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The most dangerous investing & the dot-com bubble 2.0One of the most prominent investors of the twentieth century, John Templeton in the distant 1933 called the most dangerous words in investing. They sound something like this: "this time everything is different." And although almost 100 years have passed since then, these words have not lost their relevance. They were said to justify the dot-com bubble: “This time everything is different. The Internet is super-technology and the purchase of shares in Internet companies is a win-win.” After the collapse of the bubble, Nasdaq lost 80% of its capitalization. They were said to justify the growth in the cryptocurrency market by thousands of percent: “this time everything is different. Cryptocurrencies and blockchain are a revolution in the world of finance and a new form of money is a more progressive form of money.” After the price bubble collapsed, Bitcoin lost 80% of its value. If you read the analysts who are predicting growth in the US stock market now, you can hear the same words: “this time everything is different. The era of cheap money will continue to drive stock prices up. ” But this already happened. Recall Japan in the 80s of the twentieth century. Flooding the country's financial system with cheap money has led to huge bubbles in the stock market, land, and real estate markets. After they burst the country for 10 years (the so-called "lost decade") could not come to their senses. Yes, and still has not fully recovered. People stubbornly do not want to admit that all the time they are repeating essentially the same mistakes. The inflation of the price bubble ends with its collapse - this is almost an axiom. Therefore, we urge our readers not to fall for one of the most dangerous misconceptions and not to believe that everything is different now. Just look at the list of the main drivers of growth in the US stock market (FAANG), again - before us is a dot-com bubble version 2.0. Belief in new technologies and startups has replaced faith in the Internet. Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
NASDAQ:NDXShort
by Trade24Fx
1
Another metric predicts the stock market quick dropWe continue to collect signals in favor of the imminent start of a correction in the US stock market and the collapse of the bubble on it. CAPE (or Shiller's indicator), Buffett's favorite indicator, Hindenburg cancellation and Titanic syndrome, inversion of the yield curve and much more. We have already noted that classic investment metrics (such as P/E, EPS, BVPS, etc.) have long been a signal of a strong overvaluation of the US stock market. For example, P / E is now an average of 18.4 in the market. That is, for every dollar of profit investors are willing to pay 18.4 dollars. This is a lot. Last time there were so many on the eve of the collapse of the dot-com bubble. Today we’ll talk about another rather interesting metric. It's about the PEG ratio (Price/earnings to growth). This is an original approach to improving the classic P/E, proposed by Bank of America back in 1986. The essence of the indicator is that it eliminates the main drawback of the basic P/E indicator - delay. PEG adds a company’s growth factor to the calculation formula, which can radically change the calculation results and bring them closer to the real state of things. According to the classics, a company whose PEG = 1 will be fairly evaluated will be. Any value above 1 indicates an overvaluation of the market. So, according to Bank of America, the current indicator value is 1.8, which is the absolute maximum for the entire history of observations! Recall that the history of observations starts in 1986, that is, it is more than PEG on the eve of the 1987 flash crash, or the dot-com bubble, or the global financial crisis. As you can see, this value is almost 2 times higher than normal, and also 50% higher than its average historical value. Thus, the stock market needs a correction of 40-50% in order to come to a relative norm. Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Considering that in recent years, shares of technology companies in the US stock market have grown on average 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
NASDAQ:NDXShort
by Trade24Fx
1
Failed IPOs are growing and shows market problems2019 was a busy year for various IPOs. While most of the most anticipated placements, for example, Uber, Lyft, Pinterest, and many others could not meet market expectations. Uber entered the stock exchange in May, then its shares cost $45 apiece. Six months later, in early November, they are valued by the market at $27. 40% drop. Uber's main competitor in the U.S. market, Lyft, in March 2019, placed its shares on the Nasdaq exchange for $80. At the beginning of November, papers cost about $43, having fallen in price by almost 50%. Pinterest (social network for the publication and exchange of images). After the IPO, the stock price rose to $37, but by November fell to $19. Beyond Meat (the largest producer of vegetable meat). After the IPO, the stock price rose to $235, but by November quotes fell to $80. New York Peloton Interactive Inc (upscale exercise bikes). After stocks rose to $ 37, by December their price dropped to $ 26. SmileDirectClub (offer alternatives to classic orthodontic braces). Raised $ 1.35 billion during the IPO. But after that, the company's shares fell by more than 40% compared with the offering price. And this is only the most resonant cases in which at stake were billions of dollars. As a result, the percentage of failed American IPOs reached 80%. In modern history, this was only once - on the eve of the collapse of the dot-com bubble. Revalued IPOs usually occur at the end of a long bullish period when stocks generally become very revalued. This is because investors are finally losing touch with reality and are ready to buy shares on promoted stories instead of facts. Well, investment bankers take full advantage of this, selling companies to investors at inflated prices. This situation is another sign that the price bubble in the US stock market has reached its peak and is close to collapse. Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
TVC:NDQ
by Trade24Fx
Nobel laureate indicator advises selling sharesIn one of our previous reviews on the bubble in the US stock market, we wrote about the record high values of the "favorite Buffett indicator" (the ratio of the country's stock market capitalization to its GDP). In principle, this alone is enough to think about selling stocks in the US stock market. But the real number of signals of the impending market crash is many times greater. Today we’ll talk about another very popular metric - the so-called Schiller indicator (CAPE). Note that Schiller is a Nobel laureate in economics and is considered one of the founders of behavioral finance. That is, his opinion is one of the most authoritative, at least in the academic environment. At one time, he developed an original metric to determine whether the stock market is overvalued or underestimated. We are talking about the Shiller P/E ratio (CAPE) indicator, which is the ratio of the market price of shares (or shares in the index) to the net profit of the company (companies in the index) over the past 10 years, adjusted for inflation. So at the moment, the Shiller P/E ratio for the S&P500 is 31.31 - one of the highest values ​​in the history of the US stock market. This is almost 2 times higher than the average historical value of the indicator. What is this talking about? That the market is overbought. This is confirmed by other metrics, starting from the Buffett Indicator, ending with the usual P / E for the S&P 500 (now it is almost 25, which is almost 2 times higher than the average historical value) and the ratio of capitalization to gross revenue (now this indicator is 2.37, which is an absolute record for all the time, even during the dot-com bubble, there was no such high indicator value). As you can see, for the metrics to return to their average values, the US stock market should adjust by 40-50%. Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
NASDAQ:NDXShort
by Trade24Fx
2
77% of US CFOs consider stocks overvaluedThe reluctance to put up with obvious things does not mean that these things cease to exist. Accordingly, the reluctance of the US stock market to fall today does not mean that it will not collapse tomorrow. The fundamental basis for this has been formed for quite some time and everything rests only on the non-recognition of the obvious - the market is very overvalued and needs to be corrected. Investors can be understood because the beginning of the correction with a high degree of probability will provoke the formation of a full-fledged panic wave, which will turn this very correction into uncontrolled sales. If you ask almost any professional to honestly answer the question of whether the US stock market is overvalued, the answer in most cases will be unequivocal - "yes, it is." Actually, in today's review, we would like to present the results of a similar survey conducted by specialists of one of the largest audit companies in the world, Deloitte. Moreover, the survey was conducted not among traders or investors, that is, often biased respondents, but among financial directors of major US corporations. Essentially a survey of insiders. 147 CFOs from the USA, Canada, and Mexico from companies with an annual turnover of $3 billion and above were interviewed. So, 77% of respondents believe that the stock market is overvalued. In essence, the directors state that yes, their stocks are worth much more than they should be. Such an answer can only be explained by one thing - they could not give a different answer because of the evidence of the fact. At the same time, they expect a continued slowdown in economic growth in 2020 both in the United States and in the world. In general, the level of optimism of the directors surveyed is at the lowest level over the past 3 years. Another interesting fact that follows from the results of the survey is that American companies are not only aware of the problem, but are also actively preparing to deal with possible consequences: they reduce costs and optimize the number of employees. 82% of respondents admitted that they take preventive protective measures. Finally, we give one more fact. 97% of the CFOs of American companies believe that the economic downturn has already begun or will begin in 2020. Buying stocks on such a background is pure madness. But the main US stock indices, however, continue to update historical highs. Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
TVC:NDQShort
by Trade24Fx
Nasdaq: Short term sell opportunity.The index is extending its bullish trend within the 1D Channel Up (RSI = 74.927, MACD = 135.620, ADX = 64.929, Highs/Lows = 106.5770). As you see this technical action is too close to the overbought zone. On top of that the MACD is converging and about to make a bearish crossover while the RSI is on a bearish divergence as it did on the last 3% drop in early December. Because of that we are expecting NDX to pull back towards the Channel's Higher Low trend line on another -3% decline. Our TP is 8,720. ** If you like our free content follow our profile (www.tradingview.com) to get more daily ideas. ** Comments and likes are greatly appreciated.
NASDAQ:NDXShort
by InvestingScope
1
New highs in the stock market promise only a tougher fallAttempts to grow the US stock market in 2020 are increasingly reminiscent of agony. The maximum in the history of the stock market US overvaluation, a sharp increase in the level of geopolitical tensions in the world against the background of US military confrontation between Iran and the threat of a global recession and a general deterioration in the world economy as the trade wars of the results - any of these factors would be enough to start a full-fledged correction in normal conditions. But this is not a complete list. Today we propose expanding it to further emphasize the inconsistency of what is happening. The increase in stock prices of companies, in theory, should be a direct result of improving their financial results. In theory, but not in practice, the exact opposite is happening here and now: the financial results of American companies are rapidly losing their upward momentum, but the growth in stock prices is accelerating. Here are a few numbers from Refinitiv data to confirm our words. The corporation’s profit from the S&P500 index in 2018 increased by 23%. Recall that in that year, the S&P 500 index fell by 6%. In 2019, profit growth was only 1.1%, but the S&P 500 index added 29%. That is, prices in the stock market are completely divorced from reality. When this was the last time (meaning the value of the forward PE indicator in the region of 18), the market corrected itself quite sharply (this was in late 2017 - early 2018). Considering how events are developing in 2020 (an armed conflict between the United States and Iran, which entailed, among other things, a sharp increase in oil prices, and hence an increase in the costs of US corporations), one can hardly expect a sharp improvement in the financial results of companies. Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to be corrected. And the scale of correction is from 50% and higher. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
TVC:NDQShort
by Trade24Fx
4
Dow Jones: Bearish divergence on RSI.DJI managed to recover the drop that (marginally) broke the 1D Channel Up resuming the bullish technical action (RSI = 64.012, MACD = 186.600, ADX = 46.489, Highs/Lows = 130.1071). The RSI on the 1D chart is on a bearish divergence though and the last two times that happened the index dropped -3.20% and 5.13%. If the current bearish divergence follows the same patterns then we are looking at two downside targets: 27,965 and 27,400. ** If you like our free content follow our profile (www.tradingview.com) to get more daily ideas. ** Comments and likes are greatly appreciated.
OANDA:US30USDShort
by InvestingScope
Another $20 trillion threat on the horizonIn previous reviews, we have repeatedly talked about the future global crisis. The economy is developing cyclically and sooner or later will have to pay for a period of growth and prosperity. 2019 clearly showed that the situation in the world economy is rapidly deteriorating and if nothing happens, then it is only a matter of time before the decline comes to replace economic growth. We have already said that trade wars, escalation of the conflict between the USA and Iran, presidential elections in the USA, all kinds of force majeure and flash crashes, the collapse of price bubbles in the stock market, corporate lending and real estate, derivatives market, defaults of Chinese corporations, lack of liquidity in financial markets, etc can accelerate existing negative trends and provoke a global crisis. Today we’ll talk about another problem, the price of which, according to various estimates, is up to $ 20 trillion. We are talking about the financial risks associated with climate change. Current events in Australia show that the scale of natural disasters is growing rapidly, as well as their consequences. Moreover, we are talking not only about physical consequences (destruction), but also financial ones (for example, payment of premiums by insurance companies, loss of assets, etc.). Here is a trivial example: real estate on the coast. The fear of flooding can lead to the fact that people will begin to massively get rid of such real estate, which could trigger a crisis in the market as a whole. And this is just one aspect. Insurance companies, for example, may refuse to insure real estate on the coast or radically increase insurance rates. Banks may stop issuing a mortgage, investors will redirect their funds from real estate investments on the coast somewhere else and so on. To understand the extent of the problem, here are the results of a recent Center for American Progress (CAP) study. If the sea level rises just a couple of meters, for the US real estate market it will cost about $ 900 billion. And this is just one aspect of climate change: fires, hurricanes, droughts. The energy industry tied to fossil fuels (coal, oil, gas) could lose from $1 to $ 4 trillion. (the actual fall in natural gas prices last year from $5 to $2 is a clear confirmation of this). Global warming will provoke a sharp decline in demand for energy assets, which in turn can trigger a chain reaction across the industry with the potential damage of up to $20 trillion. And then a chain reaction will start - insurance companies, investment companies, banks, other financial intermediaries directly or indirectly associated with the energy sector will suffer. Trillion losses will naturally not go unnoticed and will likely provoke global consequences. Such a scenario, of course, is inherently very long-term. But natural force majeure is very dynamic in terms of appearance and course. Considering how serious their consequences have become recently, they may well be one of the factors that will trigger a chain reaction, which will ultimately provoke a new world crisis. The period of unrestrained economic growth, based on monetary stimulation, provoked the appearance of price bubbles in a number of markets, we suggest not to stand aside, watching how everything collapses, but to make money on it. Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual big issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
NASDAQ:NDXShort
by Trade24Fx
S&P: Sell opportunity if the Channel Up breaks.SPX is trading within a 1D Channel Up (RSI = 64.687, MACD = 28.070, ADX = 51.456, Highs/Lows = 0.2723) since the October 3, 2019 bottom. There is however one bearish divergence signal that calls for a sell towards the 3,070 1D Support if the 1D Channel Up breaks to the downside. That signal is the RSI which is trading sideways (at best) on a pattern that resembles a lot the January - April 2019 Channel Up. That pattern also had the RSI trading sideways despite the price making Higher Highs on the Channel Up and eventually failed to sustain it, broke downwards below the 1D MA50 (blue line) and found Support on the previous Higher Low. If the same pattern is repeated then S&P should seek the 3,070 1D Support. We are waiting for such pull back for our next long term buy position. ** If you like our free content follow our profile (www.tradingview.com) to get more daily ideas. ** Comments and likes are greatly appreciated.
CME_MINI:ES1!Short
by InvestingScope
US stock market: growth out of control The Dow Jones Index is showing the longest period of growth in its history. Given that this growth is completely divorced from economic development, even the most avid bulls in the US stock market are beginning to doubt about prospects: the growth is clearly out of control. There is another fact: when the market grows very rapidly in a very short period, it becomes extremely vulnerable to correction. According to many analysts, a correction in the US stock market is inevitable and its minimum scale is 10% -20%. Jack Ablin, chief investment officer at Cresset Capital, expects a 15% correction in early 2020. The problem of the US stock market in terms of continuing the bull rally is the lack of drivers for such growth: the economic growth rate has long lagged behind the stock market growth rate, on the eve of the Presidential election, there are no serious economic reforms to be expected, companies are stopping their share buyback programs, and their financial results for the fourth quarter in a row show worse growth rates. Perhaps the only chance for stock market growth is an active interest rate cut by the Fed. But the Central Bank made it quite clear that it is not going do that. Recall, we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it is going to adjust. The scale of correction is from 50% and higher. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times, the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
NASDAQ:NDAQShort
by Trade24Fx
VIX Index: Quo Vadis?After examining VIX Index, with weekly closings for a two-year period, it can be concluded that 12,00 point looks like a strong support (green line). We have witnessed throughout this period four downward trends (red lines). In each rebound (October, May, July) from these four falls, 12,00 point was a pivotal base. I have also plotted a blue line to indicate long-run resistance, which cut every upward trend. Considering these facts and looking into daily data, I think 15,00 point-level will be sooner or later broken and we will observe more volatility in the markets in 2020. Although BREXIT and Trade Agreement risks somehow abated and risks on attitude prevailed in the last quarter, according to my opinion things will not be easily finalised. An increase in the volatility will negatively affect the markets and a fall in the stock market indices will follow.
CBOE:VIX
by Ergun_Unutmaz