VRA Investment Letter: What a Time to Be Alive. "The Big Bribe" Continues to Play Out. Another Significant Contrarian Set-up
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Good Friday morning. What a time to be alive. What a time to be an American.
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VRA Investment Letter: Japan's Crash & Fed Weakness. This Shakeout is a Classic Bull Market Buying Opportunity.
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Good Thursday morning. After crashing 13% on Monday, Japan’s Nikkei has gained back 90% of those losses in the last few days. After Monday’s selloff, the Bank of Japan (BOJ) reversed course on hiking rates, saying that “doing so in unstable markets is a mistake we will not make”.
Read MoreVRA Letter: The Worst Fed Chair of My Time…and The Bond Market Agrees. An Overbought Pause in Megacap Tech Will Produce "Buy the Dip" Opportunities.
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Good Thursday morning. As I explained on my podcast yesterday, J Powell went off script at his presser and likely just made “another” policy mistake, which will be his 5th since taking the appointment to Fed Chair.
I repeat; J Powell is the worst Fed Chair of my time…
Read MoreVRA Investment Letter: Semis Surge to Fresh ATH's. The Power of the Roaring 2020's. Investors Are Getting a Second Shot at a "Dot-com-like" Melt-up.
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Good Friday morning. As if right on cue, the semis and megacap tech stocks surged to ATH’s yesterday, in advance of Q4 tech earnings that kick off in earnest next week. When the semis (SMH), tech (XLK) and Nasdaq 100 (QQQ) are hitting new ATH’s together they’re giving us a crystal-ball road-map for the broader markets.
Read MoreVRA Investment Letter: Led By Semis & Housing, Significant Technical Breakouts Abound. Excellent CPI Report. Our "Disinflation" & "Great Reset" Themes Playing Out.
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Good Thursday morning. Following what has been a near-parabolic move higher from the 10/27 lows, strength in the semiconductors has now led to key breakouts for the Nasdaq, S&P 500 and Housing stocks, negating what had bears believed was a picture-perfect short for these indices at resistance
Read MoreVRA Investment Letter: Parabolic Move Higher; Next Up. The "Stunning" Reality of US Economic Health. Angry Permabears at Remarkable Economic Strength.
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Good Thursday morning. Following the parabolic move higher in each major US equity index from the 10/27 lows…just as seasonality was turning bullish…on the VRA System we now have each index hitting extreme overbought levels, but importantly this is only on our shortest term momentum oscillators. Combined with the shockingly bullish technical signals that we’ve seen over the last 8 trading days it remains our view that important lows are in place and that pullbacks from here should continue to be bought (if we have pullbacks, that is).
Read MoreVRA Investment Letter: Third Quarter GDP Soared 4.9% With Consumers Leading the Way. VRA Market Update
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Good Thursday morning. Third quarter GDP was reported this AM and showed blistering growth in the US economy of 4.9%, beating estimates of 4.5%. This is the strongest economic growth since Q4 2021 when growth was just shy of 7% (coronavirus insanity). Of note in the report, consumer spending rose 4% in Q3, soaring past Q2 consumer spending, which came in at just .8%.
Read MoreVRA Investment Letter: The Worst Week for Stocks Ends. Roaring 2020's; US Economy Remains Strong.
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Good Friday morning. The worst week of the year for US equity markets ends today, punctuated by this week’s FOMC meeting/statement and J Powell presser, which…once again…led to a steep sell-off in stocks…Powell’s specialty.
Read MoreVRA Investment Update: Q3 GDP Growth Est Now 5.8%. Our Roaring 20's Megatrends Hard at Work. Buffet Loves Housing.
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Last year, and well into 2023, you could throw a rock at 100 mainstream economists…grouped together like sardines…and not hit a single one that wasn’t predicting a recession (outside of Evercore’s Ed Hyman, that is). It was essentially unanimous; the US was headed into a recession and it was barreling towards us like a freight train.
Read MoreVRA Investment Update: Disinflation is Here. Get Ready for 2% Inflation Next Year PLUS Fed Rate Cuts. How We Want to Play It.
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Good Thursday morning. July CPI (consumer prices) gained 3.2% on an annual basis, less than the 3.3% consensus from economists estimates. On a month-to-month basis, inflation increased just 0.2%, which was in-line with estimates while year/year CPI came in at 4.7%, matching estimates. The report also said real average weekly earnings were unchanged last month, in another positive sign that the Fed can be less concerned about a wage price spiral.
Read MoreVRA Letter: The DNA of Our New Bull Market. I'm Getting a 1995–2000 Vibe. Something Special This Way Comes.
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Do you believe in history repeating?
I’m Getting a 1995–2000 Vibe.
From 1995–2000, Nasdaq rose from 750 to 5132, soaring 584%. Over a 3 year time frame more than 500 companies went public that more than doubled on their first day of trading.
Read MoreVRA Investment Update: Fox Business; When The Generals Lead, the Troops Fall in Line. Inflation Does Have An Upside.
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Good Thursday morning. Charles Payne of Fox Business had me back on his show ‘Making Money’ yesterday and the events surrounding it were interesting. Here’s how it works: First, one of Charles producers emails you a day or two before and ask if you’re available for the show. Second, they ask you to send over your latest “hit” (VRA Letter). I’m assuming they do this so they can see whether or not what you’re saying is interesting and/or worthy of being on air. Third, they let you know whether or not you’re officially invited onto the show.
Read MoreVRA Investment Update: Textbook Bull Market Meets Overbought. Buy the Rumor, Sell the News?
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It hasn’t been straight up from the 10/13 bear market lows but in (most) ways this has been a textbook bull market move higher. From the overwhelming level of fear from 3 bear markets in 4 years to last years August — October waterfall mini-meltdown that culminated in the 10/13 bear market capitulation, from those lows the move higher has checked all of the “new bull market” boxes.
Read MoreVRA Investment Update: J Powell, the Jim Cramer of Fed Chairmen. Upside of Inflation. The Markets Love it When the Fed Stops Hiking.
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Good Thursday morning. In Tuesdays Letter I wrote the following…
“J Powell is the most unpredictable Fed Chair of our times and the root of his unpredictability lies in the fact that he desperately wants to be taken seriously. Powell is highly unpredictable. That’s a dangerous trait in a Fed Chair.
Read MoreVRA Investment Update: Disinflation Continues. Yes, This is a Bull Market. More Contrarian Buy Signals
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Breaking; we just learned that the Fed’s favorite inflation gauge (core PCE) fell to 4.2% in March from 5.1% in February. This marks 8 straight months that we’ve had “disinflation”. With both US and European GDP reports coming in weak, we reiterate our call for the Fed to cease rate hikes and to begin cutting rates. The 10 year yield is 3.44% this AM while the Fed funds rate is 5%. The Fed never leads, they only follow. The markets are screaming at the Fed to “pause and pivot”.
Read MoreVRA Investment Update: Strong Amidst Disinflation & Overbought Indicators
/Good Thursday morning. Disappointing afternoon action in the markets yesterday following the March CPI report (that was essentially in line), with talking heads reporting that the primary culprit for market weakness was FOMC minutes that forecasted a “mild recession” at the end of the year. If we listened to the talking heads we’d probably keep our heads in the sand and remain 100% in cash.
We continue to be bullish on stocks and look for a solid rest of the month which will likely include Q1 earnings that surprise to the upside. We’ll get a taste of Q1 tomorrow morning with JP Morgan and Citi earnings reports. If I didn’t dislike bank/financial stocks so much I would be a buyer here. I think they might just blow the doors off…certainly the behemoths.
This morning we got more proof that inflation continues to evolve into disinflation. Huge drop in PPI this AM. The Fed will cut rates by year end. Were it not for the Trump Economic Miracle we’d likely be in a deep recession today.
But even with this beat (to both CPI and PPI), the odds have increased that we have a “negative credit impulse” building with rising odds of a recession, certainly after the implosions of SVB and Signature Bank NY. The latest inflation reports did not capture these banking failures and potential credit crunch as it’s inherently backward looking. The CPI report is always a “fade” and I think this report is especially the case. A Fed pause and pivot should now be here. I’ll be surprised if the fed hikes again on 5/3, but we have 3 more weeks of data plus of course earnings reports of Q1.
My forecast (of the last 4 months) remains unchanged; the Fed will start cutting rates in the 4th quarter and by years end the 10 year yield will fall below 3%.
Financial markets and the Fed are reading from two different playbooks but as history has taught us well, the Fed never leads, they only follow.
Chart Review S&P 500
The largest and most important equity index in the world continues to flash “buy me”. From the 10/13 bear market lows…just classic capitulation…SPX has a clear series of higher highs and higher lows as it remains well above its 200 dma and has worked off its overbought levels over the last week. I expect a breakout to take place in the next 1–2 weeks which would lead to a rally to 4300 + (5% + from here).
Semis (SMH)
Full VRA System look at the chart of SMH, which has worked off its extreme overbought levels and looks ready to make its next major move higher.
Well above its 200 dma and advancing steadily from the 10/13 lows using the blue trend line as stellar support.
Check out the supporting trend lines for RSI and MFI. Again, perfection. As goes the semis, so goes the market.
Precious Metals and Miners; overbought but still flashing “BUY”
While the miners are hitting extreme overbought levels on the VRA System, our top buy signal for this group (precious metals) continues to flash strong buy.
Below is a chart of the relative strength of miners (GDX) to gold. When the miners are leading gold higher, its an extraordinarily strong buy signal.
This group has been doing exactly what it’s known for, acting as a discounting mechanism for what comes next; rate cuts and eventually more QE/money printing. The bull market of bull markets is underway for metals and miners.
Rising Housing, Transports, Semis and Bitcoin; discounting mechanisms and high probability correlations that tell us “the markets are headed higher”.
From our new book “The Big Bribe” (below). Housing is a long term bullish mega trend & should continue to propel the US economy. Housing bears are just plain wrong.
VRA Bottom Line: we remain long and strong as we’ve entered a top 2 month of the year and the best year period (pre-election years are highly bullish). As always, we’re keying off of the semis. We have been aggressively long from the 10/13 bear market lows and will likely remain long well into April, although last week we hit overbought levels that we paid attention to. We’ve now worked off those ST overbought levels and the markets reaction to Q1 earnings is “everything”. We look for the rest of April to be stellar.
Heads up; we have a target in mind for potentially taking profits on some of our ETF positions. It rhymes with “sell in May and go away”.
Until next time, thanks again for reading.
Kip
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VRA Investment Update: Textbook Front-Running Liftoff into April. Semis Are Breaking Out (again). New Buy Signal for Precious Metals and Miners.
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Good Thursday morning all. A major investing theme, as taught to me in my 20’s by both of my mentors (Ted Parsons and Mike Metz, RIP gentlemen) goes like this;
Read MoreVRA Investment Update: Sentiment Hitting 90th Percentile Bearish Readings. Analytics Say “Buy".
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Another volatile day of trading yesterday influenced by fears of global bank runs. Of note, in the last two trading sessions the smart money hour was met with strong buying pressure (with tech leading the way).
Read MoreVRA Investment Update: Follow the Semis & Buy The Dip. Economic Acceleration; The Trump Economic Miracle
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Breaking: Treasury yields lost momentum this AM, with stock markets reversing higher, after the Labor Department reported that initial jobless claims rose to 211K last week, up from 190K the week before and more than the 195K forecast by analysts. The 10-year yield sits at 3.96%, after trading above 4% before the data. The data indicates the labor market may be weakening (due to higher interest rates).
Read MoreVRA Investment Update: The US Economy is Accelerating (thanks #45). Investor Sentiment is Heavily Bearish…and Why That's Bullish.
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This morning we learned that weekly jobless claims came in at just 190,000, another incredibly low reading which backs up a series of economic data from the last 1–2 months that show the economy is actually accelerating, rather than slowing down.
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