VRA Weekly Update: CV Fear Mongering, Psyops. VRA Market Update. IWM Head and Shoulder Chart Pattern.
/Good Thursday morning all.
Following the Dows -710 point yesterday we’re looking at -150 this AM. Second wave CV fears abound and a market looking for its next round of monetary (Fed) and fiscal (govt) stimulus. It was just 11 trading days ago that we had our -1800 point (6%) swoosh lower in the Dow, a gap the broad markets have yet to fill. It remains our view that the Fed is “all in” and will use future sell-offs to launch additional QE measures. That’s not bearish. Not for a market that thrives off of liquidity.
As much as this feels like a bubble, having worked through the dot-com boom, I can tell you that this is nothing like 1999. As we covered on Monday, in ’99 the P/E multiple for the nasdaq 100 was 80. Today, its (just) 28. In ’99, 500 co’s went public with an average 1 day gain of 60%. Today, we’ve yet to see the IPO market really start to come back to life.
We’re witnessing nothing like 1999 today. And we may never have another 1999 again…just making the point that if 2020 is a bubble, its a small bubble in comparison. This market can get a whole lot more stupid on the upside before we can even begin to compare it to 1999. Add the Fed’s unlimited QE and a US economy that appears to be bouncing back like CV never happened (housing market is doing exceptionally well) and we can find plenty of reasons to be optimistic.
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Regardless of the CV psyop games being played, the fears of second wave shutdowns are real. This week the same groups that have been on the roller coaster from hell….casinos, airline, cruise stocks…have headed sharply lower again. The fear mongers are out in full force. Yes, new cases are rising…that’s what happens when testing ramps aggressively…but daily deaths are running at a 1/4 of what they were in May. Mortality is what matters most.
Our VRA trading signals remain unchanged. They are; oil, tech/semis, internals, VIX and the smart money hour. From the beginning of CV insanity (late Feb) to the CV lows (3/23) to today, these 5 signal keys have provided directional clarity…each flashed sell signals yesterday. More than anything we’re watching the semis and tech, which have continued to lead the way higher. It remains our view that the markets have (generally speaking) put CV in their rear view mirror. New rounds of central bank QE and fiscal stimulus have followed each market sell-off from the 3/23 lows. A repeating pattern of the most powerful kind.
IWM Head and Shoulders
We own TNA Puts. Traders are talking about the potential head and shoulders pattern (bearish). A break through the $135 area would validate the pattern and it would also violate a key support area. We will continue to hold our TNA puts.
Why We Own Gold.
In our update to our member’s on Tuesday (Sign up at VRAInsider.com) we covered negative real rates and why gold is among the best investments in this environment. Here's some additional supporting evidence. Below is a 2 year chart of the 5 year TIPS (Treasury Inflation Protection Security), with its negative yield of .-65% compared to golds price movement over the same period. The inverse correlation of gold to negative rates is powerful...as you'll really see in the next chart.
This is a 12 year chart of Gold to SPIP (Treasury Inflation Protection ETF). As real rates go further negative, the price of SPIP and gold rise in lock-step. Today, we are as close to a parabolic move higher in gold than at any point since late 2008, when QE1 was born. Here at the VRA we've been on record for close to 3 years that interest rates would plummet. The 10 year was 3% back then....today its .70%. We now believe that its a near certainty that US rates go negative as well. Just like Japan. Just like much of Europe. Little could be more bullish for gold, silver and miners than negative rates (as banks struggle to survive and central banks print with abandon to stave off deflation).
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 15/17 years.
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