One group of experts state that the markets are ready to crash, another states the markets are ready to soar to new highs. Which group is one supposed to believe? For starters, the naysayers have the odds stacked against them as every so-called stock market crash according has proven to be buying opportunity. We view stock market crashes as once in a “lifetime buying opportunity” and frankly so should every self-respecting long term investor. The smart money always swoops in and buys top quality stocks when there is blood on the streets, and the dumb money sells right at the bottom. This video for it reveals why stock market crashes are buying opportunities
Therefore, our advice is that you should never listen to Penguins like Marc Faber who continuously state that the market is going to drop, but instead it ends up going higher. Had you listened to him you would have been bankrupted several times over. What is even more disturbing is that stations like CNN continue to host this chap even though his track record is abysmal at best, clearly proving that you don’t have to know anything to be labelled a Financial Analyst. Had you listened to Marc Faber over the past few years you would have lost your shirt and your pants in the process? Marc Faber has repeated the same thing year after year and the markets have continued to trend higher & higher. It is obvious that he is not listening to his advice as he would have had to file for bankruptcy several times over in the process.
Here is a video that shows just how wrong this chap has been
In the precious metals markets, we have individuals like Peter Schiff claiming that Gold will soar to $5000. The problem is that he has made this claim many times over the years. For example, he stated this again in 2015 and what happened? Did Gold soar? It did not even make it to the $1800 mark. A better strategy would be to suggest more orderly targets; for example, $2000 and when that is hit raise the targets.
The prize, however, goes to James Sinclair who issued targets that are straight out of some Sci-Fi novel. He had the audacity to state Gold would trade to $50,000 an ounce. That target is beyond insane, and if indeed Gold ever trades to that range, it won’t be within the next 100 years, making such a target moot.
For the record, we bailed out of most of our Gold holdings in 2011 as we saw clear evidence of a top. We then moved out of Gold into the dollar, and other assets that we believed would fare better. While we are viewing the precious metals sector in a more favourable light as of late, we are still not bullish on it as the trend has not changed.
Regardless of what Market is being addressed, one needs to be cautious when so-called expert’s start issuing targets that seem to match the ravings of Ward 12 inhabitants. For Gold, our extreme target stands at $5, 000. The more probable targets fall in the $3,800-$4,500 ranges. In order for Gold to have any chance of trading past $3,400, it would need to close above $2200 on a monthly basisi.
Now we have another expert who is stating that the Dow could trade to 30K; is this expert full of air too? Well, there are some notable differences. Schiller uses the word could and more importantly he has a track record to lean on:
It’s not very often that a Nobel Prize-winning economist who is known for his bearish calls turns extremely bullish. Last week, Professor Robert Shiller of Yale, who called the housing collapse ten years ago, proclaimed that stocks could rise another 50 percent in the next few years based on his latest research. Meaning Dow 30,000! That got the attention of many folks, especially the Wall Street analysts, many of whom don’t understand this market. Shiller accurately saw the housing bubble and predicted that it would end very badly, as it did. He also co-developed the S&P/Case-Shiller index, which is a benchmark for measuring housing prices around major US cities. What many may not know is that. Full Story
So what’s our take on this call? Dow 30K sounds a lot more realistic than Gold $5K at this point. Here’s why
The trend as per our trend indicator is still bullish and so higher prices are favored
The masses based on our anxiety index and various other measures of market sentiment are still anxious. The Crowd has not embraced this bull market. Not once this year have the individuals in the bullish camp ever made it to the 60% mark. In fact, most individuals are opting for the neutral camp. No bull market has ever ended without the mass participation, and we don’t think this stock market bull will be any different. In fact, for the past several years we have gone on record to state that every major pullback should be viewed through a bullish lens.
The markets are extremely overbought and dying for a reason to let out a healthy dose of steam. We don’t think the Dow will trade to 30K without letting out a large dose of steam. We are not stating that the Dow will trade to 30K, but we have stated many times over the years that this bull market will trade to heights that would shock even the most ardent of bulls; that has come to pass as many bulls decided to throw the towel early in the year. We tend to pay more attention to the SPX, and there is a case slowly building up for the SPX to trade to the 2900 -2950 ranges with a possible overshoot to the 3040 ranges. If the SPX moved to such levels could be comparable to the Dow trading to 30k.
Having said that we need to state that our goal has never been to focus on absolute targets, instead, the focus is on the trend. If the trend is up, then we view strong pullbacks as buying opportunity and vice versa.
Every major bull market has experienced at least one sharp to very strong correction, before topping out. This sharp correction provides astute players with an entry point for a spectacular rally that leads to the feeding frenzy stage; at this stage, the masses have finally decided it’s time to join the party, and then as they say the end is usually close at hand. After that, the market can experience a correction ranging from 30%-50% which for most will represent a crash as they purchased at or close to the top.
This article was first published on the Tactical Investor