Never seen anything like it
Friday, 5 January 2018
By Kris Sayce
- Everyone’s a winner (so far)
- Don’t let this common myth stop you
From day one…actually, even before the Brexit vote, we predicted that Brexit would never actually happen.
The more we see, the more we’re convinced how right we’ll ultimately be. Prior to the Christmas break, the UK parliament voted to ensure that there would be a ‘meaningful vote’ on the UK’s exit terms.
And now, as the Financial Times reports:
‘Tony Blair has urged the Labour party leadership to back his call for a second referendum on whether to stay in European Union, arguing that ordinary Labour voters’ problems will not be resolved by Brexit.
‘Speaking on the BBC Today programme, the former prime minister said voters were “entitled to think again, if the circumstances changed”.
‘He predicted the coming negotiations on a trade deal would “expose” what he called the “central dilemma” facing the UK:
‘“You’re either close to Europe in which case you have to obey the rules, or you’re far away in a kind of Canada-style free trade agreement in which case you’ve got a big process of economic restructuring”.
‘He said in those circumstances “in my view, the Labour party doesn’t believe the answer to the problems of Leave voters is Brexit”.’
Forget about Brexit. It won’t happen. The next step is ‘Bremain’ or ‘Bre-entry’, or whatever you want to call it. What we do know is that it’s a win for the ‘Deep State’ and those who believe in the power of the state and bureaucracy over the power of the individual.
On that note, on with the markets…
Overnight, the Dow Jones Industrial Average closed up 152.45 points, or 0.61%.
The S&P 500 gained 10.93 points, or 0.4%.
In Europe, the Euro Stoxx 50 index ended the day up 59 points, for a 1.68% gain. Meanwhile, the FTSE 100 added 0.32%, and Germany’s DAX index gained 1.46%.
In Asian markets, Japan’s Nikkei 225 index is up 42.07 points, or 0.18%. China’s CSI 300 is up 0.23%.
In Australia, the S&P/ASX 200 is currently up 37.42 points, or 0.61%.
On the commodities markets, West Texas Intermediate crude oil is US$61.97 per barrel. Brent crude is US$68.04 per barrel.
Gold is trading for US$1,320.94 (AU$1,683.78) per troy ounce. Silver is US$17.19 (AU$21.92) per troy ounce.
The Aussie dollar is worth 78.45 US cents.
Bitcoin is US$15,148.73.
Everyone’s a winner (so far)
It’s a new record close for the Dow Jones Industrial Average.
Overnight, it closed above 25,000 points for the first time ever.
It means that the US market has gained 36.8% since Donald Trump’s election victory in November 2016.
The question now is whether that period, from November 2016 through to today, counts as the final stage ‘melt-up’ rally that often occurs before a steep stock market crash.
We’ve indicated the point on the chart below at which the rally began:
Source: Google Finance
Click to enlarge
During the previous four years, the market gained around 30%. It has gained more than that in 14 months. That’s a boom by anyone’s standards. But is it a ‘melt-up’? Looking at the NASDAQ before the dotcom bust in 2000, you could argue that it isn’t.
From October 1998 to March 2000, the NASDAQ gained 229%. But wait. We’re not comparing the proverbial apple with another apple.
Let’s not consider what happened to the NASDAQ during that period, let’s consider what happened to the Dow Jones Industrial Average. By coincidence, as the NASDAQ gained 229%, the Dow gained…36.8%.
What do you know!
That’s important. The key to understanding whether the melt-up has happened isn’t necessarily to look only at the performance of the Dow. We need to look at the performance of other benchmarks.
You know where this is heading, don’t you? In the 1990s, speculators flocked to the biggest speculative opportunity they had seen in their lifetime — tech stocks. They poured millions and billions of dollars into the sector.
It was great…for as long as the market kept going up. And it did keep going up…for longer than most expected. Some of the market’s biggest and most well-known bearish investors started calling the top of the tech boom as early as 1996.
But it was another four years before it topped.
As it happens, right now, folks are calling the top of another great speculative market — cryptocurrencies. If some of my colleagues are to be believed, this is the biggest speculative boom, not just of our lifetime but of all lifetimes.
We shall see. But what we do know is that some of the gains are extraordinary. This past week of leisure from your editor has given us the opportunity to check in on the track record of our crypto services.
And not without reason. As much as some folks are excited by the investing and speculating opportunity with cryptos, we’re receiving many more emails from folks who are calling us scammers…and much worse.
So how is the track record of these services looking right now? I’ll show you — without revealing the individual recommendations of course. These numbers are taken from the most recent weekly updates:
Secret Crypto Network:
- Crypto #1 — up 468%
- Crypto #2 — up 225%
- Crypto #3 — up 808%
- Crypto #4 — up 458%
- Crypto #5 — up 469%
- Crypto #6 — up 68%
- Crypto #7 — up 133%
- Crypto #8 — up 224%
- Crypto #9 — up 123%
Crypto Tech Investor:
- Crypto #1 — up 505%
- Crypto #2 — up 202%
- Crypto #3 — up 1,940%
- Crypto #4 — up 1,506%
- Crypto #5 — up 488%
- Crypto #6 — up 1,291%
- Crypto #7 — up 645%
There are also four other cryptos on the recommended buy list that are yet to trade.
Extreme Crypto Trader:
- Crypto #1 — up 37%
- Crypto #2 — up 88%
- Crypto #3 — up 209%
- Crypto #4 — up 85%
- Crypto #5 — up 155%
- Crypto #6 — up 6%
I’ll just come out and say it: I’ve never seen a combined track record like this in my 13 years in the financial publishing business. Moreover, I’ve never seen a combined track record like this in all my time in the market since 1995.
In short, it’s possible the melt-up isn’t taking place in stocks but in cryptos.
That thrills me…and worries me at the same time. I know from experience that returns like this can’t last forever. But I also know from experience that these kinds of returns tend to last longer than the bears (count your editor as one of them) ever imagine.
Ultimately, the dotcom bears were right. But they were way too early with their calls, all the while missing a huge opportunity for life-changing gains. The crypto bears will likely be right too…one day. But for now, life-changing gains are on the table.
If you want to see how, get ready. Next week we’re reopening spots in Sam Volkering’s hot premium crypto service, Crypto Tech Investor. You can automatically join the priority access list here for FREE. Just note, due to the risks and extraordinary opportunities possible with this service, we only want serious investors.
Therefore, no trial period applies.
Now over to guest essayist Jason McIntosh…
Don’t Let This Common Myth Stop You
Jason McIntosh, Quant Trader
Hey, I’ve got a stock tip for you…
I think you’ll like this company. It’s in a growing industry and has loads of potential.
There’s just one hitch…
The shares are trading at a 90-week high. A popular analyst also recently said of this stock: ‘…at current prices, we don’t see the shares as cheap, and there are better options out there…’
Do you want to hear more?
Odds are you’re rapidly losing interest. You may think that buying after a big advance is way too risky. Some traders would even consider short selling this sort of stock.
But don’t be too hasty.
A stock could remain in a bullish phase for years. And the best indicator I know for detecting this is a strong share price. Avoiding a stock because it’s been doing well is often a costly mistake.
Now, this isn’t a hypothetical scenario. It’s an example from Quant Trader’s portfolio. Members were in this very situation in late 2014 — and there’ve been dozens of similar cases.
I’ll tell you more about the stock in question shortly. You’ll also see why it’s often better to trust the trend than your broker. The market has a knack of catching many analysts on the hop.
But first, have a read of this:
‘I am a bit confused about a recent signal. The shares are very close to a 52-week high. How do you expect us to make a profit when our entry price is very high?
‘Upon asking my broker about this stock, the recommendation was Strong Sell.’
Let me start by saying this: Quant Trader identifies stocks at various stages of a trend. Some will be at all-time highs, while others will be in the early stages of a recovery.
That said, Hamdi asked an excellent question. I think his logic will strike a chord with many people. It naturally seems prudent to avoid stocks after a big run.
But there’s a problem with this reasoning…
A stock trading at a 52-week high is clearly doing well. Traders are bidding up the share price because they believe the future is bright. This isn’t a reliable sign of an approaching top.
Sure, all bull markets end — a strong stock could break down tomorrow.
But chances are it won’t.
The odds favour a continuing trend. And some stocks keep trending for a very long time. In fact, trends often run further than almost anyone thinks possible.
If you exclude strong stocks, you’ll likely miss many of the best performers.
Debunking a myth
Now, here’s a question: Could a strategy that only buys stocks at a 12-month high beat the market?
Many people will answer with a resounding ‘no’. They’ll say the strategy is a sure-fire way to lose money. In their view, the only way to beat the market is to buy when prices are low.
But is this really the case?
Well, I did some back-testing during the week. The aim was to show you that, contrary to popular belief, buying stocks near their highs is a potentially profitable strategy.
Here’s what I did…
I put together a basic system for buying shares. There was only one key entry rule: A stock must be trading at a one-year high.
I also set a minimum entry price of 20 cents. This removes the ‘penny dreadfuls’. These stocks can double or halve overnight, and they often increase a portfolio’s volatility.
Finally, the system uses Quant Trader’s exit strategy. This allows profits to run, while cutting stocks when the trend turns lower.
What do you think will happen?
Check this out:
This shows the strategy’s hypothetical profit for the last 15 years. It assumes putting $1,000 on every buy signal, and there’s no allowance for costs or dividends.
Now remember, these results are not for Quant Trader. The graph plots the performance of a very simple strategy. It’s not a method I would trade myself.
But the message is clear:
You could make a lot of money buying stocks at a one-year high. This should debunk the myth that buying after a big run is asking for trouble.
For comparison, here’s a chart of the All Ordinaries for the same period:
Click to enlarge
The All Ordinaries is still below its 2007 peak.
Now take another look at the ‘buy at a 12-month high’ strategy — it’s at record levels.
Counter to popular thinking, buying after a strong move is often profitable. This is because you’re trading with the trend, and the odds favour that the trend will go further.
What would you do?
Cast your mind back to the scenario at the beginning of the update. It was about a buy signal sent to Quant Trader members in 2014.
Here’s the chart for the stock in question:
Quant Trader’s buy signal is at the top-right of the graph…
The shares had just hit a 90-week high and were up 62% for the year.
And four months earlier, a popular analyst said of this stock: ‘…at current prices, we don’t see the shares as cheap, and there are better options out there…’
Would you consider buying?
Think about this for a moment. What’s your natural tendency?
Many traders will tell you it’s too late. They’ll say the stock has already run.
But that often isn’t true.
Check this out:
This is the same stock 14 months later. The company’s name is Blackmores Ltd [ASX:BKL]. And its shares rose by 353% from what was a 90-week high.
As I said before: A stock could remain in a bullish phase for years. And the best indicator I know for detecting this is a strong share price.
So don’t fear stocks because they’ve been rising.
Instead, consider buying them. You may find that the trend has a lot further to run.
Until next time,
Editor, Quant Trader
Editor’s Note: Strength is one of the best indicators that a stock will keep rising. But many people don’t understand this. Instead, they think strength is a sign that the market is about to turn lower.
Quant Trader specialises in finding shares that are on the rise. The system’s algorithms scan the entire market for opportunities. When the setup is right, it will give you a buy signal and calculate a unique exit stop. This could have a dramatic impact on your odds of success.
Try it. See if it makes sense to you. It could change the way you trade forever. Until midnight Monday, we’re reopening the doors to Quant Trader membership. But you must act now. This is for a limited time, until midnight Monday. Details here.
(Note: In order to make this available to you, we’ve had to act fast. So some of the deadline dates will be out of whack. Be assured, you have until midnight Monday to act.)
PS: All graphics produced by Quant Trader unless otherwise noted.