will give a nice boost to an already strong economy. once tax cuts kick in, consumer(already at record levels of wealth as 401k's & stock portfolios have never been worth more) discretionary spending will go way up even more, companies will hire and spend bigtime on cap ex along with increasing their stock buybacks (they have already made small fortunes doing so over the past 4-5 years). a recipe i believe which could lead to the economy overheating that may possibly lead to a correction in stocks up to as high as 10% . as for the fundamentals, they continue to look good and are getting stronger.


the move towards dow jones 40,000 is getting shorter : )

dow jones 30,000 is only 20% away!

87 new all time record high stock market closes in the past 13 months.

T.Berry said...

hugh, uvxy will be over 40 in 2018

T.Berry said...

naz only 1% from 7000. 6850 wasn't much of a match.

T.Berry said...
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T.Berry said...
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T.Berry said...

hugh, uvxy is getting close to your buy under 10.00. i wouldn't rec holding that one too long. it's been in a downtrend for over 7 years. i dabbled in tvix back in sept and lost a quick 7.5% in about a week. since i sold at 11.50 it's lost another 50% in just over 2 months. hedging in a secular bull market ,not a good strategy, doesn't work.

Kevin Wilde said...

Load up on hedges and shorts once SMH completes its Elliott C wave of wave 2, somewhere near the SMH 104 level. If we see that on day 4 of a cross above the 50 day MA (currently just beneath that MA,) then it would be a near perfect match of the NAZ in 1987. Short at that point, and put a stop above prior highs for SMH, tis the plan. So a few more days of financial summer, then prepare for the white walkers on Wall Street.

Stockboom said...

T.Berry,

When you say UVXY will be over $ 40 in 2018, you mean with the reverse split correct? I can't imagine, UVXY will go from $ 10 to $ 40 without reverse splits....multiple RS...

T.Berry said...

yes stockboom, uvxy will be splitting again. only 7 years ago uvxy was trading at over $33,000+ (reverse split adjusted) that trend isn't going to change for quite a while.



nas 7,000! good thing we made it past the 6850 crash number. whew! now just 14% more till 8,000. give it 12 maybe 16 months.

next up s&p 2,700 and dow jones 25,000!

T.Berry said...

stockboom, want an easy way to make $$ short vxx it's easier to short than uvxy. i was given that as a tip about 2 years ago from a person who knows the market pretty well and has made a small fortune shorting it. its probably closer to a bigger fortune now

Stockboom said...

T.Berry,

Thanks. Dont you think at this low level VIX prices, shorting VXX would not be a great idea?

Thanks

T.Berry said...

not really stockboom as vxx or those similar have been in such a powerful 8 yr downtrend.

no matter how high the vix has spiked during the past 8 years vxx has always continued towards zero. more or less a long term hold in which you have never had to cover. back in march of 2009, vxx was over $118,000 (split adjusted) and today barely above $27.00.

not giving investment advice you decide.

T.Berry said...

70 new all time record highs so far in 2017. that works out to 1 new all time record high every 4 trading days.

nah, it' not the strongest secular bull market in history. nah, the fed didn't get it spot-on this time

T.Berry said...

edit--and 2017 was a perfect 12 for 12. the stock market was up every month in 2017. thats never happened before.

Kevin Wilde said...

If you put the current NAZ overlaid over past high risk blow-off phase, such as 1987, 1998, 2007 - which I do every Friday using weekly closing data - the current NAZ is at the exact spot where the top landed and the slide began in 1987, and at a level where other blow-offs peaked, such as 1929 and 1998. SMH looks like it still has a few more days of rally to go to complete its wave 2. Last we saw a major wave 2 like this going into Christmas week was the last blow off bull phase that died - 2007. Yep, the slide began in earnest after December 24. And here we are again, and just business as usual as blow-offs peak ahead of life-changing major bear market.

T.Berry said...

hugh, you in uvxy now that it's below 10? if so, hopefully its a light position. uvxy and it's cousins tvix & vxx have been absolutely the worst stock market investments ever. they have lost more investor money than any other stock or etfs.

uvxy has gone from $35,304 on 10/03/2011 to currently $9.94

tvix has gone from $19,695 on 11/29/2010 to currently $5.43

vxx has gone from $100,044 on 2/02/2009 to currently $27.56


holding any of these more than a week or so is almost guaranteed loss so be very careful. if you have to hedge stay away from these

Kevin Wilde said...

SMH looks like it wants to close above the 50 day MA today. If so, top in next Monday near SMH 103 to 104 area. That's the exact topping pattern back in 1987. SMH news highs at 106 needed to keep me bullish on the broader market. 10% chance of that happening, 90% chance we top early next week, and we do the 1987 thing.

Hugh Jazole said...

Bitcoin will lead the way into the glorious bear of 2018.

T.Berry said...

you really think that's taking down this market hugh? bitcoin just crashed almost 50% and the dow jones hit it's 74th new all time record high for the year.

free beer tomorrow

Kevin Wilde said...

It's a repercussions of an bubble asset that falls hard in value that brings the financial house down, due to margin calls. I would be shocked if this week's plunge for Bitcoin doesn't force some major entity to go BK. Depending on the degree of losses determines whether they have to sell all their other assets, such as stocks, or not.

Hugh Jazole said...

Merry Christmas UN!!!

https://nypost.com/2017/12/25/nikki-haley-negotiates-285m-cut-in-bloated-un-budget/

T.Berry said...

stockboom,
today is a great example of why you can short vxx and the like and always make $$$$.

markets are all down yet so is vxx down even more than the markets. hedging with these is like throwing money out the window. they're all zeros even more so in an epic secular bull market that we're in.

Hugh Jazole said...

Now we're getting somewhere. 52% bullish. Those who have been neutral are finally picking a side!

http://www.aaii.com/sentimentsurvey


T.Berry said...

whoah! the dow jones is now up over 5,000 points this year : )
those selling ahead of the new tax rates were outnumbered by smart money that was buying this week knowing the stock market is going way higher over the next several years. the dow jones has never in the history of the stock market finished higher.

what a year : ) naz up 30% , dow +28%, s&p +25. And heading into 2018 with some serious momentum. with consumer spending at record highs in 2017, they’ll only get better as consumers see a huge tax cut and the us consumer is already the strongest in the world. 2018 should see continued strength in hiring as corporations will benefit greatly from tax cuts as well. this will be another benefit to consumers as the economy is near or at full employment, wages will rise. corps will also ramp up cap ex spending which will only continue to strengthen the economy. in addition, i believe corps will continue buying back stock. and why not? stocks still have plenty of upside left (5th inning of a secular bull). the us economy will continue to be the strongest on the planet and the us market will continue to be the market of choice for both domestic and international investors. there isn’t a better place to invest. if international money decides to increase their us exposure, that will only provide a little more upside juice to us stocks.

the economy is on solid footing now and has been for the better part of ’17 and hitting stride. with that comes 2018 targets. once again going to err on the conservative side with the dow jones hitting 28,200, s&p hitting the big 3,000 and naz coming in at around 7,880. some of the sectors that should do very well under the new tax cuts-==tech, banks & small caps. given all these positives, there is a chance and I do believe we may see 6-8% pullback which would be very healthy. as for a crash, just remember, circuit breakers, the fed and the donald.

the big wild card for upside to the above targets is when in 2018 congress pass the infrastructure bill. this is going to a huge boost for the economy. depending on the timing, it will be off to the races across the board for stocks. if it passes in q1 upward revisions to the targets will need to be made.

happy new year to all and best for 2018

Kevin Wilde said...

Years following big up years are usually churn years. Traders will want to sell in January, buy the sell-off into March, sell a summer high, buy the lower lows for the year in September/October. Where those March and October lows are will dictate whether we remain in a bull that hits new highs by year-end 2018, versus in a big bad bear. Conservative investors should remain heavy in cash till October, then buy. One should a show-me approach to larger melt-up or crashing bear - then trade accordingly - and trade the churn model till proven otherwise. Buy and hold making money next year approx. a 33% probability of not delivering the disaster that awaits them.

Hugh Jazole said...

BPSPX at an amazing 80.60, don't think I've ever seen it this high.

Kevin Wilde said...

SMH remains the key. When SMH was near $96 I pointed out the 5 wave down pattern, which has very bearish implications in the intermediate term. I said to expect a 3 step partial recovery rally targeting the $105 level, which I later revised to $103-$105. I said to expect that final run to be a 4 day rally across the 50 day moving average (blue line in chart below.) I said such a rally for SMH would do wonders for the broader stock indexes, especially the NASDAQ. It appears today will be day 1 of that expected 4 day push, which puts the top of the bull market next Monday. I would short at that point - if SMH rallies for 4 straight days above the 50 day moving average and is sitting near the $103-$105 level. New highs nixes this super bearish pattern, thus I would use a close above the $106 SMH level as a stop (out of short positions) and go long. So great opportunity to short, with limited risk (small loss) if SMH makes new highs.

Bryan Franco said...

KW. Watching exactly that. This tech thing really puts us on the "dark side of the moon" in a way.

Bryan Franco said...

KW. SOXX has that nested 1-2, 1-2 look northward. Needs to exhibit imminent weakness to keep the bear case alive.

Kevin Wilde said...

I have that as an A and B wave of an A-B-C wave 2. I expect 3 more days of rally. Then we should see the bear strike for real. If SMH hits new highs during those 3 more days of rally, then such exhibition of strength would keep the bull alive. 4 day rally above 50 day MA while in this position is exactly what transpired in 1987 to complete the top pre-crash.

Christian Gustafson said...

From 2714 back to the 1810 low would be precisely a 33% decline.

One-third off.

Hugh Jazole said...

I'm thinking more like 13% decline this summer. 33 would be lovely though. 66 would be even better!

Bicycle said...

my current favorite targets are a pin high ~2740 this week,

~2747 around Jan 16, mid-month,

and ~2758 Feb 1.

the TL that those match up to was rediculously strong support from '87 - '08 and should be very tough resistance.

Hugh Jazole said...

I believe this is the highest level of bullishness/complacency I've ever seen. CAPE ratio just tagged 33! Historic times fellers.

http://www.multpl.com/shiller-pe/

pb said...

We don't care bout no Stinkin CAPE/Ratio. We got the Bank of Japan, the Swiss National Bank and all the Euro Trash fueling this Bubble of Doom.

Kevin Wilde said...

Yep, but currencies can flip the other way when everyone moves to one side of the speculation boat. Currency movement is what will kill this bull and deliver the next collapse and crises.

T.Berry said...

couldn't ask for a better start to the new year. 4 straight all time records highs. plus fastest 1000 point move in dow history. if this keeps up i'll be revising my targets higher. long term holders need not worry anytime soon. the last 4 times the s&p was up over 20% the following year was up double digits.

we made it through the fall crash and the 6780 naz that would have triggered the 80% correction. markets are calm & steady but watch out there is a chance to see a 6-8% pullback at some point this year. i'd give the odds better than 50%.
keeping targets as of now:

dow 28,800
s&p 3,000 (almost a lock)
naz 7,880


ps stockboom, since the 18th in 12 trading days a vxx short returned over 5.3%. that's about as easy a money as you can make in this bull.




T.Berry said...

mkts up 2% and the effects of the tax cuts haven't hit yet. record corp and consumer spending coming up in 2018. and when the infrastructure bills pass, look out above

Kevin Wilde said...

SMH hit my 103 target (hey, not a bad trade, buy at 96 looking for 103-105,) with Monday day 4 of the (expected) 4 day rally above the 50 day moving average. Thus, SMH high on Monday marks THE top of the entire stock market. Sometimes the open marks the top - thus bear starts at the open Monday - and sometimes the top lands going into the close. Either way, top Monday. (Unless SMH hits new highs above 106, then bull accelerating - though that is not expected.)

Kevin Wilde said...

SMH completing day 4 rally on Monday fits the 1987 pre-crash pattern, and where SMH goes, so goes the broader stock indexes.

Kevin Wilde said...

Bubble Watch:

Visit website below and scroll down to view how current bubble looks when compared to past ones.

https://realinvestmentadvice.com/exuberance-marks-start-of-2018-01-05-18/

T.Berry said...

Nas 7336 wow already 500 pts past the high