I believe that there is an excellent chance that the market will either have, or start a substantial decline (10%-20% for 2-3 months) by the end of October.
Possibly starting as soon as next week. If that happens it will present huge opportunities.
Jesse Livermore:
Livermore continued to make money in the bull markets of the 1920s. In 1929, he noticed market conditions similar to that of the 1907 market. He began shorting various stocks and adding to his positions, and they kept declining in price. When just about everyone in the markets lost money in the Wall Street crash of 1929, Livermore was worth $100 million after his short-selling profits.
Jesse Livermore: The Greatest Trader Who Ever Lived
He returned to New York with what he termed a “fair-sized roll.” Then, on April 16, 1906, he was hit by a premonition. With no warning, he yielded to a strange urge to sell short a thousand shares of Union Pacific railroad—an urge even he admitted he didn’t understand. Two days later, the San Francisco Earthquake hit. and the Union Pacific was decimated; he’d made $250,000 literally overnight.
The reason that he made so much in the market crashes isn't a coincidence. It's because markets never crash up and individual stocks almost never crash up.
That means that if the market has either a substantial correction, or a crash it's a huge opportunity that doesn’t happen very often. The Macro Thread has a lot of excellent discussion about protecting assets, but don't remember anything about taking advantage of the potential opportunity.
Our crystal ball (my wife's intuition) has the SP varying between about $312 in early September, rising to about $320 in early November. She thinks that there's going to be some kind of macro shock. I decided to try to find someone else with more experience who might be able to help us navigate the next few months and discovered Michael S Jenkins and subscribed to his SCF newsletter and his nightly phone calls:
Michael S. Jenkins
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Mr. Jenkins has worked in bank trust departments as a portfolio manager, ran three mutual funds and was in the top ten managers in the world in the late 70’s and early 80’s. In 1984 he moved to NYC to become a professional trader for a number of NYSE Specialist firms. In the past, he has been licensed as a stockbroker, commodity broker, hedge fund manager, and investment advisor. In 1985 he founded the Stock Cycles Forecast investment newsletter which has correctly called almost every major bull and bear market turn in the past 25 years including the 1987 crash, the 1990 break, the year 2000 bear market and its exact lows in 2002 and 2003, and recently predicted the final top in 2007 within two days. Because of this notoriety he was a weekly guest on CNBC for 12 years and is the frequent subject of magazine articles on trading and technical analysis. He has written four books and two courses on professional stock market trading and is considered an authority on cycles in the economy and the stock market.
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I have not investigated his past record but I love his newsletter and his nightly phone calls. His newsletter and phone calls are pretty close to my wife's projections (except he is much more cautious). I asked his permission to post one of his newsletters and some recordings of his calls.
Notes:
Not an advice! If you believe that there is a substantial chance that he and my wife are correct it would be prudent IMO not to have a substantial amount of calls that expire before J19's.
It would also be prudent to keep some dry powder on hand to be able to take advantage of potential opportunities, and to be prepared mentally to do that.
I love the "cyclic turns" and the "activity calendars" in his newsletters. I think I could probably make a living by using the "cyclic turns" for TSLA, AMZN and GOOG.
Some quotes from his newsletters and emails:
The newsletter cyclic turns are simple day trading cycles that are often good for 3 to 6 days and usually $10-$20 for day traders and weekly options players. Occasionally they will coincide with the final high or low for the year if the rest of the market gives a signal. the 8/15 one on TSLA would normally be a top as it went up into it and the price is back to the 'low of the high bar' sell signal back in June.
Three more cyclic turns:
AMZN - 08-18
TSLA - 08/31
GOOG - 08/31
TSLA - 09/22
These squares are very popular and all the traders use them, and you can't trade AMZN or TSLA without using them as every single hit in their charts are on these Cardinal and Fixed crosses in calendar days.
In regards the nightly hotwire I don't 'recommend' trades other than to say we will scalp long the emini above 2437 and short below 2429 (tomorrow). I assume my listeners who are members of the stock exchange and largely hedge funds- are competent traders and know how to use stops and reverse- and the word 'scalp' eminis implies at least 7 trades of buying the dip or shorting the rally on either side of my levels each day. I do give the targets of the main trend and what the next day likely will be i.e. strength in morning with a 3 PM top (tomorrow) and down opening Wednesday.
My nightly levels are for emini day traders who trade 5-7 times each day and the average profit or loss is 1.75 points, to 3-4 points on momentum days. Then they always reverse for 45 minutes or so. All the swings over a day from extreme high to low run 14-18 points on normal days.
You must understand that 'crashes' and panics are rare. We have seen more in the last 20 years then the prior 100. This is because of the evolution of technology- in 1987 the invention of the S&P future and OEX options in 1983 and the first derivatives, in 1998 the over shorting of options by institutions destroyed liquidity, in 2000 the over concentration of ETF QQQ names in all the institutions (not really a crash), and in 2010 and 2015 'flash' crashes of 1000 point down days as high speed electronic trading went thru all stop levels in the market. We are currently due a typical bear market not a crash. It will be a slow decline like 1973-1973 or early 2008. The institutions adjust to each evolution with new strategies so you must have a news item spark to catch them off guard. Right now they use formulas to invest based on the VIX or the XIV inverse ETF and as volatility increases they sell and after three days of a declining volatility they buy. The options are created by Goldman and others who short them to you at a price that will not make you money unless you are very good at outguessing the volatility since they have tens of billions of house capital to 'drive' the market to any level they need to so that 90% of all options will expire each week. The only way to beat them is with a letter like mine that specializes in cycles so you know where they will be looking up and selling cheap put premiums but the cycles are peaking. Unfortunately just now there are so many cycles peaking for a long term decline of years just ahead we won't have a sharp single day spike but more likely a gradual rollover like we have seen since June. This time frame extends into October for top with the next big event on Sept 5th. This is why I emphasize sell signals on all the time frames (daily, weekly, monthly) before getting aggressive with shorts. While my bias is for a top, I am a professional trader who has to make money every single day so crossing any 50% swing on a 1 min or 15 min or 60 min chart would at least turn me bullish for those time period durations UNTIL I see a series of lower lows and lower highs. We are only getting to minor ones now with NO big time frame confirmations like consecutive weekly lows or month lows broken, nor do we see any price momentum on the downside. Until that happens all options will expire worthless as Goldman shorts the puts (creating buy programs) and uses house capital to insure the outcome. They only lose control when there are MULTIPLE institutional sellers competing for bids and so far all we see is one at a time liquidating with limits as early sellers. Until the FANGS all have lower highs and lower lows on a weekly chart the market will still be under their control.
The options on the SPY are the way to go for 3 days at a time or once we break 2380 insuring that they will not make a new high for at least 6 months. Otherwise you will have better premiums on individual stocks that are not in the baskets Goldman needs to manipulate to keep the market averages flat and crush the premiums.
My newsletter gives the 'big picture' about once every other or third letter when I update the outlook for the two to three year decline and its shape and characteristics. I list individual stocks in each letter that have all the cyclic characteristics of the market while we are waiting and no big break will occur until these individual leaders you watch daily turn. Right now the clear downside leader is GS and the fractal suggests 6 weeks or so to a low but it looks to be more of a drift than a crash. If you study 2007 from the October top to the Spring of 2008 you will see you had six months of 3 week modest swings and each came back 3/4ths the break keeping everyone guessing. This current market will likely be the same as the FED also buys S&P baskets these days to prevent any 'crashes' so it's likely to be a perpetual liquidation each day of ETF baskets once the decline sets in. Remember 90% of a cycles damage in done in the last 10% i.e. the 1987 financial panic was really only 55 Fib days and the 'crash ' was the last 5 days only where all the money was made. That's why Gann and Livermore knew that you WAITED for the distribution at the top to be complete and on the first obvious and significant break you then went short and made the most amount of money in the shortest amount of time (i.e. options). If we are looking at a two year decline, the best trades will be the last 3 months out 1 and a half years or more from the start. Livermore had that kind of patience. My newsletter and hotwire will definitely warn you when the break starts and also give you inside info on the big accounts showing up to sell and the arbitrage programs coming up in September and if the entire month will be up or down as the baskets need to roll out to the December future creating liquidations that can't be stopped if the premiums collapse enough. Usually that top is the end of the first week in the quarter when Goldman engineers the last rally and goes short for the next three weeks.
the only currently bearish thing is the break on news validating a down cycle, but we are still barely 50-60 S&P points off the top so there is still no downside momentum.
From the most recent newsletter (Scf-09-2017-Sep.pdf):[/B]
Many cycles have already topped but the market hasn't gone down. My experience has been that when that happens you are dealing with a great many cycles that all are culminating prior to a very long term downtrend. As each cycle tops they individually take several weeks to develop downside pressure but each week another cycle is reaching its peak and so the market goes sideways or slightly up or down and often has a last gasp short squeeze to a record high before reversing very swiftly and permanently. This is why both Gann and Livermore said that the fastest way to make the most amount of money in the quickest time, is to wait for the distribution to be complete and then short on the first major breakaway to the downside. The key is the patience to wait for a definitive sign that all the big legs up are done and they are actually breaking weekly or monthly lows on declines. Many individual stocks have begun this process but the bulls have channeled all their remaining reserves into the FANGS and a few dozen other big cap names that make up the serious weights in the indexes so they won't break until these individuals break. A lot like the 'nifty fifty' false rally into January 1973 which set the peak for the two year 50% decline in '73 and '74.
FOUR audio phone calls files. I intend to post a link to an audio file every night through Friday Sep 15, as well as any trades I make until this situation is resolved
or until I'm banned from posting, whatever happens first:
SCF-2017-09-01_Fri.m4a
SCF-2017-09-05_14-Tue.m4a
SCF-2017-09-07_13-Thu.m4a
SCF-2017-09-08-Fri.m4a
