Seasonality Is Out of Season

By: Chris Vermeulen | Wed, Feb 3, 2016
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A "rally" attempt is underway. Stocks are continuing to rebound and all is well with the World? Or is it? With each passing day, the United States plummets deeper and deeper into a "black hole" of debt, of which it will be almost impossible to repay. At the time, of this writing the national debt is $18,939,663,109,937!

To put this into perspective, the national debt is so bad that if every citizen (including children) were to help pay it off, each one of us would have to contribute $58,652.00.

In the last couple of weeks, I have informed you of this "rebound" in the US Markets. Yesterday, February 2nd, 2016, a sharp fall in the markets was recorded.

Major support levels have held, perhaps slightly bent last month, but they did not break. Major support level of the SPX is 1880. If this support is breached, it may drop to 1861 before it rebounds. I do not see the SPX sustaining below 1880.

Markets are once again expected to bounce back.

SPX Daily Chart

I still have a bullish bias for the market, in fact if my analysis is correct it could last until March 24th.

But if we do get more downside from this current level it would create another wave of "Panic Selling" and we must hold above the low of January 20th, 2016 or it may be the start of the next bear market for large-cap stocks sooner than later.

The U.S, Stock Markets have not reacted to any bad news, as of yet. The markets are at their fourth highest level of valuation, in history, according to the Shiller P/E Model. Professor Robert Shiller, of Yale University, invented the Schiller P/E to measure the markets' valuation. The Schiller P/E is a more reasonable market valuation indicator than the P/E ratio, because it eliminates fluctuations of the ratio, caused by the variation of profit margins, during business cycles. There are only three other periods, in time, that these ratios occurred (1929, 2000, 2007) in with we measured similar readings when the market topped or should I say triggered market crashes and multi-year bear markets...

Shiller P/E 10 2006-2016 Chart

Short term I'm still bullish but the longer-term bias remains firmly BEARISH!

 


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Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
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Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

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He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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