My next global strategy webinar will be held live from Silicon Valley on Wednesday, May 9, at 12:00 PM EST.
Co-hosting the show will be Mad Day Trader Bill Davis.
I'll be giving you my updated outlook on stocks, bonds, commodities, currencies, precious metals, and real estate.
The goal is to find the cheapest assets in the world to buy, the most expensive to sell short, and the appropriate securities with which to take these positions.
I will also be opining on recent political events around the world and the investment implications therein.
I usually include some charts to highlight the most interesting new developments in the capital markets. There will be a live chat window with which you can pose your own questions.
The webinar will last 45 minutes to an hour. International readers who are unable to participate in the webinar live will find it posted on my website within a few hours.
I look forward to hearing from you.
To log into the webinar, please click on the link we emailed you entitled, "Next Bi-Weekly Webinar - May 9, 2018" or click here.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/John-relaxing-story-1-image.jpg255281MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-05-08 01:08:322018-05-08 01:08:32Don't Miss the May 9 Global Strategy Webinar
Followers of my Trade Alert service have watched me shrink my book, reduce risk, and cut positions to a rare 100% cash position.
No, I am not having a nervous breakdown, a midlife crisis, nor have I just received a dementia diagnosis.
It's because I am a big fan of buying straw hats in the dead of winter and umbrellas in the sizzling heat of the summer.
I even load up on Christmas ornaments every January when they go on sale for 10 cents on the dollar.
There is a method to my madness.
If I had a nickel for every time that I heard the term "Sell in May and go away," I could retire.
Oops, I already am retired!
In any case, I thought that I would dig out the hard numbers and see how true this old trading adage is.
It turns out that it is far more powerful than I imagined.
According to the data in the Stock Trader's Almanac, $10,000 invested at the beginning of May and sold at the end of October every year since 1950 would be showing a loss today.
Amazingly, $10,000 invested on every November 1, and sold at the end of April would today be worth $702,000, giving you a compound annual return of 7.10%!
This is despite the fact that the Dow Average rocketed from $409 to $26,500 during the same time period, a gain of 64.79 times!
Since 2000, the seasonal Dow has managed a feeble return of only 4%, while the long winter/short summer strategy generated a stunning 64%.
Of the 68 years under study, the market was down in 25 May-October periods, but negative in only 13 of the November-April periods, and down only three times in the past 20 years!
There have been just three times when the "good 6 months" have lost more than 10% (1969, 1973 and 2008), but with the "bad six month" time period there have been 11 losing efforts of 10% or more.
Being a long-time student of the American and, indeed, the global economy, I have long had a theory behind the regularity of this cycle.
It's enough to base a pagan religion around, like the once practicing Druids at Stonehenge.
Up until the 1920s, we had an overwhelmingly agricultural economy.
Farmers were always at maximum financial distress in the fall, when their outlays for seed, fertilizer, and labor were the greatest, but they had yet to earn any income from the sale of their crops.
So, they had to borrow all at once, placing a large cash call on the financial system as a whole.
This is why we have seen so many stock market crashes in October. Once the system swallows this lump, it's nothing but green lights for six months.
After the cycle was set and easily identifiable by low-end computer algorithms, the trend became a self-fulfilling prophecy.
Yes, it may be disturbing to learn that we ardent stock market practitioners might in fact be the high priests of a strange set of beliefs. But hey, some people will do anything to outperform the market.
It is important to remember that this cyclicality is not 100% accurate, and you know the one time you bet the ranch, it won't work.
But you really have to wonder what investors are expecting when they buy stocks at these elevated levels, over $205 in the S&P 500 (SPY).
Will company earnings multiples further expand from 19X to 20X or 21X?
Will the GDP suddenly reaccelerate from a 2% rate to the 4% promised by the new administration, when the daily sentiment indicators are pointing the opposite direction?
I can't wait to see how this one plays out.
It's May!
https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/blue-chart-story-2-image-2-e1525728834696.jpg334580MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-05-08 01:07:312018-05-08 01:07:31Reminding You Why You Should Be Selling in May
Featured Trade: (THE MARKET OUTLOOK FOR THE WEEK AHEAD, or WHERE?S THE RECOVERY?) (AAPL), (BAC), (AXP), (XLP), (CAT), (X), (POPULATION BOMB ECHOES), (DBA), (CORN), (SOYB), (WEAT), (MOS), (TESTIMONIAL)
Where did that global synchronous economic recovery go? You know, the one strategists were gushing about as the foundation for the bull market in stocks?
Last week we saw ISM, Pending Home Sales, Capital Goods Orders, Chicago PMI, and Prices Paid all disappoint. And Europe just posted a dismal Q1 GDP of only +0.4%.
What is becoming painfully obvious is that the enormous tax breaks given the corporations to expand capital investment and create jobs is having the opposite effect.
Instead companies are accelerating the adoption of tax subsidized robots to replace workers, destroying jobs in the process, but boosting profits.
That was clear as day with the April Nonfarm Payroll Report, which came in at a weak 164,000. With all the hyper stimulus the economy is now getting, it should be over 400,000 a month.
The boost has yet to show up in Average Hourly Earnings which were up a miniscule 0.1%, or a 2.6% YOY rate. No wage hikes here.
The headline Unemployment Rate fell to 3.9%, which will be close to a cycle low. The boarder U-6 "discouraged worker" unemployment rate fell to 7.8%, a 17-year low.
Professional and Business Services gained 54,000 jobs, Manufacturing 24,000, and Health Care 24,000.
Peak earnings? Really?
Maybe for old line industrial companies like US Steel (X) and Caterpillar (CAT) which got a big, one time only shot in the arms in January from the tax bill, and then no more.
Technology companies are still powering on, full speed ahead damn the torpedoes on both earnings and announced share buy backs.
With the Trump team in Beijing this week trying to cut a deal with an incredibly weak hand, we have another big dark cloud hanging over the market.
Gee, do you think the Chinese read the New York Times too and are also aware of the president's weak poll numbers, a Mueller investigation that is closing in for the kill, and desperation to get anything done on the international front?
With corporate stock buy backs expected to leap from $500 billion to a record $800 billion this year, companies have become the sole net buyers supporting the stock market.
It's all starting to sound like a Ponzi scheme.
The great irony here is that consumer staples (XLP), long considered "safety stocks" because of their high dividend yields, have been the worst performers of 2018. When your aggressive stocks do poorly but your safe stocks do worse, you have to worry.
I have never been one to argue with Oracle of Omaha Warren Buffet. The founding subscriber to the Diary of a Mad Hedge Fund Trader has been a follower of many of my Trade Alerts, including for Bank of America (BAC), Burlington Northern (he bought the whole company), and American Express (AXP). But I could never get him into technology stocks.
Now, at last, you can add Apple (AAPL) to that list.
You know all of those panicky investors unloading Apple stock just over $150 a few months ago, apparently believing that the company's product cycle and innovation were at an end? That was Warren doing the buying.
Too bad I couldn't get him interested in the stock when Steve Jobs was still alive. Since then, the share price has risen by 400%. Knowing Steve as I did, maybe that was the reason he stayed away.
Still, I tried.
Looking at Apple's earnings this week, it's better late than never.
Buffet now owns a staggering 240 million shares of Apple worth $44 billion. It is his largest position, and Buffet is also now the largest shareholder in Apple. Remember, when you sell the shares of Apple, you now have both Buffet and Apple itself competing to buy the shares from you.
It's not a trade I would recommend.
I spent a rare week on the sidelines with the Mad Hedge Trade Alert Service, preferring to preserve my performance at an all-time high.
I decided to let the next false breakdown of the 200-day moving average take place without me. To mix a few metaphors, when the sun, moon, and stars line up once again I'll go pedal to the metal once again.
Remember, it's "Sell in May, and go away," except that this year May happened in January.
Now that the financial and technology Q1 earnings reports are out, the rest from here are going to be pretty boring.
On Monday, May 7 at 3:00 PM we get April Consumer Credit.
On Tuesday, May 8 at 9:45 AM EST, we receive the April NFIB Small Business Optimism Index, which has been red hot as of late. Disney (DIS) and China's JD.com (JD) reports.
On Wednesday, May 9, at 8:30 AM, the April Producer Price Index, and important read on inflation.
Thursday, May 10, leads with the Weekly Jobless Claims at 8:30 AM EST, which saw an of 2,000 last week from the 43-year low. At the same time, the all-important Consumer Price Index is released, the most crucial indication of price inflation. NVIDIA (NVDA) and Dropbox (DBX) report earnings.
On Friday, May 11 at 10:00 AM EST we get April Consumer Sentiment.
We wrap up with the Baker-Hughes Rig Count at 1:00 PM EST. Alibaba (BABA) reports.
As for me, I'll be playing around with my new Samsung 75-inch curved QLED quantum TV. I just bought it half price on Amazon (AMZN) half price with free delivery.
And you know what? Just to mess with me, Amazon offered me the set $500 cheaper after I bought. Jeff, you're so cruel.
Good Luck and Good Trading.
?
?
I Think I See Disney?s Earnings Coming
https://www.madhedgefundtrader.com/wp-content/uploads/2017/08/john-telescope-e1503946045827.jpg328400Arthur Henryhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngArthur Henry2018-05-07 01:09:072018-05-07 01:09:07Market Outlook for the Week Ahead, or Where's the Recovery?
"The profits at Apple are unprecedented in American history. They are double the next largest competitor. All their products would fit on a small table. We've never seen anything like that," said Oracle of Omaha Warren Buffet.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/Apple-prod.jpg230229Arthur Henryhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngArthur Henry2018-05-07 01:05:522018-05-07 01:05:52Quote of the Day - May 7, 2018
Featured Trade:
(DON'T MISS THE MAY 9 GLOBAL STRATEGY WEBINAR),
(A DAY IN THE LIFE OF THE MAD HEDGE FUND TRADER),
(SPY), (TLT), (TBT), (FXE),(GLD), (GDX), (USO),
(AMLP), (STBX), (NFLX), (DIS), (AAPL), (GM)
My next global strategy webinar will be held live from Silicon Valley on Wednesday, May 9, at 12:00 PM EST.
Co-hosting the show will Mad Day Trader?Bill Davis.
I'll be giving you my updated outlook on stocks, bonds, commodities, currencies, precious metal, and real estate.
The goal is to find the cheapest assets in the world to buy, the most expensive to sell short, and the appropriate securities with which to take these positions.
I will also be opining on recent political events around the world and the investment implications therein.
I usually include some charts to highlight the most interesting new developments in the capital markets. There will be a live chat window with which you can pose your own questions.
The webinar will last 45 minutes to an hour. International readers who are unable to participate in the webinar live will find it posted on my website within a few hours.
I look forward to hearing from you.
To register for the webinar, please click on the link we emailed you entitled, "Next Bi-Weekly Webinar - May 9, 2018" or click here.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/04/John-Thomas.jpg337369MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-05-04 01:07:262018-05-04 01:07:26Don't Miss the May 9 Global Strategy Webinar
Everyone who has been reading this letter for the past decade (yes, there are quite a few of you), know that I am a fundamentalist first and a technician second.
Of course, you need to use both, as those who mistakenly leave one tool in the bag reliably underperform indexes.
The one-liner here is that I use fundamentals to identify broad, long-term, even epochal trends, and technicals for the short-term timing of my Trade Alerts.
Do both well, and you will prosper mightily.
Strategists often like to cloak themselves in the fundamental or technical mantels alone. But parse their words carefully, and the best fundamentalists talk about support and resistance levels, while the ace technicians refer to the latest economic data points.
The reality is that the best of the best are using both all the time. The differential titles have more to do with marketing purposes than anything else.
Having said all that, you better take a good, hard look at the chart below for the Shanghai Stock Exchange Composite Index ($SSEC). The 2016 low has held and the long-term uptrend lives.
My bet is that it resolves to the upside. All it would be doing then is coming in line with the rest of the global equity markets, including those of many emerging markets.
Since the last top, the earnings multiple of Chinese companies has plunged, from 35 times to a mere 15 times. This means that the 6.5% a year growing economy (China) is trading at a lower multiple than the 2.3% a year growing one (the U.S.). The big question among strategists since 2009 has been how far these valuations would diverge.
If I am right, then you can expect a rally of at least 25% in the Shanghai market soon, and more in peripheral markets, such as Hong Kong (EWH) and in single Chinese names. My bet is that it starts in August, when the current correction ends and we resume the year-end ramp-up.
You should place a laser-like focus on the Chinese Internet sector, so you won't go wrong picking up some Baidu (BIDU) around $180, if you can get it (click here for my original recommendation to buy the stock at $12 nine years ago).
If you are looking for further confirmation of the coming bull move in China across asset classes, please peruse the chart below for copper. The red metal has one of the closest correlations out there with the fate of the Middle Kingdom's economy and stock markets. It appears to be breaking out of a major five-year downtrend as well.
The other nice thing about this scenario is that it provides more fodder for my expectation of another global bull market move in the fall, when you can expect major indexes to tack on another 10% by year-end.
Jim Chanos, watch your back!
https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/Man-in-China-story-2-image-6.jpg225336MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-05-03 01:06:152018-05-03 01:06:15Don't Be Short China Here
Legal Disclaimer
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
