New BUY Signals!! F*ck Chicken Little…

We’ve reached a new cluster of buy market signals. Of course, indicators aren’t an exact science BUT the more signals that occur together the stronger the confirmation. This market could definitely go down more (market timing is a fool’s errand). We’re just looking for a general trend indication and right now signals are leaning to opportunity, NOT A CHANCE TO FREAK OUT AND SELL.

For those with no background in technical indicators, we’ll give you the shortest explanations possible… If this is way over your head, totally understand. You’re just going to have to trust that we know what we’re talking about.

 

The McClellan Oscillator is an indicator that measures overall market movement. Any reading below -200 means the market is oversold. Meaning the market is close to running out of sellers and almost only buyers will be left soon. Right now, we’re sitting around -240.

8.6.19McClellanOsc_598

 

The Put/Call ratio measures how many bets options traders are making on the market going down vs up. Right now, the ratio is at 1.24. The average usually hovers around .9. That means right now there are 24% more bearish bets than. bullish. You’ll notice that the last 2 times the indicator was this high were late May and late December. Screaming buy opportunities.

8.6.19cpc

 

This next chart has 2 VIX (volatility index) signals. The Bollinger Band signal and the CVR3 cluster. For the Bollinger bands we just want to see that the close comes back into the upper band after it’s spent a few days outside. For CVR3, we want to see: the close lower than the open for the day, the close higher than the 10 day moving average, and the PPO close above 10 (right now it’s at 15)

8.6.19vix.JPG

 

Keep an eye and you might want to review your watch lists. Do NOT get shaken out of your positions unless you hit a trailing stop you had previously set.

 

How Close Is A Recession? Probably About 18 Months – 2 Years

Sorry we haven’t posted in a while. In all seriousness, there really hasn’t been much news in the markets. Yes, it’s reaching all time highs, but that’s just as planned for the end stages of the bull market. Expect more volatility, use caution when adding large chunks of money to your positions, but don’t expect the “crash” any time soon. In other words, don’t let any kind of news scare you off. This market has room to run.

How do we know? Well, we previously posted a bit about inverted yield curves here:

Yield Curves and Recessions

It’s one of those super nerdy economic indicators that bores people to tears. All you need to know is this: when the yield curves invert, a recession is typically 12-18 months away. A yield curve inverts when the markets and the Federal Reserve seem to disagree about the direction in the economy. The most popular indicator of a coming recession is the 10 year yield – the 2 year yield. Don’t worry about what that means exactly, you JUST need to know where to look for the number and what it means. The other most common indicator is the 10 year – 3 month. The 10 year – 3 month spread number is typically warning sign one before the 10 year – 2 year. ONCE AGAIN, do  NOT worry if you don’t know what this means exactly. We’re going to show you where to find a chart to cheat and know what the big heads of finance know.

10 year – 3 month Yield Spread = Warning Sign #1

10 year – 2 year Yield Spread = Warning Sign #2

When you load those charts, you just need to see if the blue line has crossed below the 0 line (black) at the bottom. You don’t need to understand the mechanics, you are just looking for it to dip below 0. Here is a snapshot of where the 2 warning signs stand today:

10y3yspread 7.25.19

As you can see, the blue line just crossed below 0. And you see those 3 shaded areas that come before? Those are recessions. Notice a pattern between the blue line dipping below 0 and those 3 shaded areas? This indicator has worked 100% of the time since the spread has been tracked around 1982. So that’s warning sign one and will show up before our next warning sign.

10y2yspread7.25.19

Notice that this one hasn’t crossed below 0. But you also notice, those 3 grey shaded areas have the same pattern seen with the 10 year – 3 year chart.

Ok, here is where our estimation of a recession comes in… When the 10 year – 2 year chart crosses below 0, a recession typically takes 12-18 months to show up. Right now, the first warning sign (10y-3m) has fired off, but we haven’t yet dipped below 0 on the famous signal (10y-2y). That gives us a bit more time, but we need to keep an eye out.

So consider this: the big crashes happen around the time a recession is imminent, but if you hear the talking heads on the news site this nerdy signal as if a crash is going to happen tomorrow…well, they’re talking out of their asses. We have time. Hold your positions in this bull market and if you want to check on this signal from time to time, have at it.

Cliff’s Notes:

If the blue line on this chart, crosses below the black 0 line. We probably have 12- 18 months before an actual recession. It’s close, and a warning sign has already fired off, but we’re not there yet.

Related note:

Check out this post if you want to a way to predict where interest rates are going next.

Read the New York Times, Wall Street Journal, and Other Paid News Sites for Free

At least once in your life I’m sure you’ve gone to read an article linked up from a favorite site only to find a stupid popup asking for a ridiculous amount of money to read the rest of the article. Typically the ad begging for money will block the content or just blur it all out. Pain in the ass. NSFW has a solution you could “hypothetically” use if one were so inclined…

For articles from the WSJ, Forbes, Bloomberg, and most Newspapers

*UPDATE 5/28/19*

Several sites including the WSJ have updated the paywall security. If the Outline method doesn’t work, you will need to use the following updated Github extension link.

Paywall Bypass

*UPDATE 6/20/19*

WSJ will show you the paywall, but if you click X on the ad it will disappear.

 

Go to Outline.com

Copy and paste the URL of the article you want to read into the box and click Create Outline.

outline picture

Every now and then, the Outline program just doesn’t cut it and won’t get past the paywall. Business Insider Prime is a good example,  If by chance, the site is down or you can’t get a result to load. Try this next trick…

Most paywalls are bypassed if you disable JavaScript. For people that aren’t total tech nerds, here are the easiest methods:

PC Users: Open Chrome, click this link and install the Toggle JavaScript plugin. Go to the article you want to read and click the icon in your browser toolbar to disable java.  Reload the page. If you use Mozilla (Firefox), you can just click the reader mode to bypass most walls. If you use internet explorer, you better be a card carrying member of AARP… Use a better browser.

MAC users:  Read the most up to date method at the Apple tutorial page for disabling java in Safari

Voila! You’ve “hypothetically” bypassed the paywall and “hypothetically” saved hundreds of $ in paywall news sources. Just remember to switch Java back on when closing out the article so that the rest of your browsing is unaffected. 

DISCLAIMER: NSFWallstreet.com assumes no liability for the usage of this information.

 

 

**For the more advanced tech guys out there, see below for a chrome extension build to bypass needing to use Outline. You will probably still have cookie popups using this method.

Bypass Paywall 

The New Gold Bull Market Has Begun

This morning, the Fed stated that it was keeping interest rates the same, but was open to cutting rates in the near future “should it be needed” to aid the slightly wounded economy*. We’re not going to go into more detail on what they said exactly because, frankly, it bores the ever-living sh*t out of us. But you can read that stuff if you’re on the toilet here…

Fed Holds Rates Steady, Hints at Future Cuts if Outlook Doesn’t Improve

Here’s what the stock market liked from the Fed

The Fed just defied Trump’s wishes for a rate cut but signaled that one could come soon

What you do need to know, is that interest rate cuts means gold goes up. Why? Well, in a nutshell, for interest rates to go down the Federal Reserve has to “print money” to buy up treasuries and cause the yield to go down. Prices of bonds/treasuries work in a seesaw motion against the yields they have. (Lesson for another time) Printing money means more money in circulation, which means “theoretically” more inflation, and gold is supposed to be an inflation hedge.  It’s all very boring. Gold went up nearly 3% on the Fed news, but here’s what’s important about gold’s recent price action. Gold spiked up in MULTIPLE currencies, not just the US dollar and has been on a steady move up in all of the big 5 currencies for the last month. The big 5 currencies are the US Dollar, Great Britain Pound, Swiss Franc, Canadian Dollar, and the Japanese Yen. Gold is officially having a bull moment when it moves up in ALL 5 currencies. This metric is used so that it can be established that gold is not just being used as a hedge for one currency while not affecting anybody else in the globe.

Gold prices6.19.19

 

Notice how the Japanese Yen price of gold has gone up the least amount in the last month and it’s still up over 2.5%. When we add up the last month’s price action, 1, along with the 3% spike today in all currencies, 2, then note that the high of today for spot gold in the US dollar is $1,394 and that is the highest level gold has reached in over 5 years (in the US of course) …we’ve got a pretty damn good case that the bull market in gold we’ve been waiting for is here.

There IS a major caveat to this article. We may be a bit premature. We need to see gold break the $1,400 level and stay there to really know that the new bull is here, but our money is on exactly that happening in the next week or 2. Our preferred place to look at the spot price of gold is Kitco.

 

 

 

 

*The main thing hurting the economy at the moment is the trade war. Trump wants the rates cut to theoretically unf*ck problems he caused in the first place.

Using Metal Prices To Predict Interest Rates (Master-Level Nerdy Sh*t)

This article is going to fall under the “a quick take our word for it and go do your own research” category. Not just our word, Jeff Gundlach (one of our favorite market geniuses) is a big proponent of this indicator.

How many of you have heard the phrase “the Fed is lowering rates”. Well, in a nutshell it means the government is stepping in to control the interest rate that works as the baseline for the economy. Around this baseline, real estate mortgage loans, bank loans, car loans, etc are going to be be tacked on based on a certain percent spread. It’s all very nerdy and boring. For those of you who already DO understand this concept, a rather esoteric trick to predict where interest rates are going (as controlled by the Fed) is to compare the ratio of copper prices to gold prices.

Copper is often called “Dr. Copper”. Because it’s such a staple in construction, the prices going up typically indicate that the economy is humming along. Buildings are being built, cars are being manufactured, you know the drill.  Gold on the other hand is more of a fear/pessimism metal. It has no way near as much use as a base metal like copper. Gold is usually going to go up when investors are worried the economy is NOT going to do all that well. It’s a safe haven metal that people hold on to in case of emergencies.

So long story short: the price of copper going up typically = economic optimism, gold going up = economic pessimism. When you divide gold price by copper price and the ratio is high you can assume an optimistic outlook on the economy as determined by the pricing. Vice versa, a low ratio means pessimism. How does the Fed react to pessimism? It lowers rates, making it easier for the man on the street to borrow money to use for things that will get the economy back in shape (buying bullsh*t, taking out loans on homes, creating jobs, etc)

This may be a bit more succinct explanation from longtermtrends.net :
Gold is the most widely recognized safe-haven asset among investors. Therefore, during times of economic and geopolitical distress it generally tends to perform well, making it a leading indicator of fear.
Copper is the exact opposite. Because it is a key industrial metal that is used globally in a wide range of industrial applications it performs strongly when the global economy is firing on all cylinders. This makes it a leading indicator of global economic health and has led to it being commonly called Dr Copper.
The ratio prices copper in gold and it represents the number of ounces of gold it takes to buy an ounce of copper.

 

This is where it gets pretty cool to look at… If you overlay the copper to gold ratio with the Fed controlled interest rate IT’S A PRETTY F*CKING CLOSE CORRELATION. Not exact, but pretty damn close. See below for somebody else’s fancy example of the correlation in action…

copper to gold ratio april 2015 to june 2017

See what we mean? Pretty damn close. Granted that’s an older time line and we’re too lazy to make our own graphic at the moment. But you can use the following two links to find updated graphs.

StockCharts Copper-to-Gold Ratio

Longtermtrends Copper-to-Gold Ratio

 

The current graphs indicate rates going down a bit.coppergold2

Low and behold, the jobs report that came out this morning led to the Fed saying that they may be cutting rates back down.

 

It’s no longer a question of if the Fed will cut interest rates, but when

Fed Begins Debate on Whether to Cut Rate as Soon as June

So that is where we leave you today. Go out and do your own research and know that now you can make an educated guess about where rates are going when people want to sound smart mentioning the economy at “cocktail parties”. But in all seriousness… who the hell still has cocktail parties.

 

 

 

 

Further Reading and Resources:

The Power of Copper-Gold – Jeff Gundlach’s Double Line Fund Report PDF

Validating Gundlach’s 10-yr Treasury relation to the Copper:Gold Ratio

How the Gold-to-Copper Ratio Can Make You a Smarter Investor

Copper-Gold Ratio Signals Treasury Yields May Be Set to Drop (July 2018 Article)

The Copper-Gold Ratio

Buy While Everybody Else is Cryin’

Well that bounce played out much better than we expected! On January 9th, we suggested averaging in to your watch list because stocks had become so comparatively cheap. The market “crashed” down in late December when we first said NOT to sell. We were looking for another possible down turn, but it didn’t happen. Instead stocks went on a monster run, peaking on May 1, before coming back down to the 200 day moving average. Now we’re 5.5% off the highs, but the way people are reacting you’d think we were back down -20%. Below are a few gauges we’re looking at in deciding that this is a great new opportunity to buy in, if you haven’t already…

Exhibit AAAII Sentiment Survey (a weekly survey of mom and pop investors). Note the excessive bearishness in comparison to the historical average.

aaii53019
American Association of Individual Investors

Exhibit B: Yield curve inversion of the 10 year -3 month spread. 99% of you don’t know what this means, so check out our previous article for an intro. The 10 Year – 2 Year curve is the most popular indicator of a recession, but the most important thing to understand is that recessions are usually foretold about 18 months ahead of time. Right now we only see an inversion with the 10 year – 3 month, not the 2 year yield. It doesn’t matter though, most people who have heard a yield curve inversion signals a possible recession think it’s IMMEDIATE and think it signals a stock market crash, which it doesn’t.

yield curve inversion

Exhibit C: Seasonality. Without even looking at an indicator, the old adage is “sell in May and go away” Historically, stocks have made almost all of their gains between mid-October through early May. Summer has horrible returns. Why does this matter? If everybody is on board with thinking summer is a garbage time to own stocks, and they all sell-off after a fairly large drop, the market runs low on sellers. Remember last October through December? Horrible. It’s a fair bet to say that the last year may not stick to the old adages for season. A contrarian sees this as a good time to buy.

Exhibit D: The total put/call ratio. The options market is a great tool for contrarian ideas. Once again, when the majority is bullish or bearish, we know it’s close to a good time to buy or sell. Right now the amount of puts (bearish bets) is almost as high as it was in mid December, right before the market bottomed out. Meaning if not now, very soon we should be hitting a market bottom.

marketbottom253019

Exhibit E: Trump loves to say he has the upper hand in the trade war, but here’s the key to why he doesn’t. The primaries. Voting is starting soon, and he needs a strong economy in middle America where he gets the majority of his votes. The irony is that those areas are populated with people like farmers and coal miners. Guess who the biggest buyers of those economies are? China. All Xi Jinping as to do is hit middle America where it hurts to screw Trump and his votes are gone. This is just a theory on our part, of course. But when it comes down to it, we think that the pessimism on getting some kind of trade war agreement underway is way overblown. Something will pan out sooner rather than later in our opinion.

Verdict: We’re ONLY down 5.5% from the peak on May 1st at the moment. The McClellan Summation Index is still positive. The VIX is only bouncing around the 15-17 range. Yet we just outlined several examples of  people reacting way too negatively. If you waited this last rally out, right now is a GREAT time to buy in. We may not be at the absolute bottom, but we would bet it wouldn’t be more than a few weeks off at the absolute max. Play it like we recommended back in December and January.

Now is not the time to be pessimistic. 

Read the Same News as a Market Genius

We’re lazy and copying a metric shit-ton of links isn’t our favorite way to start our day. For an easy one click way to read what somebody much smarter than us is reading daily, see below.

Ed Yardeni: What I Am Reading

 

BONUS #1:

A semi-hidden part of Business Insider that narrows down the news to different investment markets

Markets Insider

 

BONUS #2: The following are great for (close to) daily lessons that generally mix news with investment ideas. Beware the click-bait links though.

DailyWealth 

Jeff Clark’s Market Minute