November 30, 2012
- Rare and inaccessible video yields clues to next year’s market action: One of our insiders who’s seen the video deciphers the code
- Results from our trading “experiment” now complete: If you missed out, you can review the results… and get a second chance
- Official guidance to lock the doors and load the guns: scenes from a current and future America
- Never give up: new developments in the dollar coin fiasco… new nominees for the Fiscal Cliff National Monument… a virtual seat at the table for the next Rancho Santana Sessions… and more!
Even in the Internet age, when archival video clips ricochet around the world at the speed of light, it’s nearly impossible to find. For the lucky few who’ve seen it, it might hold the key to what the market is set to do in 2013.
One of our resident technicians, Jonas Elmerraji, is among that select company.
“In 1987,” he says, “a documentary called TRADER was broadcast on PBS. The film featured a then little-known trader named Paul Tudor Jones, the same Paul Tudor Jones who today manages more than $11 billion — more than $3 billion of it his own money.”
“There will be some type of a decline,” a young Jones tells the camera, “without a question, in the next 10, 20 months. And it will be earthshaking; it will be saber rattling.”
He called the crash of ’87… when the Dow plunged 20% in a day.
And he did so by examining charts comparing the market’s peak that year with a previous high in 1929.
Today, precious few copies of the documentary exist. “Those that do,” according to a 2007 New York Times story, “are hoarded by traders who watch the hourlong movie in the hope of gleaning possible trading tips from Mr. Jones. On the Internet, bids for the video start at $295. According to Michael Glyn, the video’s director, Mr. Jones requested in the 1990s that the documentary be removed from circulation.”
It’s even rarer now. A search on Amazon and eBay this morning turns up zilch. (Heck, value guru Seth Klarman’s book Margin of Safety can be had for a little under $900.)
“Having seen the documentary,” says Jonas, “I can tell you that his approach then was a lot like what I’m about to show you now.”
“It’s crucial,” Jonas adds by way of background, “to remember that the market isn’t magic.
“Mysticism has no place in what we do as technical traders, so when the market lines up, we’ve got to ask ourselves why. The short answer is that markets tend to rhyme because buyers and sellers react psychologically to given market conditions in a similar way.
“When price action synchs up over the long term,” he says, “it’s worth paying attention.” And right now Jonas is finding many parallels between events in 2012 and events 15 months earlier.
Check out the following two charts of the S&P 500: The first runs from the spring of 2010 through late last year. The second runs from July 2011 to the present.
The parallels are striking… and they offer a powerful hint at what’s ahead for early next year.
[Click chart to enlarge]“Both start out in a downtrend,” he says. “They consolidated for the next month, and then moved into an uptrend.” The uptrend topped about seven months later, then consolidated sideways for about four months. On the bottom chart, that brings us to today.
“It’s not just that the trends were the same,” Jonas adds. “The major peaks and troughs in both charts trend to match up within a couple of days of one another.”
But there are also some differences: “The biggest is the magnitude of the moves. Looking at the top chart from last year, it’s clear that the pullbacks were bigger than their equivalent corrections have been this year. So while both are moving the same, we’d say that this year has better relative strength. That’s a good thing.”
Bottom line: “We’re approaching the point that lines up with where stocks started on a large rally at the end of 2011,” says Jonas.
“I think we can expect some sideways churning for the next month and change, followed by a distinct rally leg when the calendar turns to 2013.”
Jonas and colleague Greg Guenthner are primed and ready for what they’re calling “The 21-Day Trading Challenge.” You can put their proven trading techniques to work in your own portfolio.
Why 21 days? That’s the average hold time for Jonas’ and Greg’s recommendations — long enough to generate consistent double-digit winners.
You might recall the trading “experiment” Jonas and Greg conducted recently. The results are now in: 12,500 readers took part, taking a custom-designed trading quiz. At the outset, the average grade was a “C.” After only five days of simple tutorials from our trading duo, that average grade improved to an “A.”
With that kind of success, we’re ready to throw open their research to the general public.
“You’re not obligated to do a thing when you sign up for the Challenge,” says Greg. “You can simply follow along with our plays; even ‘test-drive’ a few paper trades. The Challenge is devoted to YOU, so you can see if you’re interested in this aggressive style of investing.”
Up to now, we’ve kept access to the Challenge strictly limited. Today, we’re opening it up to all of our readers. Greg walks you through the process, step by step, when you follow this link.
The market today? More of that “sideways churning” Jonas speaks of. The Dow sits at 13,000 on the nose. Should that hold at day’s end, it will be an “up” week, barely.
Precious metals are losing ground as the week winds down. Gold is holding the line on $1,700 at $1,716. But silver has given up $34, sinking to $33.66.
Crude is up a bit to $88.45, smack in the middle of its trading range the last two months.
Americans are getting a touch more cautious with their household finances, judging by this morning’s “income-and-spend” report from the Commerce Department.
Personal income was flat in October, while spending fell 0.2%. That reverses the trend of the previous three months in which pre-2008 profligacy was back in style — spending was outpacing income growth.
Conventional wisdom attributes the reversal to Hurricane Sandy. We’ll have a better idea if that’s true with the November numbers next month.
This report also includes a reading of “core PCE” — the Federal Reserve’s favorite measure of inflation. It came in at 1.6% year over year — well under the Fed’s now-official 2% target. There’s nothing here to hold the Fed back from transforming Operation Twist into full-on money printing at year-end.
The Fed’s decision is due at the conclusion of its next meeting Dec. 12. We’ll get the full dog-and-pony show, complete with a press conference by The Bernank himself. As always, try to contain your excitement.
Folks in San Bernardino, Calif., are being urged to “lock their doors and load their guns” — by none other than the city attorney, Jim Penman.
San Bernardino, population 210,000, filed for bankruptcy in the summer of last year — right around the time Addison issued the first iteration of his “mother of all financial bubbles” forecast.
In the ensuing 16 months, about 80 officers were cut from the police force. The number of murders this year is up 50% from last year.
City attorney Penman issued his warning at a city council meeting Wednesday night, when about 150 people showed up. Given the chance to backtrack later, he did not: “Let’s be honest, we don’t have enough police officers. We have too many criminals living in this city. We have had 45 murders this year…that’s far too high for a city of this size.”
“Government, retail and service industries dominate the economy of the city of San Bernardino,” says the city’s Wikipedia entry — not exactly the formula for a superhealthy tax base right now.
If the description sounds uncomfortably similar to wherever you live, it’s still not too late to act on Addison’s forecast: The updated edition, compiled with input from Bill Bonner, is right here.
Looks as if Uncle Sam is bound and determined to get its humongous stash of dollar coins into your hands, like it or not.
The Government Accountability Office now estimates the government could save $4.4 billion over the next 30 years by doing away with dollar bills and replacing them with coins.
Heh… It would also have the effect of emptying Federal Reserve vaults stuffed with $1 billion in dollar coins. Readers with keen memories will recall our item about that from June of last year: NPR took a snapshot of a vault in Baltimore stuffed with Presidential dollars and Sacagawea dollars.
Orphan coins in a Fed vault…“Heck”, Addison wrote, “there are still Susan B. Anthony dollars in this vault. Those were last minted in 1999… but have been caressed by nary a greasy palm.”
Back to today: “The latest projection from the Government Accountability Office on the potential savings from switching to dollar coins entirely,” says The Associated Press, “comes as lawmakers begin exploring new ways for the government to save money by changing the money itself.”
Our research team has been on the trail of one of those “new ways” for several months now. Play it right and it could prove quite lucrative.
We’re still putting the finishing touches on this research; keep an eye on your inbox this weekend.
“I am reading more and more about the recent hearings sponsored by the Treasury and Labor departments’ effort to nationalize the nation’s pension system and to eliminate private retirement accounts, including IRAs and 401(k) plans.
“This will affect millions. What is your opinion on this critical situation? Should we cash them in, pay the tax to have control over our assets?
“Thank you for your consideration of this very important matter.”
The 5: We’re guessing you saw a recent article at WorldNetDaily. We’ve done our own exhaustive research into the issue this year, but we share it only with paying readers of Apogee Advisory. We plan to address the matters raised by the WND article in the next issue. For access — including archived issues to all of Addison’s write-ups on the subject this year — look here.
“I’ll nominate,” says the latest entry for a Fiscal Cliff National Monument, “the Hull-Rust-Mahoning open pit iron ore mine near Hibbing, Minn.
“In part because that’s where the nation’s progress really began, and in part because it is a big hole we’ve dug by ourselves, so it seems more appropriate if we’re jumping off a cliff.”
“Since we are following our European counterparts over the fiscal cliff,” writes another reader, “why not use the White Cliffs of Dover as our trajectory point?”
“It seems,” writes our final contributor, “no one’s mentioned the most obvious analogy to the fiscal cliff — the rim of the average American toilet bowl. The similarities are obvious, and one need not venture from one’s own home to view it.
“I can’t remember the last time I laughed out loud at an email before reading Wednesday’s 5,” the reader adds. “Your comments regarding Washington’s response to Mr. Wolff’s study brought startled looks from my cubicle neighbors. Then again, I’m probably easily amused. Thanks for the levity.”
The 5: You’re welcome, but please note that The 5 bears no responsibility for any spontaneous reactions it might elicit in the workplace.
Or anywhere else for that matter…
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Several members of our team — Eric Fry, Chris Mayer, Joel Bowman — will be en route to Nicaragua only days from now to convene the next round of The Rancho Santana Sessions.
This comprehensive briefing — featuring experts in the areas of foreign real estate, foreign business opportunities as well as tax and estate planning — is open to only 30 readers.
We’re sorry you can’t attend in person — Nicaragua’s Pacific frontier is a truly stunning place — but we don’t want to shut you out of access to the information that will be revealed next week.
You can sign up now for access to recordings of the Rancho Santana Sessions. They’ll be released in mid-December, a few days after the conference closes. Order now to secure the best available price.