Dear subscribers,
This is update #1977 for Thursday early morning, February 27, 2014.
Extremes have already been an important feature of 2014 and will likely continue to razzle and dazzle investors on both sides of the market. The S&P 500 achieved a new all-time zenith of 1858.71 at 12:08 p.m. on February 24, 2014, while the Russell 2000 achieved a historic top of 1188.06 at 12:40 p.m. on February 26, 2014. From a timing point of view, the last U.S. equity bear market was relatively rapid so the upcoming one will probably be around 2-1/2 years which would be more in line with historic norms and would effectively confuse algorithmic software which has adapted to the 2007-2009 behavior. Therefore, whenever the S&P 500 ends up peaking in 2014, add roughly 30 months to determine the timing of its approximate next bottom. In a future update I will discuss the implications of this slump on the next U.S. Presidential election which will occur close to the next stock-market nadir.
Some gold and silver mining shares rallied during the first hour of trading on Monday to their highest levels since the third week of September 2013 before retreating moderately thereafter. So far in 2014, there have been two pullbacks for GDXJ of almost exactly 10% apiece, and the current decline from its Monday high of 44.21 (which was below its February 14, 2014 top of 44.60) reached 8.1% on Wednesday shortly before noon and may not be over. True bull markets often feature frequent rapid slumps to knock out those who are attempting to play them on the long side while using sell stops, thereby proving that you can't have your cake and eat it too. Other shares of commodity producers and emerging-market equities have been notably more sluggish in recovering from their deep winter bottoms (deep applying both to the winter's severity and the oversold nature of these sectors), and will likely soon enjoy powerful uptrends as they typically rally or retreat about two to three months after gold mining shares have begun major trend reversals. Gradually accumulating HDGE into weakness will allow you to capitalize upon most investors' believing that we've passed the worst part of 2014 and that we're set for an approximate repeat of 2013.
This analyst is one of the few to recognize what should be an obvious megaphone formation in U.S. equity indices--which means that it has been making higher highs and lower lows for nearly two decades, with another lower low scheduled for two or three years from now. Whether the S&P 500 will actually rally in the short run, or eventually bottom near 450, is uncertain--but at least Walter Zimmerman deserves credit for being willing to avoid the usual consensus nonsense and to make non-mainstream two-way forecasts:
Euphoria, fascination over "hot stocks", and lack of concern over a possible bear market is characteristic of each long-term top going back several centuries or more:
I personally favor this plan to overhaul the U.S. tax system, although special interests will likely create numerous roadblocks:
During 1997-2003, I frequently purchased coins and related items from Hannes Tulving, but as his family gradually took over the business there have unfortunately been serious problems which I have verified outside of this report:
Here is a fascinating story--and the comments are worth reading also:
This gold may have been stolen from the San Francisco mint during a 1901 robbery:
The diagrams are a bit puzzling, but the first sentences of these novels are fascinating:
The U.S. dollar index rose to a Monday 10:15 a.m. high of 80.366, and then retreated to a Tuesday 10:00 a.m. bottom of 80.016, its lowest
point since February 19, before it rallied to a Wednesday 12:50 p.m. peak of 80.524, its highest level since February 12, and traded
Wednesday night near 80.40.
The behavior of the U.S. dollar index appears to have confirmed that its July 2013 foray above the July 24, 2012 intraday high of 84.100
was a false upside breakout, with several important lower highs being completed since the U.S. dollar index topped out at 84.753 on July 9, 2013.
The U.S. dollar index will likely undergo an intermediate-term pullback toward a level in the mid-70s which will likely be completed
at some point in 2014. Emerging-market currencies had been especially out of favor during the first eight months of 2013, and will
therefore continue to be among the strongest to rebound into the first half of 2014.
The U.S. dollar index has been in a peculiar long-term bull market since March 16, 2008, when it had completed an all-time nadir at 70.698.
Since then, the U.S. dollar index completed its first higher low of 71.314 on July 15, 2008; its second higher low of 72.696 on May 4, 2011; its
third higher low of 73.421 on July 27, 2011; its fourth higher low of 73.452 on August 17, 2011; its fifth higher low of 73.525 on August 29, 2011;
and its sixth higher low of 74.724 on October 27, 2011.
It may have completed additional higher lows in November 2011, but we won't know that for certain until the greenback completes its current
intermediate-term retreat.
Peculiar is an excellent word, because the U.S. dollar index surged to an important high in less than one year on March 4, 2009, and has been
forming several important lower highs since then, thereby creating a long-term bear market which has persisted for roughly one year less in duration
than its long-term bull market.
On February 19, 2014, the U.S. dollar index retreated to a 3:05 a.m. bottom of 79.927, its lowest mark since December 27, 2013.
On February 12, 2014, the U.S. dollar index climbed to a 7:45 a.m. peak of 80.831, its highest point since February 7, 2014.
On February 7, 2014, the U.S. dollar index recovered to a 7:55 a.m. peak of 81.007, its highest mark since February 6, 2014.
On February 6, 2014, the U.S. dollar index rebounded to an 8:30 a.m. peak of 81.232, its highest reading since February 5, 2014.
On February 5, 2014, the U.S. dollar index rose to a 10:30 a.m. peak of 81.240, its highest level since February 3, 2014.
On February 2, 2014, the U.S. dollar index rose to a 9:45 p.m. peak of 81.323, its highest point since January 31, 2014.
On January 31, 2014, the U.S. dollar index climbed to a 10:00 a.m. peak of 81.324, its highest mark since November 12, 2013.
On December 27, 2013, the U.S. dollar index slid to a 6:45 a.m. bottom of 79.686, its lowest reading since October 31, 2013.
On November 12, 2013, the U.S. dollar index climbed to a 4:35 a.m. peak of 81.464, its highest reading since November 8, 2013.
On November 8, 2013, the U.S. dollar index surged to a 10:30 a.m. peak of 81.482, its highest level since September 13, 2013.
On October 23, 2013, the U.S. dollar index slid to a 12:05 a.m. bottom of 78.998, its lowest level since February 1, 2013.
On September 5, 2013, the U.S. dollar index rallied to a 10:45 a.m. peak of 82.671, its highest point since July 18, 2013.
On July 15, 2013, the U.S. dollar index rallied to a 7:50 a.m. peak of 83.460, its highest mark since July 10, 2013.
On July 9, 2013, the U.S. dollar index rallied to an 11:40 a.m. peak of 84.753, its most elevated reading since July 5, 2010.
On February 1, 2013, the U.S. dollar index slid to an 11:45 a.m. bottom of 78.918, its lowest point since September 18, 2012.
On September 14, 2012, the U.S. dollar index slumped to a 10:10 a.m. bottom of 78.601, its lowest mark since February 29, 2012.
On July 24, 2012, the U.S. dollar index rallied to a 1:45 p.m. peak of 84.100, its most elevated reading since July 13, 2010.
On May 1, 2012, the U.S. dollar index dropped to a 9:55 a.m. bottom of 78.603, its lowest reading since February 29, 2012.
On February 29, 2012, the U.S. dollar index retreated to a 12:05 a.m. bottom of 78.095, its lowest level since December 2, 2011.
On November 30, 2011, the U.S. dollar index slumped to a 9:00 a.m. bottom of 77.923, its lowest point since November 23, 2011.
On November 8, 2011, the U.S. dollar index slid to an evening bottom of 76.513, its lowest mark since October 25, 2011.
On October 27, 2011, the U.S. dollar index slumped to a 2 p.m. bottom of 74.724, its lowest reading since September 6, 2011.
On August 29, 2011, the U.S. dollar index slid to a very early morning bottom of 73.525, its lowest level since August 17, 2011.
On August 17, 2011, the U.S. dollar index slumped to a mid-morning bottom of 73.452, its lowest point since July 27, 2011.
On July 27, 2011, the U.S. dollar index retreated to a very early morning bottom of 73.421, its lowest mark since May 5, 2011.
On May 4, 2011, the U.S. dollar index slid to a mid-morning bottom of 72.696, its most depressed reading since July 29, 2008.
Relevant past peaks for the U.S. dollar index include 88.708 on June 6, 2010; 89.624 on March 4, 2009; 92.63 on November 16, 2005; 99.49 on August
26, 2003; and 120.99 on July 5, 2001.
I expect the U.S. dollar index to complete a historic top near the end of the next global equity bear market, perhaps in the year 2016, which
could be anywhere between 90 and 120.
TLT, a fund of U.S. Treasuries averaging 28 years to maturity, dropped to a Monday 12:49 p.m. low of 106.17, and then rallied to a Wednesday
closing peak of 107.92, its highest level since February 5, and representing a Wednesday net gain of 57 cents.
The behavior of TLT is typical for any asset which is still in a very-long-term bull market, but which has been forming several important lower highs
since July 25, 2012 and is likely to continue its decline during the next several months. This is part of a typical rotation from defensive to cyclical
assets, which occurs during nearly any transition from a multi-year equity bull market to a subsequent equity bear market. Because defensive
assets became more overvalued than usual and cyclical names including mining and emerging-market shares had been more undervalued than
usual during June-December 2013, this rotation will likely continue to be stronger than average into the first several months of 2014 and
perhaps even into early 2015.
TLT is likely to slump to roughly 90-100 where I will progressively repurchase it probably as close as possible to its lowest points of 2014.
I would like to see several well-known analysts declare that the long-term U.S. Treasury bull market which began in 1981 has ended, since that will
signal that it still has a lot of life and at least one more spectacularly higher high still to come during 2015-2016.
On February 21, 2014, TLT dropped to an 8:43:47 a.m. pre-market bottom of 105.78, its lowest level since February 20, 2014.
On February 20, 2014, TLT retreated to a 1:02 p.m. bottom of 105.69, its lowest point since February 12, 2014.
On February 12, 2014, TLT slid to a 1:31 p.m. bottom of 105.62, its lowest mark since January 22, 2014.
On February 5, 2014, TLT rose to an 8:35:09 a.m. pre-market peak of 108.38, its highest point since February 4, 2014.
On February 3, 2014, TLT rallied to a 3:59 p.m. peak of 109.34, its highest mark since July 22, 2013.
On January 10, 2014, TLT dropped to an 8:28:12 a.m. pre-market and pre-U.S. employment report bottom of 103.05, its lowest reading since January 9, 2014.
On January 8, 2014, TLT retreated to a 1:02 p.m. bottom of 102.10, its lowest level since January 3, 2014.
On January 3, 2014, TLT descended to a 10:33 a.m. low of 101.77, its lowest point since January 2, 2014.
On January 2, 2014, TLT dropped to an 8:30:15 a.m. pre-market bottom of 101.44, its lowest mark since December 31, 2013.
On December 31, 2013, TLT slumped to a 1:59 p.m. bottom of 101.17, its most depressed reading since August 2, 2011.
On July 22, 2013, TLT climbed to a 10:02 a.m. peak of 109.69, its highest reading since July 3, 2013.
On July 2, 2013, TLT climbed to a 10:27 a.m. peak of 110.80, its highest level since June 20, 2013.
On June 14, 2013, TLT rallied to an 11:47 a.m. peak of 114.66, its highest point since June 7, 2013.
On June 6, 2013, TLT rallied to a 12:26 p.m. peak of 116.79, its highest mark since May 24, 2013.
On May 22, 2013, TLT climbed to a 10:09 a.m. peak of 118.55, its highest reading since May 16, 2013.
On May 16, 2013, TLT rallied to a 2:31 p.m. peak of 118.94, its highest level since May 10, 2013.
On May 9, 2013, TLT rallied to a 1:14 p.m. peak of 121.32, its highest point since May 3, 2013.
On May 1, 2013, TLT rallied to a 1:24 p.m. peak of 124.26, its most elevated mark since December 12, 2012.
On December 6, 2012, TLT climbed to a 1:58 p.m. peak of 126.08, its highest reading since November 28, 2012.
On November 28, 2012, TLT rallied to a 10:08 a.m. peak of 126.20, its highest level since November 16, 2012.
On November 16, 2012, TLT climbed to an 11:28/11:34 a.m. peak of 127.19, its highest point since September 5, 2012.
On August 31, 2012, TLT surged to close at 127.72, its highest mark since August 6, and traded in the after-hours session as high as 127.76.
On August 2, 2012, TLT soared to an 11:53 a.m. peak of 130.69, its highest reading since July 26, 2012.
On July 25, 2012, TLT climbed to a 10:09 a.m. top of 132.21, an all-time record zenith.
On July 25, 2011, TLT slumped to a pre-market bottom of 94.75, its lowest reading since July 7, 2011.
On June 30, 2011, TLT slumped to a mid-morning bottom of 93.29, its lowest level since May 2, 2011.
On April 8, 2011, TLT slid to a pre-market bottom of 89.64, its lowest point since February 18, 2011.
On February 10, 2011, TLT retreated to a late morning bottom of 88.14, its lowest mark since April 7, 2010.
On April 7, 2010, TLT slumped to an early morning bottom of 87.30, its most depressed reading since September 20, 2007.
VIX is probably the best-known measure of equity index implied volatility, which is synonymous with investors' fear of an upcoming bear market.
VIX climbed to a Tuesday 10:02 a.m. peak of 14.83, its highest point since February 20, and then slid to a Tuesday post-4:00 p.m. bottom of 13.66,
its lowest point since February 14, before it dropped to a Wednesday 9:32 a.m. bottom of 13.73, its lowest level since February 25,
climbed to a Wednesday 2:30 p.m. high of 14.54, and closed Wednesday up 68 cents at 14.35.
VIX has apparently been forming a pattern of higher lows from a multi-year bottom which occurred at 11.05 on March 14, 2013, and which is signaling
the recent or upcoming completion of a bull market for the S&P 500 just as the VIX bottom of 9.39 on December 15, 2006 followed by several higher
lows for VIX presaged the general U.S. equity peaks in the second half of 2007.
On February 20, 2014, VIX rose to a 10:00 a.m. peak of 15.80, its highest mark since February 7, 2014.
On February 14, 2014, VIX slid to a 2:04 p.m. bottom of 13.44, its lowest mark since January 22, 2014.
On February 5, 2014, VIX climbed to a 10:29 a.m. peak of 20.72, its highest reading since February 3, 2014.
On February 3, 2014, VIX rallied to a post-4:00 p.m. peak of 21.48, its most elevated level since June 24, 2013.
On January 22, 2014, VIX dropped to a 9:33 a.m. bottom of 12.55, its lowest reading since January 17, 2014.
On January 17, 2014, VIX retreated to an 11:09 a.m. bottom of 12.04, its lowest level since January 15, 2014.
On January 15, 2014, VIX slid to an 11:15 a.m. bottom of 11.81, its lowest point since December 26, 2013.
On December 26, 2013, VIX slid to a 1:59 p.m. bottom of 11.69, its lowest mark since March 15, 2013.
On June 24, 2013, VIX surged to a 10:05 a.m. peak of 21.91, its most elevated point since December 31, 2012.
On March 14, 2013, VIX slid to a post-4:00 p.m. bottom of 11.05, its most depressed reading since February 26, 2007.
On December 28, 2012, VIX soared to a post-4:00 p.m. peak of 23.23, its highest mark since June 14, 2012. Because VIX trades until 4:15
p.m., it reflected the entire post-closing slump for the S&P 500.
On June 14, 2012, VIX climbed to a 9:45 a.m. peak of 24.81, its highest reading since June 13, 2012.
On June 13, 2012, VIX surged to a 3:30 p.m. peak of 24.93, its highest level since June 5, 2012.
On June 4, 2012, VIX rallied to a 10:09 a.m. peak of 27.73, its highest point since December 12, 2011.
On December 8, 2011, VIX climbed to a late afternoon peak of 30.91, its highest mark since November 29, 2011.
On November 25, 2011, VIX climbed to an early morning peak of 34.77, its highest reading since November 21, 2011.
On November 21, 2011, VIX rallied to a late morning peak of 35.29, its highest level since November 17, 2011.
On November 17, 2011, VIX surged to a 1:52 p.m. peak of 36.46, its highest point since November 1, 2011.
On November 9, 2011, VIX soared to a late afternoon peak of 36.43, its highest mark since November 1, 2011.
On November 1, 2011, VIX soared to a noon peak of 37.53, its highest reading since October 7, 2011 and a gain of more than 53% within 1-1/2 trading days.
On October 4, 2011, VIX climbed to a 10 a.m. peak of 46.88, its highest level since August 9, 2011.
On August 9, 2011, VIX rallied to a post-Fed-announcement peak of 47.56, its highest point since August 8, 2011.
On August 8, 2011, VIX soared exactly 50% to its intraday peak of 48.00, its highest mark since May 21, 2010.
On May 21, 2010, VIX soared to an early morning peak of 48.20, its most elevated reading since March 10, 2009.
The S&P 500 Index rallied to a Monday 12:08 p.m. peak of 1858.71, a new all-time zenith, before sliding to a Tuesday 10:04 a.m.
low of 1840.19, rebounding to a Tuesday 11:34 a.m. high of 1852.91, touching a Wednesday 11:30 a.m. lower high of 1852.65, retreating to a Wednesday
2:30 p.m. low of 1840.66, and closing Wednesday up 4 cents at 1845.16.
Continuing a two-decade pattern, the S&P 500 had achieved a new all-time zenith above its October 11, 2007 top of 1576.09,
just as its 2007 top was higher than its 2000 top which was above its 1997 top.
Within the next few years, the S&P 500 will slump below its March 6, 2009 bottom of 666.79, just as its 2009 bottom was lower than its 2002
bottom which was below its 1998 bottom, thereby continuing another long-term pattern.
This sequence of higher highs and lower lows over a period of many years is known as a megaphone formation.
Eventually, its dividend yield will climb above six percent, just as U.S. equities overall have done during all prior eras of stagnation.
On February 20, 2014, the S&P 500 descended to a 10:08 a.m. bottom of 1824.58, its lowest mark since February 13, 2014.
On February 5, 2014, the S&P 500 slid to a 10:29 a.m. bottom of 1737.92, its lowest reading since October 18, 2013.
On October 9, 2013, the S&P 500 retreated to an 11:24 a.m. bottom of 1646.47, its lowest point since September 6, 2013.
On August 30, 2013, the S&P 500 slid to a 3:54 p.m. bottom of 1628.05, its lowest mark since August 28, 2013.
On August 28, 2013, the S&P 500 retreated to a 9:35 a.m. bottom of 1627.47, its lowest reading since July 5, 2013.
On June 24, 2013, the S&P 500 slumped to a 12:23 p.m. bottom of 1560.33, its lowest level since April 22, 2013.
On April 18, 2013, the S&P 500 slid to a 2:58 p.m. bottom of 1536.03, its lowest point since March 5, 2013.
On February 26, 2013, the S&P 500 slid to an 11:48 a.m. bottom of 1485.01, its lowest mark since January 22, 2013.
On December 28, 2012, the S&P 500 slid to a 3:50 p.m. bottom of 1401.58, its lowest regular-hours reading since December 5, 2012. At 16:14:45 in
the after-hours session, the S&P 500 as measured by SPY at 138.55 would have traded at 1387.61, its lowest reading since November 28, 2012.
On December 5, 2012, the S&P 500 retreated to a 10:55 a.m. bottom of 1398.23, its lowest level since November 28, 2012.
On November 28, 2012, the S&P 500 slid to a 10:10 a.m. bottom of 1385.43, its lowest point since November 20, 2012.
On November 16, 2012, the S&P 500 slid to an 11:29 a.m. bottom of 1343.35, its most depressed mark since July 26, 2012.
If you admire the old monk, the 61.8% Fibonacci retracement is 1346.11, which was slightly broken to the downside on November 16, 2012.
On July 25, 2012, the S&P 500 slid to a 10:57 a.m. bottom of 1331.50, its lowest reading since July 24, 2012.
On July 24, 2012, the S&P 500 slumped to a 2:30 p.m. bottom of 1329.24, its lowest level since July 12, 2012.
On July 12, 2012, the S&P 500 slid to a 10:46 a.m. bottom of 1325.41, its lowest point since June 28, 2012.
On June 28, 2012, the S&P 500 slumped to a 2:31 p.m. bottom of 1313.29, its lowest mark since June 26, 2012.
On June 26, 2012, the S&P 500 slid to an 11:10 a.m. bottom of 1310.30, its lowest reading since June 25, 2012.
On June 25, 2012, the S&P 500 slumped to a 12:00 p.m. bottom of 1309.27, its lowest level since June 12, 2012.
On June 12, 2012, the S&P 500 slumped to a 10:39 a.m. bottom of 1306.62, its lowest point since June 6, 2012.
On June 4, 2012, the S&P 500 slid to a 1:25 p.m. bottom of 1266.74, its most depressed mark since January 5, 2012.
On December 19, 2011, the S&P 500 slid to a late afternoon bottom of 1202.37, its lowest reading since November 30, 2011.
On November 25, 2011, the S&P 500 slid to a late afternoon bottom of 1158.66, its lowest level since October 10, 2011. If you count the
pre-market session, the futures-equivalent bottom at 8:36 a.m. was 1149.60, which would mark its lowest level since October 6, 2011.
On October 4, 2011, the S&P 500 plummeted to a 10 a.m. bottom of 1074.77, its lowest point since September 1, 2010.
On August 27, 2010, the S&P 500 retreated to a mid-morning bottom of 1039.70, its lowest mark since July 7, 2010.
On July 1, 2010, the S&P 500 slid to a late morning bottom of 1010.91, its most depressed reading since September 4, 2009.
GDX, a fund of primarily large- and mid-cap gold mining shares, climbed to a Monday 10:31 a.m. peak of 26.96, its highest reading
since September 19, 2013, before it slid to a Wednesday 11:58 a.m. bottom of 25.78, its lowest level since February 20, and closed
Wednesday down 28 cents at 26.05.
On February 20, 2014, GDX dropped to a 7:48:15 a.m. pre-market bottom of 25.54, its lowest point since February 13, 2014.
On February 19, 2014, GDX slumped to a 3:51 p.m. bottom of 25.56, its lowest regular-hours point since February 13, 2014.
On February 12, 2014, GDX slid to a 3:16 p.m. bottom of 24.72, its lowest mark since February 10, 2014.
On February 6, 2014, GDX slid to a 10:49 a.m. bottom of 23.07, its lowest reading since January 28, 2014, and revisited that price again on
February 7, 2014 at 8:00:11 a.m. during the pre-market session.
On January 28, 2014, GDX retreated to a 9:35 a.m. bottom of 22.81, its lowest level since January 16, 2014.
On January 15, 2014, GDX retreated to a 9:47 a.m. bottom of 21.87, its lowest point since January 10, 2014.
On January 10, 2014, GDX dropped to an 8:30:00 a.m. pre-market bottom (to the exact second of the U.S. employment report) of 21.24, its lowest mark
since January 9, 2014.
On January 9, 2014, GDX retreated to a 3:57 p.m. bottom of 21.26, its lowest regular-hours reading since December 31, 2013. In after-hours
trading, GDX touched a 4:25:57 p.m. bottom of 21.19, its lowest reading since December 31, 2013.
On December 31, 2013, GDX retreated to an 8:50:16 a.m. pre-market bottom of 20.48, its lowest level since December 24, 2013.
On December 23, 2013, GDX descended to a 9:51 a.m. bottom of 20.24, its lowest point since December 19, 2013.
On December 19, 2013, GDX slumped to a 10:04 a.m. bottom of 20.37 (20.179 ex-dividend), its lowest mark since December 6, 2013.
On December 6, 2013, GDX retreated to an 8:30:43 a.m. pre-market bottom of 20.31 (20.119 ex-dividend), its most depressed reading since
November 21, 2008.
On September 18, 2013, GDX soared to a 3:50 p.m. peak of 28.64, its highest level since September 3, 2013.
On August 27, 2013, GDX rallied to a post-open peak of 31.35, its highest point since April 12, 2013.
On April 9, 2013, GDX surged to an 11:59 a.m. peak of 36.29, its highest mark since April 2, 2013.
On March 21, 2013, GDX rallied to a 1:46 p.m. peak of 38.58, its highest reading since February 27, 2013.
On February 26, 2013, GDX rallied to an 11:57 a.m. peak of 39.29, its highest level since February 19, 2013.
On February 7, 2013, GDX ascended to a 10:54 a.m. peak of 42.94, its highest point since January 30, 2013.
On January 30, 2013, GDX rallied to a 10:39 a.m. peak of 43.14, its highest mark since January 24, 2013.
On January 22, 2013, GDX rallied to a 2:18 p.m. peak of 45.92, its highest reading since January 15, 2013.
On January 15, 2013, GDX rallied to an 11:52 a.m. peak of 45.96, its highest level since January 3, 2013.
On January 2, 2013, GDX surged to an 8:06 a.m. pre-market peak of 47.75, its highest point since November 30, 2012.
On November 23, 2012, GDX rallied to a 12:52 p.m. peak of 49.00, its highest mark since November 14, 2012.
On November 8, 2012, GDX surged to a 3:15 p.m. peak of 51.82, its highest reading since November 1, 2012.
On October 31, 2012, GDX surged to a 3:55 p.m. peak of 52.97, its highest level since October 17, 2012.
On October 17, 2012, GDX rose to a peak of 53.40, its highest point since October 9, 2012.
On October 5, 2012, GDX climbed to a 10:22 a.m. peak of 54.64, its highest mark since September 21, 2012.
On September 21, 2012, GDX rallied to a 9:41 a.m. peak of 55.25, its highest reading since March 2, 2012.
On May 16, 2012, GDX slid to a 1:51 p.m. bottom of 39.08, its most depressed reading since September 2, 2009.
On February 29, 2012, GDX rose to a 9:38 a.m. peak of 57.91, its highest level since February 2, 2012.
On February 2, 2012, GDX rallied to an 11:07 a.m. peak of 57.94, its highest point since December 9, 2011.
On December 1, 2011, GDX rose to a mid-morning peak of 61.01, its highest mark since November 16, 2011.
On November 8, 2011, GDX rose to a 1 p.m. peak of 63.69, its highest reading since September 21, 2011.
On September 21, 2011, GDX rallied to a mid-afternoon (pre-Fed) peak of 66.90, just below its all-time high.
On September 9, 2011, GDX climbed to a mid-morning all-time zenith of 66.98.
On December 7, 2010, GDX rallied to an early morning peak of 64.62, a new all-time high.
Today's main topic is flexibility vs. consistency, part two.
Amateur investors often confuse flexibility and consistency with market cyclicality. Near the top of a bull market in any asset, investors will congratulate themselves on being steadfast and holding this asset "for the long run". In recent months, I have heard from dozens of people who told me about friends, neighbors, family members, and colleagues who recently checked the values of their brokerage accounts and have concluded that even with all of the stock market's volatility, they're better off continuing to steadily contribute and to "not worry about" fluctuations. In early 2000, many of my co-workers refused to sell their Nasdaq holdings in the belief that no matter what happened, they would come out ahead simply by being patient and not changing their method. Ditto with 2007, in slightly modified fashion as widespread complacency about a potential bear market replaced the euphoria of early 2000. In early 2014, we have an especially dangerous combination of both euphoria and complacency, with many of the most popular securities enjoying the greatest recent gains, while almost no one I meet is aware of the megaphone formation for most U.S. equity indices and can't imagine a significant retreat. I agree with one of the links earlier in my update in which we are likely to experience a greater percentage decline for the S&P 500 than we had in the last bear market, probably exceeding 60% for the first time since the Great Depression. The total loss was 57.7% from top to bottom for the S&P 500 Index during the 2007-2009 bear market.
In sharp contrast, near any major bear-market bottom for an asset, investors become convinced that buying and holding "is dead" or "worked fine for previous generations", thereby conveniently forgetting that years like 2009 and 2002 were not exactly in the Mesozoic Era. Instead of extolling the virtues of holding on for the long run, investors equate investing with "gambling at a casino" and often complain that "the system is rigged". At a nadir for anything, the assumption is that there won't be a strong recovery for "at least several more years", even though historically the strongest rebounds almost always happen shortly after the deepest bottoms.
Improving asset allocation is almost always underrated as a method for increasing long-term portfolio performance. Amateurs overrate the significance of security selection, and believe that they can improve their market timing even though that is almost always a quixotic hope. Deciding what percentage of one's net worth to put into various investment choices is ignored as a sort of necessary and unimportant ritual, but in reality it is usually by far the most important decision. From my own experience, my biggest investing mistakes have been putting too great a percentage of my money into certain assets and not paying close enough attention to my personal history with trading various assets. If you find that you have a consistently above-average return when you invest in asset A, but your long-term results from asset B are mediocre, then in the future you should find ways to minimize or eliminate your investment in asset B while emphasizing assets which are closely related to A. In my own experience, for example, my most impressive track record is with U.S. Treasuries, with emerging markets in second place. The Treasury performance should not be that surprising since I began to buy U.S. Treasuries in 1981, and because for whatever reason the combination of sentiment and signals tend to be especially strong at major bottoms in the Treasury market (alas, the tops in these markets are less easy to determine). I have been trading emerging markets since 1984; investors tend to repeatedly overrate political developments which rarely have a meaningful impact on economic results. Thus, investors almost always dump shares of countries with temporary political instability creating compelling bargains, and similarly crowd into the same countries' stock markets when they are repeatedly hyped on cable TV. Because I can recognize how these patterns are repeated over and over again through the decades, it makes sense for me to trade them since I understand how they will behave similarly in the future. In your own case, you should capitalize upon whichever patterns are most obvious to you, so that your outcomes will be more consistently profitable.
One of the most glaring deficiencies in flexibility with most investors is appreciating why the near future is most likely to be similar to the distant past rather than the recent past. Now that we've passed almost exactly five years since the last severe U.S. equity bear market, it has faded emotionally in most people's minds and no longer exerts the kind of powerful psychological impact which pervaded in 2009 and was still present in lesser force as recently as 2012. It is as though people in July [January if you live south of the equator], having passed several months since the previous winter, conclude that we're not likely to have another winter. If major weather fluctuations occurred on average every seven years instead of every six months, and if they varied by a year or two in either direction, then perhaps many would in fact believe while we're at one extreme that we're not likely to go back to the opposite extreme. This is one aspect of investing which completely baffles me; I am stunned at each major market bottom and top that almost no one realizes that euphoria and panic are two sides of the same coin. If I tell anyone that we're likely to suffer a severe bear market during the next few years, by far the most common response is a recitation of recent positive economic data as a sort of rebuttal and insistence that the recent past will continue indefinitely into the future.
The financial markets exhibit certain forms of behavior because of the way that investors are trading them. Herding into anything which is near a peak, and making record outflows out of anything which is near a bottom, naturally causes already irrational extremes to become even more extreme even though regressing toward the mean remains as an eventual inevitable outcome. Paradoxically, whenever most have concluded that such a regression won't occur, it "suddenly" happens in dramatic fashion. Some institutions have rules where they can only accept a specific percentage or dollar loss on a given trade before they close it out. Under such circumstances, if they decide to sell short something like Tesla which is obviously in a bubble, they are not able to hold on until the bubble collapses. Even if the eventual percentage collapse is around 90%, they won't benefit because they're required to close out their short position after they're losing 5% or some other level which they predetermine or which is mandated by their superiors. Similar rules often apply at a bottom; if they buy something like GDXJ which is glaringly undervalued, then they cannot simply keep adding to their position into weakness but must close it out after a 5% loss. Although it happens for different reasons than emotional herding behavior by amateurs, professionals thereby end up with exactly the same result: repeatedly buying high and selling low. The ease of access on the internet also removes the ability of a human broker to intervene and discourage someone from acting rashly, as would have been the case a few decades ago when it was necessary to actually call a person on the telephone to initiate any financial transaction.
The behavior of U.S. equity indices in 2006-2009 was almost identical to its action in 1905-1908, as the past often repeats itself in the future. However, very few people were aware of the amazing similarities when it was happening. There were one or two articles on the internet in 2008 which cited the close parallels but they were mostly ignored. Starting in 2010, the close behavior was more frequently mentioned on the internet, but by then it was of course far too late to benefit from the information. It is rare that the financial markets stake out new ground or do something they've never done before. It would be highly beneficial for investors to look for past instances which closely correspond with current activity. The reason they don't do so is primarily emotional: people inherently like to think that they're incredibly unique, blessed, and are far superior to those who lived in prior generations. If you're convinced that nothing like the present has ever happened before, then you'll dismiss the past as something which happened to others during ignorant times, which can't have anything relevant to your own brilliantly enlightened self. Most people like to believe that they're the ultimate culmination of perfection, rather than an insignificant piece of a cyclical pattern which has repeated itself for thousands of years. Whenever I discuss the financial markets by making comparisons with events that happened several decades earlier, people act as though I must be crazy to assume that such long-ago happenings can have any relevance to what is going on today when we have such obvious pinnacles of human achievement such as YouTube, small computers which come in gold colors, and twerking.
Investors almost always require some form of emotional validation. If an asset has been in an extended uptrend, then this psychologically creates the illusion that it must be inherently superior and should therefore be purchased even though it has become dangerously overvalued. Similarly, if an asset has suffered a decline for nearly three years, then it is assumed to be inherently inferior and will be avoided or sold even though it may represent its most compelling bargain in one or two decades (or longer). Undervalued gold mining shares were disdained two months ago and languished at low volumes, while being eagerly bought earlier this month after GDXJ had gained 50%. Uranium shares were similarly abandoned and assumed to be hopeless earlier this month, while recently being eagerly chased by momentum players looking for "hot stocks". Sooner or later, coal mining shares and nearly all emerging-market equities will become among the trendiest assets--but only after they have already been rallying strongly and thereby "proving" that they can outperform. In another paradox, a chart of coal mining shares since the 1800s demonstrates their frequent periods of surging higher, but even if something has happened on 37 occasions over the past 140 years, investors are convinced that it's different this time and that this particular asset can't possibly recover now that it's irrationally depressed for the 38th time.
The financial markets will repeatedly reward those who take the most emotionally difficult actions like buying after an extended downtrend and selling following a protracted bull market. It will punish those who buy something because it has crossed above a given level or has surpassed a particular moving average, or who sell because an alleged downside breakout has occurred. When gold mining shares were "hopeless" and broke below numerous key technical levels in December 2013, they were left for dead when they should have been most aggressively accumulated; as they recently surpassed certain important charting points, technical traders have been piling in just in time to watch their upward trends interrupted and to inevitably have their sell stops triggered in a rapid downside flush-out. Most likely, additional short-term weakness is required to cleanse the precious metals market of recent momentum participation, after which it will rapidly rebound and move to significantly higher highs. U.S. Treasuries are more or less fairly valued, but they must slump over a more extended time period of several months to more than a year in order to convince nearly everyone who bought them near their July 2012 highs that they should finally unload them in disappointment.
Because we're human and market behavior is almost entirely driven by emotions, the duration of uptrends and downtrends reflects nothing related to company or economic fundamentals, but instead the amount of time it takes humans to recover from a powerful negative event and how long it takes for excitement to fade away. Bull markets last for four or five years because that's the length of time that people need for any traumatic event to recede into the past--whether it be the previous bear market or any other personal loss. Similarly, bear markets in everything from Brazilian equities to silver to U.S. Treasuries usually persist for about two to three years, because anything in our lives which generates excitement and eagerness to participate will take about that long to dissipate. The combined bull-bear cycle of seven years has been such a regular feature of existence that it was documented in the story of Joseph in the book of Genesis, and can be confirmed from other financial writings from thousands of years ago. The more that things change, the more they remain the same.
Take care.
--Steve
P.S. I met a fellow named Solomon Brecher on Wednesday who seems knowledgeable about many kinds of insurance products and has a pleasant personable manner. If you are interested in obtaining insurance for yourself, you can reach him here: