A chicken doesn't stop scratching just because worms are scarce.
Central bankers have conned the masses (even the hard money experts) over and over again. The theme has always been that the Fed will screw up one day and then all hell will break loose. Let’s stop right there.
One day when, today, tomorrow, 20 years, 50 years, etc.; will you even be alive when and if this day does finally arrive. Many of those who thought Gold would continue soaring to the moon in the 80’s were stunned when Gold peaked and embarked on a spectacular crash. The point to remember is that Wall Street is full of Tomb Stones of individuals that were right but could not stay solvent long enough to benefit from their convictions. Hence, follow the trend, for everything else is your foe.
Central bankers have purposely orchestrated a few moves that appear stupid in nature to give the hard money fools some respite so that they can feel vindicated after all these decades of being slammed into the concrete head first. Then suddenly they come out with a left hook from nowhere that stuns the masses and viola, mission impossible become mission possible. They have no problem in milking the Cow to death or killing the Golden Goose, because when it comes to the masses, there are many cows to milk and many Geese to lay eggs. Hence, what does a few dozen, hundreds of even thousand cows matter? Do we agree with this stance? That is irrelevant as we have long indicated. It’s not what we agree or disagree with that matters; it’s what is going to happen next that takes precedence. The trend quite clearly illustrates that misery loves company and until misery hates company the masses will always lose. The Fed’s are masters of mass psychology, and mass psychology trumps all other analysis, for it reveals up to what limit you can push the masses. Emotions are the main driving force for 99% of the populace; hence, if you understand mass psychology, you understand the main driving force behind the mass mindset. This is why the Fed can and will push the envelope to the outer limits.
That is why when all the naysayers were screaming death to the markets; we were taking the opposite stance and viewing the correction through a bullish lens.
The number of bears has increased to 41%, and the neutrals have dropped to 31%; individuals from the neutral camp have jumped into the bearish camp. The combined score is 72%, which indicates that emotions will soon hit the hysteria level. The illusory economic data still looks great and markets do not crash when the perception is that the economy is improving and market sentiment is bearish. More downside testing is likely, but a crash is still not in the works. Market Update Jan 31, 2016
The Dow came within striking distance of testing its Aug lows.
The August correction ended almost as fast as it began so one cannot fully quantify that as a deep cleansing correction. Why do we mention this? Well if this correction maintains its current trajectory it could end up knocking a huge bunch of speculators out of the market. When this happens, a market gains a new lease on life. Thus, there is a good chance that the current correction could resemble the dot.com correction of 1998; It looked liked the end was near, but it proved to be just the beginning of a massive bull market that culminated with the Nasdaq ending 1999 with a gain of 100%. Market Update Jan 31, 2016
Speculative forces have almost been eliminated from the markets, so the bedrock is being nicely set up for a strong rally. Part one of this has already come to pass, and the markets are a bit overbought now, so we would not be surprised if the Dow let out some steam and shed several hundred points before trending upwards again
The bears are already screaming bloody murder as they watch their profits vaporize and turn into losses Bears are notorious for overstaying their welcome, and they are not going to change their tactics because they assume that this is the mother of all corrections. Remember never fall for the crap that a half glass of water can be viewed as half full or half empty. This concept was invented to convince fools that the fools who came up with this concept are wise when in fact they are not. When you see a glass of water, the only thoughts that should enter your mind are one of the following:
Am I thirsty? If you are, you drink it. If you are not thirsty, you move on and focus on more pressing matters. On the same token, the concept of a market crash is retarded. The real premise is, do you want to invest in the market? If the answer is yes, then you need to focus on your criteria, and that is all that matters. History illustrates that every strong correction/crash proved to be a buying opportunity so that would be a good starting point, regarding criterion.
The world has embraced the negative rate war game, and our economy does not look as strong as it appeared to look last year. Hence, expect the Feds to join the negative interest rate club. The first step will be a change of heart. They will be a play on words as to how things are not so great, blah, blah; the bottom line is at some point they will lower interest rates, as that was their game plan all along. Lower rates will propel the corporate world to borrow even more money, and this money will be used to purchase even more shares. Share buybacks are the easiest ways to boost EPS. 2016 is already setting up to be yet another record year for share buybacks.
Action cures fear, inaction creates terror.