Stock Market Analysis

Wednesday, February 10, 2016

DEAD cat bounce...

Remember two days ago I mentioned that this is the level where the market could once again go into another dead cat bounce? Well, it seems like at least its happening right now exactly as expected. Even though the close was mixed, intraday trading action were largely positive. However, dead cat bounces like these are so so dangerous I almost never use them for any long calls. In fact, I used the opportunity to get out of two of my most profitable put options positions on NKE and MPEL, making 82.2% profit and 44.6% profit respectively (See how its done here!), setting down our first profits of the year of the Monkey. Not bad at all.

Some of you emailed me and asked me what I meant when I said that this recession is going to be the perfect storm of recessions because factors that used to individually cause recessions are now all coming together. What exactly are these factors? Well, lets take a look...

1987 - Oil Glut crisis. Slump in oil prices following global oil inventory build up resulted in the market crashing 30%.

2001 -  Dot com bubble, emergence of terrorism, accounting scandals hitting mega corporations.

2008 - Credit crisis. Bad credit rolling into a global economic slowdown snowball. Main cause of bad credit was the subprime mortgage crisis, home price bubble. European slowdown.

This time round, we have the oil glut, China slowdown, consumer debt bubble rolling up, another home price bubble, all of these will no doubt lead to more serious consequences that will truly spark the recession. And then of course, the Feds had to drop the rate hammer right now, which of course, in one of my posts a few weeks ago, I actually felt its the right thing to do as well even though in the short term, a market crash may be the price to pay for longer term stability.

Looking at the price action today, even though the market traded with higher highs and higher lows, which is a bullish indication that agreed with my expectation of another dead cat bounce around this area, I am seeing this dead cat bounce more like DEAD cat bounce rather than dead cat BOUNCE. Yes, it felt like a dangerous expectation because the market can easily slump down so fast from here that even if it does go up another day or two, its pretty insignificant. From how the internals are poised, the market doesn't seem like it has the strength to mount another assault at the 30MA line but actually looking to completing the bearish transformation (transforming the primary trend from neutral to bearish as well) by taking out the January low... soon. I would continue to use any positive days as opportunities to position me and my Master's Stock Options Picks subscribers to downside.

So far, over the past 2 decades, I have been sniper sharp at predicting the 2008 market crash, the 2009 market bottom (in fact, I was the first analyst online to propose that 2009 was the bottom of the bear market and few believed me then) and now this 2016 crash. In fact, people are calling me the "Options Sniper" now. And people are beginning to ask to learn my secrets of how I so accurately read and predict the market over the past 2 decades. I have been very secretive and protective of my methods so far but for the very first time, I would be open to teach this method over a one week online intensive course with 30 mins daily Skype live chat and daily lesson materials for just $10,000. Yes, $10,000 to start reading the market like a pro and making ALOT more in profit. Most  successful traders won't give up their secrets even for $100,000. So, if becoming an "Options Sniper" is what you wish, email me at founder@mastersoequity.com for more details!

Market Crash Timer: RED

For now, the market remains in short term bear trend within an intermediate bear trend and primary neutral trend.

Monday, February 08, 2016

Bearish Year of the Monkey

Happy Lunar New Year to all our folks who celebrate this event! May the year of the Monkey be prosperous and happy for you!

Well, in my opinion, the year of the Monkey is going to be a painful one for most people as it is most likely going to see one of the worst recessions in history. However, the year of the Monkey has been an awesomely profitable one for me and my Master's Stock Options Picks subscribers so far as we are sitting on nearly 100% profits on our put options positions. Will make a full report on this when we close these positions out. Don't miss profiting in this bearish Monkey year! Join my Master's Stock Options Picks service now!

Last week, the S&P500 did exactly what I foretold it to a couple of weeks ago, turning around near the 30MA and nearly completing a primary trend transformation from neutral to bearish. So far, its all been extremely textbook behavior, no surprises at all. But why just nearly? Well, that's because The S&P500 still has to take out the January low in order to confirm the new trend. Interestingly, we see evident strength coming into the market once again at around this level from which the S&P500 staged its dead cat bounce last month, forming yet another bottom hammer candlestick at about exactly the same level. Looking at the internals, we see a huge jump downwards in the bond yields and a huge jump upwards in favor of put options trading in the total equities put call ratio. Trading volume was also an extremely strong breakaway style volume. All of these tells me one thing, that today's bearishness was overdone. Indeed, not even the great market crash of 2008 had the market go straight down when the bearish formation started in January of 2008. The bulls never give up without a fight. However, looking at market fundamentals, the Labor Market Condition Index created by the Feds slumped this month from 2.3 to 0.4, the kind of condition that shouts recession is coming. So, the bulls may actually be fighting in vain. Tomorrow would be critical. If tomorrow end up negative, it would negate this bottom hammer candlestick and move on to completing the bearish transformation. If tomorrow end up positive, we could see another retest of the 30MA. Its 50/50 at this point in time.

Market Crash Timer: RED

For now, the market remains in short term bear trend within an intermediate bear trend and a primary neutral trend.

Sunday, January 31, 2016

How January Ends, So Will The Year?

"How January Ends, So Will The Year..."

This is an old stock market adage I have heard since the day I started learning about the market decades ago (In case you guys are wondering from my young looking photo, I turn 41 this year). January 2016 ended badly, as expected. The SP-500 was down a whooping 138 points or -6.65% in the biggest monthly drop since August 2011. Looking at the high and low, the SP-500 dropped by over 260 points over the course of the month before closing higher in a negative range that is not seen since the great bear month of October 2008. Yes, things looked very bad for January 2016 and if the old adage is anything to go by, this year will go down really bad too.

However, how reliable is this old adage? Looking back in the past two decades, we actually saw that there are insignificant correlation between how January ended and how the year ended. In fact, many negative Januaries closed the year positive too. How was prevalent was actually the market cycle. In a bull cycle, Januaries that closed positive tend to close the year positive, fulfilling the adage. Januaries that closed negative actually tend to close the year positive too, breaking the adage. In fact, the only times negative Januaries actually reliably resulted in a negative year was when it was a market crash year. Looking at these findings, one can easily see that this adage doesn't really stand the test of time but rather depended on the market cycle for its fulfillment. Which means that ultimately, the market cycle is King as I have always believed. Which was the basis for my bear market 2016 prediction I made last year.

(Wanna learn how I read the market cycle? Join my Star Trading System training course now!)

So, January 2016 ended negative. Will 2016 itself also fulfill the prophecy and end negative? I do think so strongly. In fact, I think what is to come is the perfect storm of recessions as many of the factors that individually resulted in past recessions come into play all at once this time. Are you ready for the perfect storm?

Market Crash Timer: RED

For now, the market remains in short term bull trend within an intermediate bear trend and primary neutral trend.

Wednesday, January 27, 2016

Let The Stock Market Crash and Continue Rate Hikes...

"Let the stock market crash and continue to hike rates as previously planned!" said a renowned economist and Fed chairman candidate yesterday. In fact, there were also advises along those lines coming out of China to "let the stock market crash but continue...".

In fact, even though the FOMC announcement kept rates the same exactly as expected, the market still plunged as the Fed pledged with a 10-0 vote to continue raising rates in a "gradual" manner. This means that even though the stock market is looking really shaky now, the rate hammer is still hanging over everyone's heads. Well, this ties in exactly into the stock market crash scenario anyways so it didn't come as much surprise. Its usually interesting to see how the world starts to provide the reasons for a market crash whenever the time is due for a market crash. A few months ago when I first proposed a possible market crash going into Q4 2015 and 2016, many analysts tried to talk me down by quoting how economic data are strong and that the stock market do not revolve around imaginary lines blah blah blah. But when the time comes, the world always provides the reasons for my "imaginary lines".

So, why are renowned economist around the world telling policy makers to ignore the market crash, in fact, let the market crash, but establish policies for more stable economic growth in the future after the market crash?

This is because all of these people went through the same academic studies that I did... we all know that stock market cycles are inevitable and trying too hard to prevent it from happening only makes it come harder when it does and makes it even harder to recover from because of the unreasonable policies and steps taken in the pointless attempt to prevent it from happening. Yes, stock market cycles are a fact that eludes scientific understanding at the moment. How everything in nature are of cyclical nature still begs more scientific research. But for now, at least in finance we call it "retracement to the mean" meaning everything moves back to a more average level eventually and this returning to the mean occurring periodically creates this cyclical behavior that we observed.

Well one thing about today's drop that I didn't like was how strongly it happened on the back of that FOMC announcement without any real action taken by the Feds yet. Such a strong move on such a strong volume over nothing tells me tomorrow could actually be a positive day and that this dead cat bounce that I mentioned all week long isn't completely dead just yet.

Market Crash Timer: RED

For now, the market turns a short term neutral trend within an intermediate bear trend and primary neutral trend.

Monday, January 25, 2016

Cat More Dead Than Expected...

The dead cat bounce happened right after the occurrence of the dragon tail formation I mentioned last week, right on the dot. However, the cat really looks more dead than expected and the bounce has not been as strong as most people, myself included, have previously expected. This was also why I mentioned in last week's report that:

"...it would probably be already to late to catch on it for any significant reward vs the risk that you are taking because when the dead cat bounce is done, the market will turn around so hard that you may not have time to react to it and exit your call options or long positions profitably."

The thing about a dead cat bounce within such a strong bearish framework is that because it is so bearish inclined, it could actually be too short to be profitable unless you are an extremely nimble trader.  This is why most professionals take such dead cat bounces for put options accumulation such that even if the dead cat bounce ends prematurely, it will be a pleasant surprise instead. I continue to see this area to be an area of struggle as this continues to be an area in which neither bulls nor bears have attractive entries. In fact, today's trading volume took a dive and closed the second lowest volume for the month. Internals are also divided as investors returned to bonds, taking bond yields lower across the board like all real bearish days but options traders took total equities put call ratio down abit in favor of call options trading. So, this continues to be a confusing area for most people. In fact, I won't also be taking strong positions around this area but to be patient to see how this situation unfolds so that I can ride on the next leg.

Market Crash Timer: RED

For now, the market turns a short term neutral trend within an intermediate bear trend and primary neutral trend.

Thursday, January 21, 2016

Dead Cat Bouncing?

Market closed positive day exactly as I have expected it in my report to paid subscribers yesterday following one of the most significant Dragon Tail Formations that I have seen since October of 2014. I explained what this formation is about and what it comprises of in my report to paid subscribers yesterday so I shall not go into it again.

Just like October 2014, this dragon tail formation is expected to turn the market around significantly and today confirmed that tendency and I have also prepositioned my Masters Stock Options Picks subscribers for this move. Even though this is the nicest dragon tail formation I have seen in quite a while, I  do not think that this time round it would have the trend reversal effect of October 2014. In fact, I think this will start that dead cat bounce I have been talking about all week long and being a dead cat bounce, if you are not already prepositioned for it like my subscribers and I are, then it would probably be already to late to catch on it for any significant reward vs the risk that you are taking because when the dead cat bounce is done, the market will turn around so hard that you may not have time to react to it and exit your call options or long positions profitably. In fact, major index futures are already pointing upwards post market (even though it really means very little to how the market eventually ends up tomorrow). The catalyst may be a better than expected leading indicators which is expecting a very bad number.

So far, the market is playing out a typical market crash prelude, no doubt about it at all. I hope nobody out there is still expecting the market to turn around back into a bull trend... even though that could happen, it is going to take a while... a long long while as this perfect storm recession comprising of almost every factors which individually has caused previous recessions could take a while to blow through...

Market Crash Timer: RED

For now, the market remains in short term and intermediate bear trend within a primary neutral trend.


Tuesday, January 19, 2016

First Positive Week of 2016?

Welcome back from the long weekend!

Well, the dead cat bounce did not happen as I expected last week afterall. This is why I always stick to trading put options / bearish positions within such an intermediate bear trend as the possibilities of continuing downwards always outweighs the possibilities of moving upwards significantly even for only a short period of time. In fact, last Friday, the market did exactly what I predicted two weeks ago, taking out the August low. And as I said then, taking out the August low also means the confirmation of the start of the 2016 market crash, which could become a rather historic event with so many geopolitical and economic turbulence hitting all at once. The world is rarely messier.

Today, even though the market opened strongly, it didn't take long for the bears to take it all away. Indeed, traders and investors alike are selling into every bit of strength now. However, this is when it starts to get VERY tricky. The market is now in that very very strong support zone once again. The region where it bounced from the dead twice before. This time round, with the market this grossly oversold, with the buying strength coming in and the internals actually pointing more bullish than bearish with total equities put call ratio trading in favor of call options for the first time in a long time, I would say this is where a dead cat bounce could really happen. By dead cat bounce, I mean a short term rally that could be two to three days long, which means this could basically end up as the first positive week of 2016. Which means that unless you are an extremely experienced and nimble trader, attempting to profit from this "rally" is not for you. Use it to put on put options at a better price.

So far, this decline along with the hit in the energy sector due to the oil glut, my Master's Stock Options Picks subscribers and I have managed to take a pretty nice 35% profit on QEP put options last Friday. Are you missing out on profiting from this decline? Join us now before its too late! --> Master's Stock Options Picks!

Market Crash Timer: RED

For now, the market remains in short term and intermediate term bear trend within a primary neutral trend. (When will primary trend be turned bearish as well? I will explain this in my report to paid subscribers tomorrow)