Wealth Building Strategies

The Six Groups of Investors and Traders

Posted by Martin Armstrong - Armstrong Economics

on Wednesday, 25 October 2017 12:45

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The recent report by the Commodity Futures Trading Commission (CFTC), shows that the professional investors have continued to bet on falling Dow Jones “short” as private investors are starting to bet heavily on rising prices ( “Long”). Professional investors remain suspicious of a further rise in the US stock market. The private investors’ view is exactly the opposite. The question is; Who will be right?

There have been plenty of times that the professional is dead wrong and the average person on the street has actually outperformed the professionals. Reuters reported that 69% of hedge fund investors expected the second half of 2017 to be worse than the first half. So why are the professionals so pessimistic?

When you live and breath the market every single day, it is hard to get a grip on vertical markets. The professionals, more so that even the average street investor, tends to do worse in such markets because it makes them uncomfortable. Then there is the self-gratifying notion that the market is over when the retail invest comes in. But they tend not to look at the fact that there is a huge difference between the average retail investor and the person who has never invested who rushes in to join the party at the top simply be everybody else if there.

MAA-TokyoI have told the story before how I was doing an institutional only seminar in Tokyo at the Imperial Hotel. This individual bribed someone in the hotel to get in. He came up to me and apologized offering to pay. He said he just had to speak to me. I asked him what was the problem, He explained he had bought the Japanese share market on the very day of the high and now it was crashing. His investment was $50 million. But the intrigue came when he said it was the first time in his life he had purchased any stock. He then had my attention since I was talking to the guy who bought the high.

I asked him what made him buy that day for the first time in his life? He said brokers had called him every year saying the Nikkei rallied on average 5% every January with the New Year. He watched it for 7 years and then finally bought the high. That is what I mean as the difference between the average retail investor and the fool who rushes in at the end because everybody else is there. It is when that final group of people rush in that marks the end of the market – not when simply average investors buy who follow the market generally.

We have four actual groups:

 

  1. smart strategic big money (long-term portfolios)
  2. professional short-term traders
  3. the day trader who thinks he is limiting his risks
  4. program traders who try to arbitrage ticks
  5. the average retail investor
  6. the fool who rushes in at the last minute

In most real good vertical markets, it is the professional short-term traders who keep trying to sell the new highs. This has been the group that has been bearish ever since 2009. They never saw new highs coming, and they still will try sell every new high today. They falsely believe that they are “professional” and so they will be right and the average investor is the fool. But the average investor sees the trend for what it is, goes with the trend, while the short-term “professional” keeps trying to beat the market.

Usually, the day trader who thinks he is limiting his risks and the program traders who try to arbitrage ticks will typically get caught when they suddenly find the lack of liquidity traps than in a position they cannot get out of.

….also from Martin: Diamonds replacing Gold?

Energy Giant Bets On Battery Breakthrough Within 5 Years

Posted by OilPrice.com

on Tuesday, 24 October 2017 13:58

d56c89edf567c9847d49a97db588c18fNorth Carolina-based utility provider Duke Energy is betting on the rise of increasingly efficient battery technology to propel the rise of solar and wind power over the next five years, according to a new report by Forbes.

“There’s going to be a lot of excitement around batteries in the next five years. And I would say that the country will get blanketed with projects,” Duke Energy business development managing director Spencer Hanes said on Thursday as part of a conference in Chicago.

….read more HERE

also from OilPrice.com

Midwestern Refiners Seek Canadian Oil To Expand Output

Miners Could Be Setting Up For A Big Hit Into Year End

Posted by Avi Gilburt - Elliottwavetrader.net

on Tuesday, 24 October 2017 13:44

As I read through the blogs and public articles on miners and the GDX, it has become quite evident that many have now turned either bearish or completely indifferent to this complex. In fact, it seems as though the number of hits being seen in the Seeking Alpha metals section has dropped dramatically over the last year.

It seems most are looking for the metals to just drop from right here for a myriad of reasons. (Well, that is, other than those who only see the word “UP” when you mention the word “gold” to them). For those who usually place their expectation upon the immediate direction of the complex, it would seem that the recent drop in price has them expecting it will immediately continue to drop. Isn’t linear analysis wonderful? So, it would make sense, at least from a sentiment standpoint, that we need to get a number of them believing that the market is about to rally strongly, which will then trigger our trap door.

While my perspective is also a bit bearish in the intermediate term, I think we can be setting up a bit of a surprise in the short term.

Price pattern sentiment indications and upcoming expectations

So, as many are expecting continuation of the weakness in the GDX and mining stocks, I think we could be setting up more of a rally before the true weakness takes hold later this year. 

As long as the GDX remains over the lows struck in early October, I think the GDX can approach the 24.50-25 region. While there is still some potential that it can stretch as high as the 26 region, if it is unable to reach that high on the next rally, and then breaks back down below the October lows, that opens the door to a 30% decline in the GDX. 

Moreover, as I look to ABX, a leading stock in the GDX, as long as it remains below 18.35 on its next rally, and then breaks down below the lows we are currently striking, it opens a trap door for us to drop towards the 11 region.  This supports the estimated 30% drop I would expect in GDX, again, should we be unable to reach the 26 region in GDX or over 18.35 in ABX on the next rally.

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See charts illustrating the wave counts on the GDX.

 

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.

1987 Stock Market Crash Anniversary Predictions; Rubbish as usual

Posted by Sol Palha - Tactical Investor

on Tuesday, 24 October 2017 13:30

Stubbornness does have its helpful features. You always know what you’re going to be thinking tomorrow.

Glen Beaman

Expert after expert is busy proclaiming that the world is about to come to grinding halt again. They never seem to let up on pushing this sewage onto the unsuspecting masses. This is a clear example of insanity in action; mouthing the same nonsense over and over again with the desperate hope that this time the outcome will be different.  The outcome will not be different this time, at least not yet. These guys should focus on writing fiction for reality seems to elude them completely. For years we have stated (and rightly so) that until the sentiment changes, this market will continue to soar higher and higher. 

 Here is a small sample of the flood of articles that were pushed out this month. If one simply glances through them, one would almost be compelled to think that the writers shared the same notes.  There is almost no originality in these articles. The theme is the same, just because it’s October the focus is on the disaster aspect of the 1987 crash. Almost no one mentions that it proved to be a monumental buying opportunity. The focus is oh the financial world came to a grinding halt. Only it did not, the only that came to a halt was the rubbish the predecessors of today’s experts were uttering back in 1987.  This reinforces the view that most financial writers have chosen the wrong profession   One word sums all this nonsense “Rubbish.” 

Could the 1987 stock market crash happen again? – Reuters

Black Monday anniversary: How the 2017 stock market compares with 1987 – Market Watch 

Black Monday: 30 years after 1987 stock market crash… Wall Street raises fears of REPEAT- express.co.uk

Thursday marks 30th anniversary of the Black Monday stock market crash – courier-journal

Buy Climax at 30th Anniversary of 1987 Stock Market Crash – Money Show 

The Crash of ’87, From the Wall Street Players Who Lived It – Bloomberg 

Black Monday: Can a 1987-style stock market crash happen again? – USA Today

So are we stating that the stock market will never crash?

No that is not what we are stating.  The market will crash, but for the astute investor, “crash” is the wrong word to use. A strong correction is more likely as most astute investors got into this market a long time ago. It is the crowd that will eventually decide to embrace close to the top that will experience this crash that the experts have been hyping about for years. 

This market will experience one strong correction before it crashes, but the moment the Dow sheds 1000 points or more these experts will crawl from the rocks they were hiding under and start screaming bloody murder. To which our response is, please scream as loud as you can; for it will push the markets lower creating a better buying opportunity for us.  This is exactly what we said in Aug of 2015 before Trump won and countless times before and after that.  

This market is extremely overbought so a pullback ranging from 1500-3000 points should surprise no one and it certainly should not be construed as a crash but viewed as market releasing a well-deserved dose of steam. To state otherwise, would simply be disingenuous, which seems to be the only real qualification these so-called experts posses 

Market Sentiment indicates that the crowd is far from Ecstatic 

Anxiety index Oct 2017

http://www.goldseek.com/news/2017/10-24sp/BNB%20Oct%202017%20.jpg

 

The Bullish sentiment has risen somewhat, and the crowd is not as anxious as it was at the beginning of this month or last month, but until the readings indicate this crowd is euphoric, a crash is unlikely. Many people state that most people don’t have money to invest in the markets. We beg to differ; look at whats going on in the Bitcoin market, now that is a market showing some signs of Euphoria; the stock market in comparison is at the lukewarm stage. 

Conclusion 

The only thing that is going to crash and has been crashing since 2008 is the egos of these “know it all” experts. If any of them had even listened to themselves half of the time; they would have bankrupted themselves several times over. The fact that they are still around chiming the same rubbish is clear proof that they don’t believe a word they are putting to print and therefore neither should you. 

Why Not Try Something New For A Change 

Make a list of stocks you would love to own at a discount. When the market lets out a nice dose of steam, instead of fleeing for the hills, you can purchase top quality stocks for a discount

The sheer volume of these articles validates our view that the masses are from bullish and a crash is unlikely.  Until the sentiment or the trend changes,  all strong corrections should be viewed through a bullish lens. 

Obstinacy is the result of the will forcing itself into the place of the intellect.

Arthur Schopenhauer

Oct 24, 2017

  1. “The Federal Reserve and other central banks have piled up huge reserves. But there is no inflation because the money is sitting within the banks and they are not lending it. Therefore, you don’t get a multiplier effect.” -Pierre Lassonde, gold expert, interviewed by Finanz and Wirtschaft News, October 2017.
  2. Because the world’s major central banks have moved so slowly to transition from QE and rates near zero to QT and higher rates, the huge bear markets in money velocity in Western countries have not ended.
  3. Most Western gold bugs are more focused on gold stocks than bullion, and are eagerly awaiting a turn in money velocity that will usher in a new and lasting era of inflation.
  4. The bad news is that Janet Yellen initially lied about the pace of rate hikes. She has moved vastly slower than promised, and that’s kept money velocity (and gold stocks) in the “dumpster”.
  5. The good news is that the US central bank finally appears ready to increase the number of rate hikes per year. The plan is for three in 2018 and perhaps four in 2019. 
  6. It’s possible that she is lying again, but I don’t think so, mainly because of progress China is making with OBOR (The gargantuan “One Belt One Road” infrastructure program).
  7. Please  click here now. There are rumours that Janet Yellen cut a secret deal with the Chinese government behind the back of her own Fed governors when she started hiking rates. 
  8. According to the rumour, she agreed to cut the pace of hikes because China was struggling with long term downside manipulation of its stock market and with a very slow start to its OBOR program. She then ordered the Fed governors to agree to a slow path of rate hikes until getting the green light from China.
  9. I don’t know if the rumour is true or not, but I do know that OBOR is the largest infrastructure spending program in the history of the world. It makes Roosevelt’s “New Deal” look like a microscopic peanut play, and it is… inflationary.
  10. With OBOR moving forwards now and Chinese stock market rule changes implemented to prevent “robber barron” shorting, the Fed is free to move more aggressively with rate hikes and accelerated QT.
  11. Also, the ECB (European Central Bank) is poised to make a key announcement on Thursday about QT and rate hikes. In Japan, Abe just won re-election, and the stock market has been rising while the yen is steady. That opens the door to a potential reduction in QE there.
  12. Mainstream media focuses on the “government economy” and the “stock market economy”, but the real economy is Main Street. The health of that economy is best measured by money velocity that relates to GDP.
  13. Horrifically, more than twenty million people are employed by the municipal, state, and federal governments in America, while only ten million people are employed in manufacturing. 
  14. This is unsustainable. Banks have loaned companies money for stock buybacks that enrich company directors. Central banks are shareholders in some of these companies. Very little capital has been allocated to business expansion, despite a modest rise in bank deposits since 2011. 
  15. US money velocity is simply a ratio measurement of how frequently a dollar is used to buy goods & services. When government gets the money and wastes it on ridiculous wars, then money velocity obviously implodes.
  16. On that note, please  click here now. Odds are probably near 90% that 2018 is the year that the giant bear market in money velocity is ended by the US central bank with more rate hikes and accelerated QT. 
  17. Trump’s tax cuts will ice that cake.
  18. When gold traded between $1500 – $1800 repeatedly in 2011 – 2012, I suggested buying the $1577 – $1523 area and selling into $1650 – $1800. After it worked three times, I noticed that many amateur investors that didn’t take action wanted to finally buy the fourth touching of that $1500 – $1550 area.
  19. I warned that it could be a “Three strikes and you are out” situation, and so it was. In the current time frame, I notice that many gold market investors are extremely worried about the possibility of lower prices. It’s starting to remind me of the 2011-2013 situation, but this time with a huge blast to the upside that could shock investors like the downside tumble shocked them in 2013.
  20. The ECB announcement on Thursday could be the key to the next move for gold, but I’ll dare to suggest that it’s vastly more important to be a buyer of any price weakness than to avoid drawdowns on existing positions. The current time and price zone will be looked back on as generational lows for both money velocity and gold stocks. 
  21. Please  click here now. I’m not sitting on a “25 bagger” in bitcoin right now because I predicted the price would rise. If bitcoin fell to zero today, I walk out of the arena with hundreds of percent of booked gains that I’ve parked in cash and gold bullion.
  22. I’m not sitting in that position because I predicted bitcoin would rise to $5000 as it has, or to my long term $500,000 target. I’m in this position because I bought bitcoin at prices where I was 100% sure it was finished and I was emotionally destroyed.
  23. Gold bullion has a tiny fraction of the risk that bitcoin has. There’s no need to be afraid of a minor $50 – $150 an ounce decline that probably marks the end of the multi-decade money velocity bear market. That decline might not even happen, depending on what the ECB says and does on Thursday.
  24. Please  click here now. Double-click to enlarge this key GDX accumulation tactics chart. With OBOR, central bank, and tax cut winds at its back, GDX and the entire gold stocks sector need to be accumulated with a golden smile on any and all price weakness, in anticipation of a major reversal in US money velocity. GDX is flirting with my $23 – $18 buy zone, and the ECB on Thursday will determine whether investor buy orders get filled, or whether the price just soars shockingly higher. Obviously, if an investor has no buy orders in place, they cannot get filled. My suggestion to all gold stock enthusiasts is to take the order placement action to ensure they are smiling during the historic upturn in US money velocity!

Thanks! 

Cheers
st

Oct 24, 2017
Stewart Thomson  
Graceland Updates
website: www.gracelandupdates.com

Tuesday 24th Oct 2017
Special Offer: Send an email to freereports@gracelandupdates.com and I’ll send you my free “Golden Baker’s Dozen” report. I highlight 12 top senior gold stocks and the hottest junior stock in the gold community right now, Novo Resources! I focus on winning tactics, risks, and potential reward.