Trading Reversals in Reverse

Posted Feb 16, 2016 by Martin Armstrong

Trading  is something you have to develop a “feel” for. The only way to do that is with experience. The object of our modelling is to place the entire world before you. Once you become familiar with how to use the model, you will be able to look at any market and ascertain its direction based upon experience with the model in other markets.

 

 

 

Using the reversals with timing in “reverse” is one of the best trading strategies. Doing this is what awarded me Hedge Fund Manager of the Year in 1998. In 1998, I sold $1 billion worth of yen against the Yearly Bullish Reversal at 147 on an MIT (Market If Touched) just before the Long-Term Capital Management collapse. It was 16 days after the Economic Confidence Model turning point that year on July 20, 1998.

















We had also only reached three Downtrend Lines. The timing was correct for the yen. We were at a major turn in the Economic Confidence Model. Our models had forecast that Russia was about to collapse, which manifested in the Long-Term Capital Management collapse.
Everything was in line. This is what we are porting over and the computer will articulate this as everything lines up.

Many are headed to Texas.

California Dreaming – The Great Migration from California

QUESTION: Mr. Armstrong, I live in San Francisco ( silicon Valley) and due to internet and automation, technology is doing well and Real estate has been strong, perhaps overpriced. Since oct 2015 prices have declined slightly in core while keep rising in the peripheral areas.
Rents are very high and demand for rentals is softer in 2016.
In the downtrend of the business cycle, start-up and established companies layoff people.
I purchased yoru real estate report and I understand that in nominal terms RE will not appreciate.
From 2017-2020 you have state that:
-confidence in government will decline,
-proeprty taxes may increase,
-30 year mortgages may be scarcer or have a rate premium, (perhaps adjustable loans)
-need to get off the grid ( do not hold a lot of cash)
-Banks may close
– you also have stated in your RE report that real estate may not appreciate in nominal terms
Are you suggesting in today’s blog that
from 2017-2020 to diversify in stocks, gold, silver, and real estate (area dependent)
Is san Francisco bay area a good area to be in real estate?
And then from the 2020 to year 2037:
– what should we expect in real estate.
– The dollar
– Interest rates
what do I do?
Thank you in advance

DS

ANSWER: California is probably the worse state in the union to live in. It peaked in 2012 interestingly right on target (19 * 8.6 years) from the 1849 Gold Rush that populated the State. It is perhaps the most beautiful state, but from a governmental perspective, California is out of control. Residents are the highest taxed in the nation and have matched European insane levels. It is hard to see how real estate can survive there for the state is desperate for money. The chances of economic reform are DEAD in the water to any real extent. They are now hunting people who “earned” their pension while living there and then moved to Florida.

The computer field is the last great asset the state has and that is beginning to migrate outside of California. It is one state you definitely do not want to do an IPO in these days. Because of the heavy burden of a mismanaged state government, the trend is to exit California like it is in New Jersey. It is not a tax friendly state and they will get much worse. Today, California is in the top 10 states which companies are leaving. Many are headed to Texas. I would not expect real estate to hold its value when taxes are driving people out. With a State Income Tax at over 13%, the highest in the nation, you have to be insane to keep a business in California. They once said look West my boy. Guess they should now say look South East.

Investment time- That appears to be during the first half of 2017.

Blog/Q&A

Posted Feb 14, 2016 by Martin Armstrong

QUESTION:

Hello Mr. Armstrong,

I read your blog every day. Thank you but i’m having trouble figuring out where to place my money moving forward. Cash, the markets, the banks, gold…. It feels like you are saying cash is the place to be right now but maybe i have a difficult time comprehending all that is going on

Where there be at time whereby you direct or inform where to place our money? or is that up to us to decide based on the trend you posts?

Thank you

ANSWER: No. I have been saying right now we are still in the deflationary spiral and that is when CASH IS KING. This naturally depends upon where you are. The first quarter here may off the extremes for the year in most markets. So you want to be in a position to begin to come out of CASH for when CONFIDENCE begins to decline in GOVERNMENT (not just central banks since the majority do not even understand what they are), then we should begin to see the staging game prepare for what looks like the 2017-2020 move. Then you may want to be diversified with equities with good capitalization, some spec-stocks, gold, silver, and real estate (greatly dependent on area).

From a TIMING perspective, this is the Great Alignment. We will be yelling loudly when the timing is right. Edging into this will begin this year. But when will this whole thing begin to unravel? That appears to be during the first half of 2017.

Keep in mind that if you read this blog, you are already in a position where you have lost CONFIDENCE in government. Do not judge the world based upon your view. What counts is the majority view and they still THINK government is in control and is actually there to help them. When they start to see this basic assumption is wrong, then everything changes.

The younger generation already has lost faith in government. It is the new voters pouring out for Sanders and Trump against the establishment. They see Social Security in the States as a TAX, not as a plan for their retirement. However, this same segment of society is too young to remember silver coinage. They do not have the same view of precious metal. Some funny video have appears offering a 10 ounce silver bar or a bar of chocolate. The vast majority of the people on the street take the chocolate. They are not on the same page. They could not even sell a 10 ounce silver bar for 99 cents. Not everyone sees the world with the same way.

It appears that 2016 is “the staging period”

No Need to Live in Fear – It’s the Ying and Yang of Civilization

Blog/Armstrong Economics 101

Posted Feb 14, 2016 by Martin Armstrong

QUESTION: Martin. …Thank you for getting back to me. I have one quick question though. What does it mean when you say “It is in the staging period”? Thank you for your insights. I don’t want to live in fear, but don’t know what to do.

ANSWER: There is no need to live in fear. If I tell you I am going to punch you in the face, and say see, her it comes! Do you stand there and just watch it? Or do you move or defend yourself? If you understand what is unfolding then you can move with confidence and not get sucker-punched. Do not live in fear. Just accept this is our fate. We cannot stop it for this is the way things advance. They require events to promote change.

It appears that 2016 is “the staging period” and by that I mean everything is preparing to align and when it does, we will see that alignment if you simply open your eyes to the world around you. As long as we understand what is coming, no worries; we can handle it. It is the reshaping of the future that we have to fight for. What kind of world will we leave our children? We can see the authoritarian posture of government as they hunt money everywhere. This has got to stop. They have become the enemy of civilization. People come together to conduct a more efficient economy. When government abuses the power and sees us as cattle, then we retreat back in the direction of smaller tribes that offer freedom from central oppression. The Ying and Yang of Civilization.

A 10% decline in bond value equals the same economic impact as taking the stock market down 90%

Gold Low of Lows or Just A Low?

Blog/Gold

Posted Feb 14, 2016 by Martin Armstrong

QUESTION: Marty; I had purchased your gold report and the low for gold came in exactly as you laid out on that benchmark date you gave more than two years in advance. But you are not saying you called the low of lows. I assume you remain skeptical about a reversal in trend long-term. Correct?

Thanks

KD

ANSWER: Correct. The low formed right on that target. However, while there is typically a counter-trend move between the Benchmark targets and even a cycle inversion as we saw on these Benchmarks at the 1980 high which the first one picked the all time high and the second the end of the first break, I would not be comfortable claiming we called the all time “low of lows” here for everything else is not lined up just yet. Yes, the low formed on the Benchmark we provided in that report (not on the blog for obvious reasons). The next convergence of the Benchmarks after 1980 came in 1983. That did not pinpoint the high, but the panic to the downside began right on that Benchmark and the low was then confirmed for a 19 year bear market.

Sure the typical goldbugs hate the dollar and only look domestically with a myopic view of often just gold, dollar, Dow and the Fed. It is hard to imagine that the dollar declines here when the USA is the only place safe right now to park money. This still appears to be a counter-trend move and nothing else. With governments dead broke and hunting money everywhere, the hyperinflationists seem to be smoking crack for they remain delusional. We are still in a massive deflationary spiral and 2017 it gets really bad with the G20 coming online where every country has to report on everything anyone has outside their own country.

During the Sovereign Debt Crisis of the 1840s, you can see that government rates surged far above corporate. The Great Depression was massively deflationary because most of the world defaulted on its debt and that drove the dollar up and US rates to historic lows. We are looking more at the type of move of the 1840s where the the free market will turn away from government and pour into the private assets.

(the blue label marks which issue we began to use prior to maturity)

This is not going to end pretty. Yes, gold will rise along with most anything else other than government debt. Keep in mind one thing. You can take the stock market down even 90%, but that will never create a depression. If you take the bond market down which is generally 10:1 with respect to equities, just a 10% decline in value equals the same economic impact as taking the stock market down 90%.

Putting this all in perspective, we are not quite ready for prime time. I would not say we forecast the “low of lows” but just “a low” in this process right now. This was simply in line with the closing above 1044 for year-end and our call for the Euro to rally back to retest 116. The end of this fiscal tragedy is not too far away.

Rule of Five - There are always FIVE FALSE MOVES before the conclusion of a trend.

Beware of the Emotional Expectation

Blog/Armstrong Economics 101

Posted Feb 11, 2016 by Martin Armstrong

  

TIP #1: The number one reason people lose money is because their opinion moves with the trend. They see gold up and assume it will never end or the Dow down and the end of the world is here. This is part of the Slingshot Move. We must move to extremes in all markets and this is how you get opinions to change. This is necessary and standard. This is why the best thing to do is NEVER follow opinion, but cold, unbiased analysis that just calls it by the numbers. You cannot beat that because it eliminates human emotion. The more dispassionate you become, the more successful you will be.

This is what I have called the Rule of Five. There are always FIVE FALSE MOVES before the conclusion of a trend. There were five false moves to the downside BEFORE the Dow finally broke-out, concluding in the 1929 high and ending with that 51.6-year economic wave. Our current one does not end until 2032.

We simply have to play this by the numbers. This is not a game about human opinion. At the end of the day, that will not matter.

Trend is ALWAYS defined by the Bullish and the Bearish Reversals

The Postponement – Slingshot Move

Blog/Forecasts

Posted Feb 11, 2016 by Martin Armstrong

QUESTION: Marty, at the Conference you said we could conclude this in the first quarter if we get the alignment. It does not look like we will get the alignment since gold is up and the Dow is down. This is why you have been saying this looked like it was postponing into 2017?

ANSWER: Yes. We could have concluded this here in 2016, but the reversals determine the trend. Trend is ALWAYS defined by the Bullish and the Bearish Reversals. Those who expect forecasts to be one-sided opinions are not traders and will typically lose their shirt as 90% of people who try to trade do. A real trader MUST know where he is right and where he is wrong at all times since the market is the only thing that is ever infallible. Those who expect one-sided forecasts never survive. Those who do not grasp why we have Bullish and Bearish Reversals defining the trend claiming that is why we are always right are blind fools. You cannot elect both the Bearish and the Bullish on the same day. These type of people will be separated from their money real fast in the coming slingshot because they are incapable of understanding how markets even move. This is a learning experience and when there is nothing left to learn, it is time to die. So those who are incapable of learning, well I suppose they are just a waste of humanity that drives the rest of us in awe as we watch their stupidity repeat over and over again.

True, 2016 would be five years down from the 2011 high in gold. But because of the split with 2012 being the highest annual closing, this has left the door open to the conclusion being pushed off into 2017. If we got the final low for gold in the first quarter, then a low in the Dow would be the alignment that confidence in government would collapse now. But when the Dow closed year-end lower and gold closed above our number, I stated gold was not as weak as it appeared. It then began electing the Bullish Reversals, not the Bearish, and that gave us the indication we would get a rally BETWEEN the Benchmarks at a very minimum. This was only reinforced by the closing in the euro where we warned the euro should rise to 113 at minimum and 116 optimal. The decline in the dollar should have helped gold, but it will also intensify the deflation in Europe and help to push their banking system over the cliff as is happening right now.

The talk around the street is that the moves are due to a lack of confidence in general that central banks can control the economy. Well, that’s nice, for they never could. But this is looking very dicey, to say the least. That is why we have to just following the reversals and the timing. We have heard every excuse to explain the trend from the stock market following oil to gold rallying because the Fed will not raise rates. Honestly, this all sounds like gibberish.

The markets are preparing for a slingshot move that will make most people’s nose bleeds. Gold has reached so far the 1263 level so there is still room on the upside yet before encountering resistance. The two key numbers to watch now are the 1309 and 1363 levels. Pay attention to the Dow. If we can close below 15875 we have a shot of finally breaking last year’s low.

Also, pay attention to silver. It has not kept pace with gold, showing the bulk of the gold move has been short-covering. Here we need a closing for the week above 1643 to be comparable with gold just above the 1209 number. We also have a Weekly Bullish at 1544. Silver is begrudgingly following which does not speak well for the long-term sustainability here.

So in the end, we will set the stage for all this craziness moving to extremes. Then ask yourself this question? Are you willing to hand your money to government and ask them to hold it for you? If we are concerned about banks, and we are concerned about government, then there is not much life but to move to the private sector. So when rates go negative, a 1% yield in a blue-chip stock looks like heaven. That is the shift on the horizon from public to private. We have to get the weak-minded running into the arms of government before the markets will slaughter them for their stupidity.