VRA Investment Update: VRA System Buy Signals. Housing Breaks Out to New Highs.

Good Friday morning. On Tuesday I wrote the following; “IMO, US markets are set up for a significant “short squeeze” higher. The combination of investor sentiment, seasonality, analytics and technicals are all aligned. This remains one of the best set-ups of my career, coming out of the bear market bottom on 10/13/22. We are well positioned for it.”

Instead of a sharp move higher these last 3 days have been meandering and boring with lower prices (although not sharply lower). 

The set-up for a sharp move higher still remains but we must also report that the month of May is not historically a great month. However, with 3 of our most important indexes…S&P 500, nasdaq and nasdaq 100…within spitting distance of multi-month highs, the odds of a breakout move higher continue to hold the upper hand.

To date, Q1 earnings point to an economy that may be slowing but ‘without question’ has plenty of life left in it. Certainly seeing this from bank stocks, even in the regionals which started reporting earnings this morning and are broadly higher on the news. Having survived a mini-death rattle we’ll see if the move higher in banks is a dead cat bounce or the beginning of something more. 

Our interest is broader in scope. We only care about the banks as much as they provide a much needed service for the economy and should they implode the financial system, as they did with the Fed’s help in 2008, it’s game over for the global economy as we know it. So far, so good. 

And the Atlanta Fed Agrees…The Atlanta Fed’s GDP Now is estimating Q1 economic growth at +2.5%
After having started 2023 forecasting recessionary conditions in Q1, the Atlanta Fed now puts Q1 growth at 2.5%. We might be waiting a while for the recession…

We continue to see “bull market markers”, each of which comprises important screens for the VRA Investing System. 9/12 VRA Screens Remain Bullish. 

1) Ugly opens are met by strong buying pressure. We’re seeing this play out regularly, from the 10/13 lows.

2) The final hour of trading (the smart money hour) is consistently bullish. We’ve seen this play out regularly, from the 10/13 lows.
 
3) Key leadership groups/stocks rise on bad news. 

4) The market internals have improved, light years better than in 2022. As a reminder we had a rare “momentum breadth thrust” last week (Zweig). This technical buy signal has consistently marked the birth of a new bull market (back to 1950).

As Tyler covered in his podcast yesterday, we continue to see bullish buy signals from tenets of the VRA Investing System. Most notably, key leadership groups that have led the way higher from the 10/13 lows continue to point to higher prices. 

Last Friday I was on Fox Business(click here to watch) where I outlined exactly how the bears have the housing market exactly wrong. As we outlined in our new book “The Big Bribe”, it’s our view that housing is in a long term “megatrend” move higher, and as the single most important leading economic indicator in the VRA System, will continue to power the US economy and markets higher. 

And what’s been happening in housing stocks this week? They’re hitting new 52 week highs. We own NAIL (3 x Housing ETF) which also hit a new 52 week high yesterday and is now up 184% from the 10/13 lows. Folks, when stocks break out to new highs there’s no resistance above. AKA a highly bullish technical event. Or as Tyler likes to say “new highs beget new highs”.

Commercial Real Estate: Do the Permabears Have Another Story Wrong?

As you’ve no doubt seen and heard, the bears are absolutely certain that a crash will soon take place in commercial real estate. We’re researching this group fully. Frankly, we’re looking for our next buy rec in this group. 
Most commercial REIT’s (real estate investment trusts) are already down 50–75%. Looks to us like the crash has already occurred here. 

We think the bears have this story backwards….last year was the time to short/sell…now may well be the time to buy. Leverage among REITS is actually lower than most think and the banks lend at just 60% of asset values, so they look to be decently protected. We’ll have more soon. But no, we do not expect significant market weakness to come from a further collapse in commercial real estate. It’s already taken place.

Investors Are the Most Underweight Stocks Since 2009 (big contrarian buy signal)

The most common question we get here at the VRA, and we hear it often each week, goes like this; “with everything happening in the US, specifically with this administration, exactly how can you guys be bullish on the stock market??”. The best answer is that everyone should read our new book “The Big Bribe”, so that you understand the 5 megatrends in place that will continue to power the US economy and markets higher into 2030. 

But the short-cut answer is “the stock market is not the economy…and it’s not about headline news coming out of NYC or DC”.

The markets move based on supply and demand, exclusively. This is why we have the VRA Investing System, 37 years in development, that focuses on both fundamentals (70%) and technicals (30%). It helps remove emotion from the equation. Today 9/12 VRA Screens are bullish.

Plus I’ve done this a while and I understand the power of investor sentiment, seasonality and probabilities/repeating patterns. We write about these often…their predictive power is remarkable. 

I think it’s this combination thats helped us to beat the markets in 16/19 years.

The financial system we have is our system. You don’t have to like it. You can in fact detest it and you almost certainly should (especially central banking and the gross devaluation of our money) but the fact is that since Japan started QE in 2002, the US has been turning Japanese. 

There are valuable lessons to be learned from this, as in, what might happen next here in the US? Here’s a sneak peak; 

a) we’ll much more QE, not less, b) we’ll have much more debt, not less, c) the likelihood that, as in Japan, the Federal Reserve will eventually buy stocks (as well as bonds), as the Feds QE total grows from $8 trillion to almost certainly double that in the years to come. 

Of course, I don’t know any of this for sure. But, we’re big fans of repeating patterns and the resulting probabilities from same. Here’s what I do know; since I first became a financial advisor in 1985 the constant-bears message sounds exactly the same; “our debt levels will drive us into insolvency”. For 37 years I’ve heard the exact same thing. I’m sure one of these days they’ll be right…but that day might also be 100 years from now. 

We happen to believe that financial engineering is only just getting started. In this environment, our must own assets are; stocks, housing, real estate, precious metals/miners, bonds and yes, Bitcoin. While we’ve yet to issue a new buy signal on BTC we’ll likely use the next buy signal on the VRA System to do so. 

What we’re going through now looks to be a “reset” of sorts. And we have the buy signals to prove it…the ones we’ve been hyper-focused on for some time; new bull market, sentiment, seasonality, analytics and technicals.

Until next time, thanks again for reading.

Kip

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