The Parabolic Melt-up Move Higher is Here. All Time Highs in US Equities. 5 Year Highs in Gold. Just Getting Started.
/Following Wednesday’s Fed meeting, where J Powell finally admitted that the Fed got 2018 completely and terribly wrong, US equity markets are celebrating the Fed’s apology this morning. DJ +230 with precious metals and the miners breaking out across the board. All time highs this morning in US equities and 5 year highs in gold.
The parabolic melt-up move higher that we’ve been expecting is here. This is why we own our 3 x leveraged ETF’s (learn what they are with our 2 week free trial at vrainsider.com). We want to be on the right side of the market with maximum leverage and exposure to the highest returns possible, using dollar cost averaging to build our positions. I have no interest in keeping up with the market. I want to crush Mr. Market, absolutely and completely. It’s the VRA approach to funding our financial goals.
Let's jump back to the Fed for a minute. Ok, Powell didn’t actually apologize. Not literally. But come on…we all know how grade schoolishly wrong the supposed best and brightest economists at the Fed have been. With their track record, should we really be surprised?? No…we should not.
Once again, like it or not, Trump had this exactly right. US interest rates should have ALWAYS been lower. As in, much lower, as we’ve made the case here at the VRA for some time.
Gold traded as high as $1395/oz overnight. 5 years highs. Just getting started. Last trade here $1385, +$35. GDX (Miner ETF) has broken out as well. Last trade here $24.80, +3.4%.
This 8 year chart of GDX tells all. GDX has broken a primary downtrend line, which now serves as support. There’s a triple top at $25 that has to be dealt with and we’ve reached extreme overbought levels on stochastics, meaning a further ST move higher could be constrained. And volume…its building…but its nowhere near the volume we saw in the 2016 breakout (which we called *exactly*). Bottom line, gold/silver and the miners have now officially broken out.
Remember, in bull markets of scope and size…like the one that is beginning in PM’s… we want to own the highest leverage plays possible.
Long and strong folks…long and strong. This will be the PM/miner bull market of our times.
VRA Investing System Upgraded to 10/12 Screens Bullish.
It became clear this week that an upgrade to 10/12 bullish screens was in order (from 9/12 bullish screens, which had been the reading since late January).
Below are the 12 VRA System Screens, 70% fundamental and 30% technical. All 8 of our fundamental screens are now bullish. A more accommodative FED plus all-time highs in market internals (breadth), combined with a booming US economy place all fundamental screens in the bullish camp.
Our technical screens had been a bit of a mixed bag of late. Then, earlier this week, the Russell 2000 broke through its 200 dma on solid volume, as the broad markets confirmed the move with 1%+ moves higher across the board, led by technology and industrial stocks, with stellar internals of 3:1. Just what you want to see, assuming you are bullish. We could hardly be more bullish.
While our short term momentum oscillators (stochastics) are hitting overbought readings, we have yet to see euphoria spill over into RSI and MFI. We would like to see the transports trade better…this important group remains beneath its 200 dma, albeit by just 1.5%.
The VRA Investing System tracks fundamentals, technicals, internals and investor sentiment. Investor sentiment continues to give us our most bullish readings of all…what follows is shocking to me. In my 34 years, I’ve never encountered anything quite like the sentiment readings we continue to see today. Contrarians the world over are salivating at these readings.
STUNNING REPORT: MONEY MANAGERS HAVEN’T BEEN THIS BEARISH SINCE 2008
The biggest story that few have seemed to pay attention to is investor sentiment, and just how bearish it continues to read. We see it weekly in our sentiment surveys, with AAII sentiment readings of just 29% bulls that have made us say “Are you serious?? Back up the truck and buy, buy, buy.”
Then Tuesday…and everyone IS talking about this…we learned that the BAML survey of money managers reached its most bearish reading since the 2008 financial crisis. Just a stunning report, with markets just 1% away from ATH.
Here’s the breakdown of what we continue to view as BIZARRE readings. But then again, we also know that 90% of all money managers get beat by the markets each year. Maybe we shouldn’t be so surprised.
Equity allocations saw the second-biggest drop on record, while cash holdings jumped by the most since the 2011 debt-ceiling crisis, the June poll showed. Concerns about the trade war, a recession and “monetary policy impotence” all contributed to the bearish sentiment, Bank of America said.
And I’ll just leave this here. Still more bears than bulls. Stunning. HIGHLY bullish.
VRA BOTTOM LINE: with 10/12 screens bullish, this makes investing on pullbacks that much more important. Pullbacks should be short and sweet, going forward, as the markets surge to new all time highs and the Dow Jones targets 30,0000 by year end (12% higher from current prices).
We remain aggressively long this market. It’s crush Mr. Market time.
Finally for this morning, if you heard Tyler’s podcast yesterday you know that we just wrapped up year #1 with podcast #251. We hope you’re enjoying them and we always appreciate your feedback.
Until next time, thanks again for reading…
Kip
Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/16 years.
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