Why Mark Mobius says the stock market hasn’t seen an ‘absolute bottom’ yet

Why Mark Mobius says the stock market hasn’t seen an ‘absolute bottom’ yet

Emerging-markets investing pioneer Mark Mobius made those remarks Tuesday in an interview with CNBC, putting him in the investing camp that expects an inevitable cascade of brutal economic data and corporate earnings hasn’t been fully discounted by investors.

Mobius, who founded Mobius Capital Partners in 2018 after a three-decade run at Franklin Templeton Investments, said corporate earnings would be “pretty bad” and that while some bargains have emerged, investors should keep some cash ready to deploy in the event of a further market downturn.

U.S. stocks hit all-time highs in February, then plunged into a bear market as the global spread of COVID-19 forced the U.S. and countries around the world to largely lock down their economies in an effort to contain the outbreak. Stocks have taken back a large chunk of lost ground since March 23, however, with recent gains tied to expectations the pandemic is near its peak, turning attention to efforts to reopen economies.

Market bulls have argued that the unprecedented nature of the shock and the massive response from the Federal Reserve, other central banks, and governments have rendered most comparisons to past bear markets debatable.

Others have cautioned that stocks are largely sticking to the bear market script.

“Although there are some opportunities to buy, I would say it’s probably a good idea to keep some powder dry for another downturn,” he said. “We might see a double bottom.”

A Sharp Reflex Rally

A Sharp Reflex Rally

While it is indeed a sharp “reflex rally,”  With follow through today, please remember this: “Bear Markets” are not resolved in a single Day, Week, or a Month. Most importantly, “bear markets” do not end with “consumer confidence” still very elevated. 

 

Notice that during each of the previous two bear market cycles, confidence dropped by an average of 58 points.

This past week, we saw early indications of the unemployment that is coming to America as jobless claims surged to 10 million, and unemployment in April will surge to 15-20%.

Confidence, and ultimately consumption, Which comprises 70% of GDP, will plummet as job losses mount. It is incredibly difficult to remain optimistic when you are unemployed.

No Light At The End Of The Tunnel Yet

Most importantly, as shown below, the majority of businesses will run out of money long before SBA loans, or financial assistance can be provided. This will lead to higher, and a longer-duration of unemployment.

What the cycle tells us is that jobless claims, unemployment, and economic growth are going to worsen materially over the next couple of quarters.

The problem with the current economic backdrop, and mounting job losses, is the vast majority of American’s were woefully unprepared for any disruption to their income going into recession.

Two important points:

  1. The economy will eventually recover, and life will return to normal. 
  2. The damage will take much longer to heal, and future growth will run at a lower long-term rate due to the escalation of debts and deficits. 

For investors, this means a greater range of stock market volatility and near-zero rates of return over the next decade.

The Bear Still Rules

History tells the story covering the last 8 full fledged bear markets: The should be sold into!

In other words, if you have taken the decline thus far, When you see the rally explode up, sell it and preserve as much as you can before the next dip.

On Friday, our colleague, Jeffery Marcus of TP Analytics, penned the following:

  1. When the 11-year bull market trend ended, other shorter trends were also violated.  In late February, the S&P 500 fell below its 14-month uptrend line, and in early March the 13-month uptrend line was violated.  Those breaks set in place the steep declines seen in the 2nd and 3rd weeks of March.
  2. While it may seem like an epic battle is going on around S&P 500 2500, the real problem is the downtrend forming from the 2/19 high.
  3. TPA still continues to see real long term support in the 3% range between 2110 and 2180A less likely move below that support, would leave long term support levels of the lows of 2014 and 2015.

S&P 500 – Long Term

His analysis agrees with our own:

“While the technical picture of the market also suggests the recent “bear market” rally will likely fade sooner than later. Such an advance will ‘lure’ investors back into the market, thinking the ‘bear market’ is over. Importantly, despite the sizable rally, participation has remained extraordinarily weak. If the market was seeing strong buying, as suggested by the media, then we should see sizable upticks in the percent measures of advancing issues, issues at new highs, and a rising number of stocks above their 200-dma.”

On a daily basis, these measures all have room to improve in the short-term. However, the market has now confirmed longer-term technical signals suggesting the “bear market” has only just started.

There are reasons to be optimistic about the markets in the very short-term. We will get through this crisis. People will return to work. The economy will start moving forward again.

However, it won’t immediately go right back to where we were previously. We are continuing to extend the amount of time the economy will be “shut down,” which exacerbates the decline in the employment, and personal consumption data. The feedback loop from that data into corporate profits, and earnings, is going to make valuations more problematic even with low interest rates currently. 

This is NOT the time to try and “speculate” on a bottom of the market. You might get lucky, but there is very high risk you could wind up losing even more capital.

For long-term investors like our Wealth Preserver Members, just remain patient and let the market dictate when the bottom has been formed. As you can see in the image below, the InterAnalyst Green Buy signal will come as it has every other time. But it only signals when the market is on solid footing.

 
Bear markets never end with optimism, but in despair. So remain patient, it the bear will end and you will capture the slingshot move back up once the markets are on solid footing.

Although we continue to author opinion and analysis, please remember that our writings do not replace the green buy and red sell signals derived from over 140 years of market analytics. Use the Wealth Maximizer Pro to help give you daily charts and signals to help with daily market direction. Apply those to the Wealth Maximizer Weekly charts and signals to give you more confidence in the direction.

When the Wealth Preserver Monthly signal confirms both the Wealth Maximizer and Wealth Maximizer Pro memberships, you are prepared for the slingshot.

 

Members Version of A Sharp Reflex Rally

Members please login to view your market signals and read the balance of this post for entry and exit points.

 

Crono-Crash & The Slingshot

Crono-Crash & The Slingshot

Livio,

I exited with the Wealth Preserver on the on March 2nd.  The last couple of bullish days brought to mind the Slingshot, are we there and have we missed the first 2 days. In your recent Celente video post you mentioned we’re entering into a global depression which may be even worse than the Great Depression.

Before all that happens is it possible we see DOW tumble another 5K-10K?

There seems to be an incredible amount of liquidating-at-all-costs mentality at the moment. I worked on an equity desk during the 2008 crisis, and currently at a very small non-bank FX dealing desk and have never seen anything like this. Your feedback is always appreciated.

Thanks,
Victor

“Great Question Victor.

The simple answer is NO.

The worst-case scenario appears to be testing the reversal technical line in the 15,000 level and do not see a drop to 5-10K. That is way too far for a slingshot. 

I see the slingshot build and breakout to new highs by 2023.

However, let’s tale a look at history to guide us on recovery times with similar drops to our current CronoCrash. 

Look at the two charts below.

What you see is that it took 65 months from the 2007-2009 Crash to get back to even.

The 1987 Crash appears to be a likely type of pattern from a timing perspective to our current Crono-Crash. That was a 53% decline and took 24 months to break even.

The 2000 -2003 Bear Market was a 3 year 54% decline and took 81 months to break even. 

If we were to fall on par with those declines, we would be looking at a drop to the mid-15000 level.

Because InterAnalyst members s stepped aside (red signals)  for most of the Corona-Crash, they will miss all those months of recovery just to get back to even.

More importantly, while everyone else is back to even, those who stepped aside will be 100% – 400% ahead of those buy and hold investors who did not step aside of the Corona-Crash.

As for the future, when we get back in (green signal) we could reach the test of just below the 40,000 level happening in 2024.

Destructive Coronavirus Truth

Destructive Coronavirus Truth

The Destructive Coronavirus Truth is much more dangerous than the virus itself.

No one has stated it more clearly that Mr. Celente in this video. We appreciate and value his Wealth Preserver Membership.

You absolutely must watch every minute of this video as he is as animated as ever.

He explains the who, what, why, where, and when of this whole mess. More importantly, he does not mince words of how its effecting the economy.

Fortunately our members have been protected from this crash and are preparing the coming slingshot up. Holding the right investment will be vital and once this crash and slingshot back up is over, the real depression and 90% crash is coming.

The Wealth Preserver will guide our members step by step through the future like a GPS system for your Investments and retirement accounts.

Use the following promo code: Wealth25

Marxism, Buffett, Dalio, Stalin & The Bottom

Marxism, Buffett, Dalio, Stalin & The Bottom

As always, the Democrats just can’t stand the fact that Trump might take credit for helping people and have blocked and relief package. Democrats claimed in true Marxist fashion in the Senate that the GOP’s push to set aside $425 billion for loans to help select companies and industries, dubbing it a “slush fund” for the Treasury to direct as it sees fit. They said the bill is tilted toward corporations instead of working people. What they fail to even address is that those working people rely upon small businesses the Democrats hate so much which provides 70% of their employment.

Small businesses have been ordered to close down. They cannot pay employees and nobody has suspended their rents. The destruction of small businesses will be devastating to the economy and this is all about playing politics. I am saddened.

The closing for March, if down from last Friday may spark more serious liquidation as Hedge Funds dump everything and some may more to suspend withdrawals as is taking place in European bond funds. The Solus Alternative Asset Management LP, Hedge Fund, known for its investment in retail chain Toys “R” Us, informed its investors that it is shutting its flagship fund and will restrict redemption’s as it works to sell off holdings.

Even Warren Buffett’s Berkshire Hathaway may have lost more than $70 billion on its 10 biggest investments. This type of decline shows that the buy-and-hold strategy fails in a serious market correction. Ray Dalio, who will go down in history for his proclamation that “cash is trash” on January 21, 2020, has lost probably more than $4 trillion in Bridgewater.

Where the 2007-2009 Crash took out Lehman Brothers and Bear Stearns, this time we will see Hedge Funds go down in flames. This undermines liquidity and makes the market vulnerable because market-makers pull back just to survive. 

We are headed into a Global Recession which could become even worse than the Great Depression. Here’s why?

This time we have politicians taking advice from the medical industry. The medical people who do not understand that you cannot shut down the economy on this grand scale because of the devastation is insurmountable to people, their jobs, and wiping out their pensions. This economic shut down on such a massive scale is far worse than if the Corona death toll was even 8%.

Never before has the economy been crashing with such speed for this is orchestrated by people who only look at how diseases spread and not how the economy contracts.

See the source image

Yes, it is true that if we all stayed home we can even beat the common cold. But the post-coronavirus world is going to be far more damaging to the future than any of these people understand.

To have the Democrats playing politics in the middle of the is just insane.

Liquidity is collapsing everywhere. Bank failures rose after the 1929 crash because liquidity failure with a declining velocity = less money with even less money moving around the economy = recession and potential depression.

A monthly closing on Oil below $20.50 will warn of the economic recession ahead as people stay home and this command of quarantine and social distancing may undermine the very cooperation which is the foundation of civilization. 

If people are afraid to interact and suspect everyone, that is precisely the atmosphere created by Stalin during the Communist era.  We are voluntarily limiting and quickly losing all rights including the freedom of assembly. Even Twitter has shut down those who dissent against the coronavirus and this is calling into question our freedom of speech as well.

InterAnalyst will help guide everyone out of this time of insecurity and political misdirection via selfish ignorance.

Look at the chart below:

Finding The Bottom

As the markets find the bottom, it will be laced with volatility and insecurity with the media frightening you to the point of insecurity. this is not done for YOU as an InterAnalyst member. It is done for those Buy and Holders who never exited at the top and now have been scared into submission. 

However, as an InterAnalyst member,  you recognize that it likely will become the best entry point of your life! Yes, insecurity will be there but you know the stock market is going nowhere!

The stock market never lies and it always returns when there is “blood in the street” and the bottom arrives.

Thus, follow the guideline to a risky to safe entry back into the coming slingshot move.

Step One: Wealth Maximizer Pro (Daily Charts)

When the Daily chart delivers a green signal, jump for joy, then choose to enter a position or wait to see if the daily signal is holding for a few days for stability. If we are at or close to a bottom, volatility will be very high so prepare for it if you choose to trade it.

Step Two: Wealth Maximizer (Weekly Charts)

When the Daily is followed by a Weekly green signal you know that the economy is attempting to settle and gain strength.

You should begin to feel a bit more secure. Entering a bullish position here is a bit less risky because the weekly signal has some economic strength attached rather than pure daily volatility. You can even wait another week to see if it develops more strength.

Step Three: The Wealth Preserver (Monthly Charts)

Once the Green signal has elevated from the Daily to the Weekly and the Weekly has moved into a second or third week of a bullish trend, you may select to beat the green monthly Wealth Preserver signal by entering a bullish position before month end.

If you look at The Wealth Preserver chart above, ask yourself whether you remember the days or weeks Just prior to the bottom green signals in 2003 and 2008?  NOPE, right. You don’t remember them, but what you would have remembered is getting in after preserving your money at the prior top, before the full devastating decline those bear markets delivered.

The same is true now. 

So, the bottom is going to come. You must be patient, it will arrive, it always does!

Enter in when you feel most comfortable, but recognize that the Wealth Preserver has proven to be deadly accurate at economic turning points.

The phrase to be true: “Better Safe, than Sorry!” 

Obviously, entry at any point has its risks, but as you look closely at The Wealth Preserver chart above, making a move using the monthly charts is rarely a poor decision…ESPECIALLY OFF THE BOTTOM.

This time it is coming with a slingshot.

The Virus Peak & Stock Market Bottom

The Virus Peak & Stock Market Bottom

I cannot make any claims about the virus itself and this post is the reaction of major stock markets. A good explanation I’ve found on epidemics and exponential growth is this one on YouTube which I recommend watching if you are not already up to speed.

Looking at the current situation it appears that the market has room to fall further as the economic fallout continues and the virus spreads.

If the virus starts to slow down, it won’t be long before stocks find a bottom given the huge amount of stimulus that central banks are providing.

The most important thing is that we need to see the number of new daily cases start to flatten out.

Currently the virus is spreading at an exponential rate and that is causing businesses and services around the world to enter lock-down.

That has dire consequences for company profits.

Exponential Growth

To summarize some of the information in the mentioned video above, exponential growth means that as you go from one day to the next you have to multiply by some constant.

In the case of coronavirus, daily cases have been increasing by about 1.15 to 1.25 times the previous day’s cases. This results in an exponential curve with the number of new cases increasing on a daily basis. In fact, a virus provides a textbook example of exponential growth since what causes new cases are existing cases. However, there comes a time when exponential growth has to slow down.

For example, as millions of people become sick there are fewer people that can be infected so the rate of new cases must decrease. Likewise, measures such as hand washing and limiting gatherings also have the effect of reducing the spread.

So an exponential curve will eventually level out at an inflection point and turn into what’s called a logistics curve. At this point the number of new cases each day levels out and then starts decreasing. We have already seen this happen in China and now it is happening in South Korea too.

 New cases in China leveling out. Source: John Hopkins University.

Growth Factor = No. New Cases Today / No. New Cases Yesterday

A value over 1 indicates that we are still on the exponential part of the curve and there may be higher magnitudes of new cases ahead of us. In other words the growth is not slowing down.

This is the case right now in the USA and Europe. Whereas a value of 1 means that growth is leveling out and a value under 1 means new cases are decreasing.

Taking China as an example, the coronavirus spread began at an exponential rate which has gradually leveled off thanks to drastic shutdown measures.

With new cases appearing to have peaked the country has been able to get back to work and reboot its economy. Meanwhile, the United States and Europe have only just started to see new cases increase, indicating that they are likely to be near the beginning of the exponential curve.

What does all this mean for the stock market now?

I think we need to see the growth rate of new cases in the US and Europe start to level off before we can put in a major stock market bottom. So we need to see the daily growth rate drop to one or below and then stay there, perhaps for a week or so.

Once that happens I think we will see a bottom in stocks and a significant relief rally thanks to the huge amount of stimulus that is being provided by central banks.

It is because of this stimulus that we will see the slingshot. Importantly, though, I don’t think we need to see growth rates level off for the whole world.

It would be enough to see growth rates in the US and Europe start to slow for a bottom to be put in.
That’s because these areas (plus China) account for the vast majority of global GDP.

To keep on track of this I am using the coronavirus dashboard developed by John Hopkins University which seems to provide the most up to date and reliable figures that I’ve found. The dashboard provides the latest statistics on new cases which can then be used to calculate growth rates. 

For example, new cases outside China was 100.5k on Monday March 15th, higher than the previous day’s 81.7k cases and higher than the 75.1k cases on Saturday, a growth factor of 2.8.

Analyzing these numbers it doesn’t seem all that surprising that 10% drop in US stocks that day coincided with a huge daily growth rate of 2.8 times (this is for locations outside Mainland China).

Final Thoughts

Ultimately, virus growth rates and the stock market are linked and so long as the curve is exponential the markets are going to struggle.

Stock markets are likely to rally every time the virus looks to have been defeated, even when it’s not.

The data isn’t entirely accurate so there is likely to be some false starts. It’s also possible that the market will be able to lead a flattening in the virus whether it is caused by luck, government intervention or some other reason.

But eventually the market will get it right, it always does.

That being said, when stocks are up and the exponential curve has leveled off, review your Daily, then your Weekly charts with signals for Green Light Trade Signals because that will mean we are close to a bottom, or the bottom may be in!

Credit: Mr. Marwood, thank you for your research.

Our Corona-virus Trade Signals & Is There Blood In The Street Yet?

Our Corona-virus Trade Signals & Is There Blood In The Street Yet?

Baron RothschildBaron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, is credited with saying that “the time to buy is when there’s blood in the streets.”

The original quote is believed to be “Buy when there’s blood in the streets, even if the blood is your own.”

Here is an image of today’s Drudge Report…

Based on the Drudge report, it certainly looks like someone is bleeding right now.

Are we at the bottom though?

All my neighbors are out walking for exercise or stress relief.

What I do know is that I saw the same types of activities going on in late 2002 and 2008. Because this is early 2020, let’s hope to see it bottom soon and turn up.

We expect a “Slingshot” to the upside with the same ferocity as it had to the downside.

On February 18th, our daily trading charts issued a stock market exit signal. It was supported by our weekly sell signal that week, followed by our monthly Wealth Preserver that month.

(Click on any image to maximize)

Now that the Bear Market has come out of the woods to show itself, no one knew it would come with a unique flu called Caronavirus. This virus has certainly moved the bear into the psyche of our global economy. And by the looks of the Drudge Report, the bears flu it really bad.

When will this Bear fever break?

InterAnalyst will know within a few days of it bottoming and turning up.

As Baron Von Rothschild knows, more blood is coming before the bear will be ready to hibernate again. 

Fortunately, we give entry signals just as we have for almost 30 years.

These signals in the charts are real and have been followed by our member from further back than the chart illustrates. 

Each bar in the chart represents a month, all you need to do to visualize the power is to move the Green Signal up and over the prior Red Signal, and you can quickly realize how much farther ahead you would be. 

Here, let me do it for you:

FYI: The chart is consolidated for illustrative purposes and the ending values depend on when and which bear markets you would have avoided. Avoiding all of them would put you  between 400% – 1200% ahead of buy and hold. Because you are on the sideline while markets drop, you lower your risk.  

Here’s When The Stock Market Explodes Up

Here’s When The Stock Market Explodes Up

This is the Global Central Bank, Pension Fund, Retirement Account, and Stock Market Crash we warned was coming. It is here.

As for a bottom?

Keep in mind that we MUST go down first in order to clean it out and this then creates the bear trap as we saw back in 2009.

It will turn when there is more “blood in the streets” and all three of our memberships pegged it and protected our Members. That is why our members have avoided 70% of this decline thus far and will likely avoid 95% of it before it turns up. The important point here is that they will reenter the market with as much money as they had in late February.

And as the market turns and rallies off the bottom, the banks, brokerages, insurance companies and press will once again not believe it has turned because they will fear it will turn down again.

To our Members, this current market action only reinforces long-term forecast.

Now, with global interest rates at, or near, zero, bonds will soon become the place to leave.

Where will that money go?

Eventually, the only place for capital to shift to will be US Equities. Specifically, these will be in a slingshot move up.

Are We Close To The Bottom Of This Crash?

Are We Close To The Bottom Of This Crash?

Livio, As a member and reading your member blog posts I was amazed how precise your exit signal was on February 18th. I just have one simple question. Are we close to the bottom of this crash yet?

Paul, Toronto

Good Question Paul.

The simple answer is that question is only God knows the exact day, hour, and precise number is the bottom on the Dow or S&P 500.  However, we have guideline to give us the general idea. which I will cover shortly. Before I cover “todays” chart, the next section is a review of one of our members posts and chart from 2 days ago:

 

Trend-lines, also known as bounding lines, are lines drawn on a stock chart that connect two or more price points. Since stock prices tend to trend, trend-lines that connect the highs or lows in the stock’s price history can help identify the current trend and predict what the stock price might do in the future.

The markets are based on TIME and PRICE. So in time the bottom moves along the final green trend line. X axis is time, Y axis is price.

The axis is the bottom of all the prior closings in time (trend line) in the price. That is why the green line is at the bottom of the rising price trend.

In our current chart above you can clearly see when parallel market lines of prior bull runs have a retracement or Bear Market there is always possible turning point.

One possible turning point is a right before a Fib/Phi level of a 28% decline at 2477.92. So until then I will not trust the validity of any counter trend bullish rally.

NOTICE: If it breaks the trendline just take a look at where the market could head using history as your confirmation. Ouch.  Thank goodness the Wealth Preserver protected you.

That post was then and this is for today and when and where the bottom comes, lets look at the following chart.

To make it clear, I offered precise trading ranges to help you assess when and where the bottom arrives. Remember that price changes with time and that is why ranges are used because as time moves forward the range in the area automatically changes.

I have colored and commented each colored area in the chart for clarity and ease of understanding.

As the Daily, Weekly, and Monthly trade signals become available in your members area, you will precisely know when the bottom arrives in both time and price.

Ciao for now.

Members can login here to view the balance of this information and the actual trade signals.

The Buffett Retracement Gap

The Buffett Retracement Gap

Warren Buffett + Closing The Gap + 21% Retracement = The Buffett Retracement Gap

In early 1987, Warren Buffett wrote to Berkshire Hathaway shareholders about what to do in the face of an epidemic.

This was, of course, way before the outbreak of the novel coronavirus that’s causing worldwide concerns today. It was even before the avian flu, Ebola, SARS, or MERS made the news.

But more than 30 years ago, Buffett addressed two “super-contagious diseases.” He told readers that there are “occasional outbreaks” of these diseases and that they will “forever occur.” Buffett admitted, though, that “the timing of these epidemics will be unpredictable,” cautioning to “never try to anticipate the arrival or departure of either disease.”

What were these two diseases? “Fear and greed” among investors. Buffett stated that his goal to deal with these “epidemics” was “to be fearful when others are greedy and to be greedy only when others are fearful.”

There’s no question that plenty of investors are fearful right now. The so-called fear index — the CBOE Volatility Index (VIX) — has skyrocketed over the past couple of weeks. When the VIX goes up a lot, it’s a clear sign that many investors are scared. If you think that Warren Buffett was right in 1987, though, that means it’s time to be greedy.

Buffett Current Time: BE GREEDY

 

Closing The Gap

As you can see in the chart below, we are near closing the final GAP before return of a new upward push. Once the gap closes (yellow chart markers), we can start a new bullish momentum cycle.  We are very close to closing the gap and when it does close, we have another notch in our belts for a new bullish trend to begin.

23% Golden Ratio Retracement

Retracements are temporary price reversals that take place within a larger trend. The key here is that these price reversals are temporary and do not indicate a change in the larger trend.

You may wonder where these numbers come from, though. They are based on something called the Golden Ratio. If you start a sequence of numbers with zero and one, and then keep adding the prior two numbers, you end up with a number string like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 … with the string continuing on indefinitely. The Fibonacci retracement levels are all derived from this number string.

Interestingly, the Golden Ratio of 0.618 or 1.618 is found in sunflowers, galaxy formations, shells, historical artifacts, architecture, and the growth of the stock market.

Final Thoughts

Once the Gap is closed and the Fibonacci level is reached you should be looking closely at your Daily trade signal charts. If you want to be a little more patient and lower your risk level, then wait for the Weekly trade signal charts match the Daily.  Ultimately, when the Monthly turns, your investments should be growing safely and rapidly after avoiding most of the decline.

 
 

 

 

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