Stock Selling Unleashed!

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The unnaturally-tranquil stock markets suddenly plunged over this past week. Volatility skyrocketed out of the blue and shattered years of artificial calm conjured by extreme central-bank distortions. This was a huge shock to the legions of hyper-complacent traders, who are realizing stocks don’t rally forever. With stock selling unleashed again, herd psychology will start shifting back to bearish which will fuel lots more selling.

As a contrarian student of the markets, I watched stocks’ recent mania-blowoff surge in stunned disbelief. On fundamental, technical, and sentimental fronts, the stock markets were as or more extreme than their last major bull-market toppings in March 2000 and October 2007! I outlined all this in an essay on these hyper-risky stock markets on 2017’s final trading day. The ominous writing was on the wall for all willing to see.

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What Happens To Stocks When Bull Markets End

By Jeff Clark – Re-Blogged From http://www.Gold-Eagle.com

You undoubtedly know that 2017 was a record-setting year for the broad stock markets. And while gold was up last year despite numerous headwinds, most mainstream investors aren’t paying much attention to gold since they keep seeing so much green in their stock portfolios.

Even I was taken back by some of the data from the bull market in stocks…

  • The Dow hit a record high 71 times last year. On average, a new high was hit more frequently than once a week.

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Stock Markets Hyper-Risky 2

By Adam Hamilton – Re-Blogged From http://www.Zealllc.com

The US stock markets enjoyed an extraordinary surge in 2017, shattering all kinds of records. This was fueled by hopes for big tax cuts soon since Republicans regained control of the US government. But such relentless rallying has catapulted complacency, euphoria, and valuations to dangerous bull-slaying extremes. This has left today’s beloved and lofty stock markets hyper-risky, with serious selloffs looming large.

History proves that stock markets are forever cyclical, no trend lasts forever. Great bulls and bears alike eventually run their courses and give up their ghosts. Sooner or later every secular trend yields to extreme sentiment peaking, then the markets inevitably reverse. Popular greed late in bulls, and fear late in bears, ultimately hits unsustainable climaxes. All near-term buyers or sellers are sucked in, killing the trend.

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Gold Stocks Screaming Buy

By Adam Hamilton – Re-Blogged From http://www.Zealllc.com

The gold miners’ stocks are suffering from universal and overwhelming bearishness today, with nearly everyone expecting further selling.  That’s the natural reaction following this sector’s recent massive correction, which climaxed in one of its biggest daily plummets ever witnessed.  But within bull markets, there’s no better time to buy aggressively than deep in a major selloff that’s riddled with great doubt and fear.

The core mission of speculation and investment is so simple even children can easily grasp it, buy low sell high.  The great challenges arise not from understanding, but execution.  Actually buying low then selling high in real markets is exceedingly unnatural and uncomfortable.  It requires traders to overcome their own greed and fear to do the exact opposite of everything their own instincts are screaming to do.

The only times speculators and investors want to buy aggressively is when it feels great to do so.  That only happens late in powerful rallies, when everyone can clearly see how strong a sector’s performance has been.  Traders then commit one of trading’s cardinal sins, extrapolating recent performance out into the indefinite future.  They assume a red-hot sector will keep on rising, and eagerly rush to buy high after a rally.

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Stock Topping Valuations

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The prevailing valuations in the lofty US stock markets are increasingly becoming a bone of contention.  Wall Street calmly asserts stocks are reasonably valued, since it has a huge vested interest in keeping people fully-invested.  But with valuations soaring following a massive rally and weak third-quarter earnings season, they are dangerously high and portend great downside risk.  Stock topping valuations abound.

Since investing is all about buying low then selling high, the price paid for any investment is everything.  Buy good companies at cheap prices, and you’ll multiply your wealth over time.  But buying those very same good companies at expensive prices radically stunts future gains.  While cheap investments have great potential to soar as traders recognize their inherent value, expensive ones have already exhausted their upside.

And it’s valuations, not absolute stock prices, that define cheap and expensive.  Valuations are where stock prices are trading relative to their underlying corporate earnings streams.  The less investors pay in terms of stock price for each dollar of profits, the greater their ultimate returns.  Valuations are most often expressed in price-to-earnings-ratio terms, with stock prices divided by underlying corporate earnings per share.

This concept is so easy to understand, yet the vast majority of investors ignore it.  Imagine purchasing a house for a rental property that has expected annual rental income of $30k.  How much would you be willing to pay for it?  If you can get it for $210k, 7x earnings, it will pay for itself in just 7 years.  That’s a great deal.  But if that same house is priced at $630k, 21x, it will take far too long just to recoup the initial cost.

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Major Stock Selloff Looms

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The latest record highs in the US stock markets have unleashed astounding complacency.  Traders are utterly convinced that the past couple years’ massive Fed-fueled rally will continue indefinitely.  But with today’s lofty stock markets extremely overvalued, wildly overextended, and rampantly euphoric, a serious selloff is looming.  The prudent contrarians preparing for this inevitable major reversal are going to earn fortunes.

Though you wouldn’t know it from recent history, stock markets rise and fall.  They are forever cyclical, an endless parade of alternating bulls and bears.  Market history simply couldn’t be clearer on this.  Yet ironically after long bull or bear markets, the great majority of traders forget this.  They get caught up in their own emotions, and wrongly assume the long-in-the-tooth trend is the new norm that will endure perpetually.

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Beware The Stock Bear!

The US stock markets’ latest record highs have left traders exceedingly euphoric and complacent.  They are utterly convinced this stock bull will power higher for years to come.  But their enthusiasm is very misplaced.  In real inflation-adjusted terms, the US stock markets only just regained breakeven levels 15 years after the last secular bull peaked.  Now the secular stock bear ever since is overdue for a new cyclical bear.

The flagship benchmark index for tracking the US stock markets is the mighty S&P 500, often shortened to SPX.  The whole financial world literally revolves around this dominant index, with most global equity markets and even some major commodities markets like oil usually mirroring it.  American stock traders can directly trade the SPX through a handful of gargantuan ETFs including the leading SPY S&P 500 ETF.

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