Custom Index Charts Suggest U.S. Stock Market Ready for a Pause

Weeks after the Election Rally initiated a moderately strong upside breakout rally, our Custom Index charts suggest the US stock market may be ready for a brief pause in trending before any new trends continue. Global traders and investors jumped into the US stock market just days before the US elections expecting something big to take place. The rally that initiated just days before the US election pushed our Custom Index charts well into the upper range of the 2016 to 2018 upward sloping price channel. This suggests the US stock markets have ended the downward price reversion and are now attempting to extend into the upward price channel....attempting to resume the upward trending that started after the 2016 elections.

Weekly Smart Cash and Volatility Indexes

The Weekly Smart Cash Index, below, highlights the impressive rally recently and the upward sloping price channel that is back in play for price. The highlighted range of the upward sloping price channel is actually the lower half of the std deviation range of the 2016 to 2018 price channel. So, as of right now, the Smart Cash Index price level has yet to really breach the middle of this channel and is still only within the lower half of the channel. Still, the support near the lower boundary of this level has been retested two or three times over the past six months and held. This suggests the lower channel level (the lower heavy BLUE line) is now acting as moderate price support....Continue Reading Here.

Revisiting Black Monday 1987

Back in the day, for those of you that are old enough to remember and have experienced one of the most incredible trader psychology driven stock market decline in recent history. The difference between “Black Monday” and most of the other recent stock market declines is that October 19, 1987, was driven by a true psychological panic, what we consider true price exploration, after an incredible price rally.

It is different than the DOT COM (2001) decline and vastly different than the Credit Market Crisis (2008-09) because both of those events were related to true fundamental and technical evaluations. In both of those instances, prices have been rising for quite some time, but the underlying fundamentals of the economics of the markets collapsed and the markets collapsed with future expectations. Before we get too deep, be sure to opt-in to our free market trend signals newsletter.

Our researchers believe the setup prior to the Black Monday collapse is strangely similar to the current setup across the global markets. In 1982, Ronald Reagan was elected into his second term as the US President. Since his election in 1980, the US stock market has risen over 300% by August 1987.

Reagan, much like President Trump, was elected after a long period of U.S. economic malaise and ushered in an economic boom cycle that really began to accelerate near August 1983 – near the end of his first term. The expansion from the lows of 1982, near 102.20, to the highs of 1987, near 337.90, in the S&P 500 prompted an incredible rally in the US markets for all global investors.

This is very similar to what has happened since 2015/16 in the markets and particularly after the November 2016 elections when the S&P500 bottomed near 1807.5 and has recently set hew highs near 3026.20 – a 67.4% price rally in just over 3 years.

One can simply make the assumption that global investors poured capital in the US markets in 1983 to 1986 as the US markets entered a rally mode just like we suspect global investors have poured capital into the US markets after the 2016 US elections and have continued to seek value, safety, and returns in the US markets since. These incredible price rallies setup a very real potential for “true price exploration” when investors suddenly realize valuations may be out of control.

So, what actually happened on October 19th, 1987 that was different than the last few market collapse events and why is it so similar to what is happening today?

On October 19, 1987, a different set of circumstances took place. This was almost a perfect storm of sorts for the markets. The US markets had risen nearly 44% by August 1987 from the previous yearly close – a huge rally had taken place. Computer trading, which some people suspected may have been a reason for the price decline on October 19, was largely in its infancy.

Floor traders were running the show in New York and Chicago. The London markets closed early the Friday, October 16, because of a weather event that was taking place. The “setup” of these events may have played a roll in the liquidity issues that became evident on Black Monday and pushed the US markets down 22.61% by the end of trading.

The US markets had set up a top near 2,722 in early August 1987 after rising nearly 44% from the 1986 end of year closing price level of 1,895. The SPX rotated lower from this peak to set up a sideways price channel near 315 throughout the end of August and through most of September. On October 5, 1987, the SPX started a downward price move that attempted to test the lower support channel near 312. On October 12, one week later, the SPX broke below this support channel and closed at 298.10 (below the psychological 300 level). The very next weekend was October 17 & 18 – the weekend before Black Monday.

Sunday night, October 18, in the US, the Asian markets opened for trading and a price sell-off began taking place in Hong Kong. Because the London markets has closed early on the 16th due to the storm, by the time they opened the UK markets began tanking almost immediately. Early in the day on Monday, October 19, the FTSE100 had collapsed over 136 points.

Our researchers believe the declines in the US markets in early October 1987 set up a breakdown event that, once support was broken, prompted a collapse event where liquidity issues accelerated the price decline volatility – much like the “flash crash”. Global investors were unprepared for the scale and scope of the price decline event and panicked at the speed of the price collapse.

In fact, at the height of the 1987 crash, systemic problems (mostly solvency and brokerage house operations) continued to threaten a much larger financial market collapse. Within days of Black Monday, it became evident that margin accounts and solvency issues related to operating capital, large scale risks and continued fear that the markets may continue to collapse presented a very real problem for the US and for the world. Have we re-entered another Black Monday type of setup across the global markets?

As new economic data continues to suggest the global markets are economically contracting and stagnating, the US Federal Reserve has started buying assets again while the foreign central banks continue to push negative interest rates while attempting to spark any signs of real economic growth. The US stock market has continued to push higher – almost attempting new all-time highs again just recently. The US stock market is up nearly 68% over the past 3.5 years since Trump was elected and as of Friday, October 18, 2019, the US stock markets fell nearly 0.75% on economic fears.

In Part II of this article, we’ll explore the potential of another Black Monday type of setup that may be playing out before our very eyes right now in the US stock market.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short term swing trading and long-term investment capital. The opportunities are massive/life changing if handled properly.

I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis.

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Chris Vermeulen
The Technical Traders

Waiting for the Russell 2000 to Confirm the Next Big Move

While we have recently suggested the US stock market is poised for further upside price activity with a moderately strong upside price “bias”, our researchers continue to believe the U.S. stock markets will not break out to the upside until the Russell 2000 breaks the current price channel, Bull Flag, formation. Even though the U.S. stock markets open with a gap higher this week, skilled traders must pay attention to how the Mid-Caps and the Russell 2000 are moving throughout this move.

As we continue to advise our clients that the upside pricing cycle in the U.S. stock market is being underestimated, see this research post: we also believe that increased volatility and price rotation will continue to drive larger rotations in price before the final breakout upside move takes place. We want to continue to warn traders that we still don’t have any confirmed upside breakout with price continuing to stay within this price channel in the Russell 2000. Eventually, when and if the price does breakout to the upside, we will have a very clear indication that continued higher prices and a larger upside move is happening. Until then, we need to stay cautious about the types and levels of rotation that continue within the markets.

Recently, volatility has started to increase as can be seen in this VIX chart. If the Russell 2000 is not able to break this trend channel with this current upside price move, then we fully expect continued price rotation in the U.S. stock markets and another increase in the VIX as this rotation takes place. The NQ recently rotated downward by nearly 4% while historical volatility continues to narrow. When volatility diminishes in extended price trends, we’ve learned to expect aggressive price rotation can become more of a concern. We expect the VIX to spike above 16~18 on moderate volatility as we get closer to the cycle inflection date near June/July 2019.

Volatility Index – VIX chart by TradingView

Overall, our researchers believe the upside price bias in the U.S. stock market will continue for another 30+ days as our research and predictions regarding precious metals and the longer term equities price cycles continue to play out. Skilled traders need to be aware that this upside price bias may include larger price rotation and volatility as we get closer to the May/June/July 2019 cycle inflection points. Stay aware of the risks as 4~6%+ price rotations should be expected over the next 30+ days throughout this upside price bias.

Do you want to find a team of dedicated researchers and traders that can help you find and execute better trades in 2019 and beyond? Please visit The Technical Traders to learn how we can help you prepare for the big moves in the global markets and find better opportunities for greater success in the future. Our team of researchers and traders continue to scan the markets for new trades and unique opportunities.

Chris Vermeulen

How to Predict the Maximum Profit on Each Trade - Free Webinar

Every trader discovers this cold hard truth. Your profit isn’t made when you get in a trade, but when you get out. In fact, we constantly receive questions from our readers about how to avoid leaving money on the table in trades.

Sometimes people get out of a trade too early just to watch it take off and turn into a huge winner without them. Other times you watch your profits disappear because you hung onto your position too long. The key to winning trades is managing your position and timing your exit. Easier said than done, right?

That’s why we reached out to our friend John Carter at Simpler Trading. If you’re not familiar with John, he’s a 25 year trading veteran with a track record for spotting big moves and timing trades in the market for maximum profit. He’s also the author of the best selling book for traders, Mastering the Trade.

John is putting on a special free webinar for our readers this Wednesday May 23rd to show us how we can know exactly when to exit a trade for maximum gains.

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John’s been working on something really special, and he’s sharing it with our readers. Plus, he’s going to explain in detail....

   ●   How to Catch the Biggest Turning Points in Real Time

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   ●   The Simple Exit Rule that Can Generate ‘Easy Money’

   ●   How to Rapidly Grow a Smaller Account Part Time

   ●   How to Get Rid of Guesswork from Entries and Exits

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These strategies work whether you’re trading Options, Futures, or any other derivatives. The key is understanding when the market is telling you to get out. You’ll see exactly what I mean on the free webinar.

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See you in the markets!
Ray's Stock World

P.S. This is going to be one of the most popular webinars we’ve ever had, so make sure you register as early as possible to Secure Your Spot Right Here

This Week's Stock Market Analysis & Warning in Layman's Terms

As you likely know, the stock market, trading, and even long term investing are not easy. That’s why in this post we want to make the complex simple for you. We will do this in a way that will give you that “Eureka!” moment regarding knowing what the stock market is doing now, and where it is headed over the next 12-36 months.

Last August we spotted trends in the underlying financial system that are very early warning signs that the bull market in stocks will be coming to an end, along with this growing economy. There is a ton of data taken into account for this information, but we have broken it down into simple bite size points that simply make logical sense, from a technical analysts perspective.

First Warning

Back in April 2017, we posted an article showing the first set of data that most traders and investors do not see or follow, mortgage delinquency rates. Delinquency rates in Single Family Residential Mortgages and other Consumer Loans began to climb through the second half of 2016 and continue to rise today. We shared with readers a way to take advantage of this using the Real Estate Bear Fund (DRV). This fund is now up over 20% and climbing as it rises when real estate falls. The rise and timing of this delinquency rate increase coincide almost identically with the Fed when they raise rates. And the problem is not just mortgages defaulting, the same is happening with commercial loans, and credit card debt.

Just look at what has the fed being doing like a mad-man of late? Ya, jacking up rates like they are going out of style!

The graph below shows a red line which is the fed rate, and as that rises so do loan delinquency rates (blue line). You will also see the grey shaded areas on the graph, and these are bear markets (falling stock prices). It’s obvious that we are headed towards financial issues once again with debt and the stock market.

Mortgage Rates and Delinquency Rates on the Rise

On March 18th 2018 we post an update showing how real estate foreclosures are starting to rise dramatically! Subscribers to our Wealth Building Trading Newsletter took advantage of this as we got long SRS inverse real estate fund which jumped over 5% in the first two days of owning it.

Second Warning – Asset and Business Cycles

Because we are traders and investors our focus is on making money, so we are only looking at the blue wave/cycle on the diagram below. The blue cycle is the stock market, and the numbers posted along that cycle indicate which stocks/assets should be the most in favor, rising.

As you can see the numbers 9 and 11 at the top are both commodity based (precious metals and energy). And knowing that commodities typically perform well just before a bear market in stocks unfolds, we are on the cusp of a new trade that could last a few months and post significant gains.

COMMODITY PRICE INDEX

Take a look at the commodity index chart below. Without getting to deep in to stage analysis I will just say commodities have formed a very strong “Stage 1” and are primed and ready for a multi-month rally.

Third Warning – Psychology of the Market

This market appears to be in a EUPHORIC “wonderland” moment driven by the fact that the global central banks have created a waterfall event of cheap money that is driving all of this asset valuation recovery. And, as capital is continually searching for the best environment for ROI, it is moving into the best areas of the global economy for survival purposes which we feel should soon be commodity-related assets, then eventually cash once the bear market takes hold.

Stock Market Conclusion

In short, as long as the capital continues to flow into the securities (stocks) and commodities in search for the best return on investment, we will continue to see markets hold up. But, stay cautious because when the markets turn and money is no longer looking for the next top performing sector or commodity, but rather just wants to exit investments as a whole and convert to cash (cash is king), that is when the bear market starts, and it could be very quick and violent.

Additionally, as we’ve shown with these charts and graphs today, we are entering a frothy period in the markets, and we would urge all investors to be critically aware of the risks involved in being blind to these facets of the current stock market and housing bubbles.

With 53 years experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.

Chris Vermeulen
Technical Traders Ltd.

Could This Move Disrupt Global Markets?

Our team of researchers continues to attempt to identify market strengths and weakness in the US major markets by identifying key, underlying factors of the markets and how they relate to one another.

Recently, we’ve been warning of a potentially explosive bullish move in Metals and our last article highlighted the weakness in the Transportation Index as it relates to the US major markets. 

On November 2, 2017, we warned that the NQ volatility would be excessive and that any move near or below 6200 would likely prompt support to drive prices higher as our Adaptive Dynamic Learning model was showing wide volatility and the potential for rotation moves.

This week, we are attempting to highlight a potential move in Bitcoin that could disrupt the global economy and more traditional investment vehicles.  For the past few years, Bitcoin has been on a terror to the upside.  Recently, a 30% downside price rotation caused a bit of panic in the Crypto world.  This -30% decline was fast and left some people wondering what could happen if something deeper were to happen – where would Crypto’s find a bottom.  From that -30% low, Bitcoin has recovered to previous highs (near $8000) and have stalled – interesting.

While discussing Bitcoin with some associates a while back, I heard rumor that a move to Bitcoin CASH was underway and that Bitcoin would collapse as some point in the near future. The people I was meeting with were very well connected in this field and were warning me to alert me in case I had any Bitcoin holdings (which I do).  I found it interesting that these people were moving into the Bitcoin CASH market as fast as they could.  What did they know that I didn’t know and how could any potential Bitcoin blowout drive the global markets?

Panic breeds fear and fear drives the markets (fear or greed).  If Bitcoin were to increase volatility beyond the most recent move (-30% in 4 days) – what could happen to the Crypto markets if a bubble collapse or fundamental collapse happened?

How would the major markets react to a Crypto market collapse that destroyed billions in capital?  For this, we try to rely on our modeling systems and our understanding of the major markets.  Let’s get started by looking at the NASDAQ with two modeling systems (the Fibonacci Price Modeling System and the Adaptive Dynamic Learning system).

This first chart is a Daily Adaptive Dynamic Learning (ADL) model representation of what this modeling system believes will be the highest probability outcome of price going forward 20 days.  Notice that we are asking it to show use what it believes will happen from last week’s trading activity (ignoring anything prior).  This provides us the most recent and relevant data to review.

We can see from the “range lines” (the red and green price range levels shown on the chart), that upside price range is rather limited to recent highs whereas downside prices swing lower (to near 6200 and below) rather quickly.  Additionally, the highest probability price moves indicate that we could see some downside price rotation over the Thanksgiving week followed by a retest of recent high price levels throughout the end of November.

This NQ Weekly chart, below, is showing our Fibonacci price modeling system and the fact that we are currently in an extended bullish run that, so far, shows no signs of stalling.  The Fibonacci Price Breach Level (the red line near the right side of the chart) is showing us that we should be paying attention to the 6075 level for any confirmation of a bearish trend reversal.  Notice how that aligns with the blue projected downside support level (projected into future price levels).  Overall, for the NQ or the US majors to show any signs of major weakness, these Fibonacci levels would have to be tested and breached.  Until that happens, expect continued overall moderate bullish price activity.  When it happens, look out below.

The next charts we are going to review are the Metals markets (Gold and Silver).  Currently, an interesting setup is happening with Silver.  It appears to show that volatility in the Silver market will be potentially much greater than the volatility in the Gold market.  This would indicate that Silver would be the metal to watch going into and through the end of this year.  This first chart is showing the ADL modeling system and highlighting the volatility and price predictions that are present in the Silver market.  Pay attention to the facts that ranges and price projections are rather stable till about 15 days out – that’s when we are seeing a massive upside potential in Silver.

This next chart is the Fibonacci Price Modeling system on a Weekly Silver chart.  What is important here is the recent price rotation that has setup the Fibonacci Price Breach trigger to the upside (currently).  This move is telling us that as long as price stays above $16.89 on a Weekly closing price basis, then Silver should attempt to push higher and higher over time.  The projected target levels are $19.50, $20.25 and $21.45.  Notice any similarity in price levels between the Fibonacci analysis and the ADL analysis?  Yes, that $16.89 level is clearly identified as price range support by the ADL modeling system (the red price range expectation lines).

How will this playout in our opinion with Bitcoin potentially rotating lower off this double top while the metals appear to be basing and potentially reacting to fear in the market?  Allow us to explain what we believe will be the most likely pathway forward…

At first, this holiday week in the US, the markets will be quiet and not show many signs of anything.  Just another holiday week in the US with the markets mostly moderately bullish – almost on auto-pilot for the holidays.  Then closing in on the end of November, we could start to see some increased volatility and price rotation in the metals and the US majors.  If Bitcoin has moved by this time, we would expect that it would be setting up a rotational low above the -30% lows recently set.  In other words, Bitcoin would likely fall 8~15% on rotation, then stall before attempting any further downside moves.

By the end of November, we expect the US markets to have begun a price pattern formation that indicates sideways/stalling price activity moving into the end of this year.  This ADL Daily ES Chart clearly shows what is predicted going forward 20 days with price rotating near current highs for a few days before settling lower (near 2540~2550 through early Christmas 2017).  The ADL projected highs are not much higher than recent high price levels, therefore we do not expect the ES to attempt to push much higher than 2595 in the immediate future.  It might try to test this level or rotate a bit higher as a washout high, but our analysis shows that prices should be settling into complacency for the next week or two while settling near the lower range of recent price activity.

What you should take away from this analysis is the following : don’t expect any massive upside moves between now and the end of the year that last longer than a few days.  Don’t expect the markets to rocket higher unless there is some unexpected positive news from somewhere that changes the current expectations.  Expect Silver to begin to move higher in early December as well as expect Gold to follow Silver.  We believe Silver is the metal to watch as it will likely be the most volatile and drive the metals move.  Expect the major markets to be quiet through the Thanksgiving week with a potential for moderate bullish price activity before settling into a complacent retracement mode through the end of November and early December.

If Bitcoin does what we expect by creating a rotational lower price breakout setup from recent highs, we’ll know within a week or two.  If this $8000 level holds as resistance, then we will clearly see Bitcoin rotate into a defensive market pattern (a flag formation or some other harmonic pattern above support).  The US majors will likely follow this move as a broader fear could begin gripping the markets.

Lastly, as we mentioned last week, pay very close attention to the Transportation Index and it’s ability to find/hold support.  Unless the Transportation index finds some level of support and begins a new bullish trend, we could be in for a more dramatic move early next year.  Our last article clearly laid out our concerns regarding the Transportation Index and the broader market cycles.  All of our analysis should be taken as segments of a much larger market picture.  We are setting up for an interesting holiday season where the market could turn in an instant on fear or news of some global event (like a Bitcoin collapse).  The volatility we are seeing our modeling systems predict is increasing (especially in the Silver market over the next few weeks).  We could be headed for a bumpy ride with a classic top formation setting up.

Overall, protect your investments and your long positions.  Many people will be away from their PCs and away from the markets over the holidays.  It is important that you understand the risks that continue to play out in the markets.  Pay attention to market sectors that are at risk of showing us greater fear or weakness in the major markets.  Pay attention to these increases in volatility and price rotation.  Most of all, pay attention to the market’s failure to move higher over this holiday season because we should be traditionally expecting the Christmas Rally to push equities moderately higher at this time.

Should we see any more clear signs of weakness or market rotation, you will know about it with our regular updates to the public.  If you want to know how Acitve Trading Partners can assist you in staying up to day with the market cycles and analysis, then visit the Active Trading Partners and learn how we can assist you with detailed market research, daily updates, trading signals and more.

We are dedicated to helping you achieve success in the markets and do our best to make sure you are prepared for any future market moves.  See how we can assist you now and in 2018 to achieve greater success.

Chris Vermeulen

Utility Tokens and Cryptos Finally Properly Explained

We have asked our trading partner Teeka Tiwari to explain to us what crypto currencies are and the difference in a crypto currency and the many tokens being offered in the ICO markets right now. Please take a few minutes to read his entire response, when you are done you will have a complete grasp of cryptos and utility tokens....

Cryptos are a brand new asset class. They're completely different from stocks, bonds, and traditional currencies. But that was over 18 months ago. Since then, Bitcoin has risen 1,600% and ether (the coin for the Ethereum network) is up 2,563%.

Perhaps you feel that crypto assets aren't assets at all. Perhaps you've missed out on this incredible run and think it's too late to get in. I want to show you why cryptocurrencies are not like the Dutch Tulip Craze. In fact, we're still in the early days of the cryptocurrency boom.

According to billionaire hedge fund manager Mike Novogratz, the entire crypto market is set to become 25 times larger in the next 5 years. That would be a 2,400+% rise from today. And he's putting his money where his mouth is. Novogratz recently put 10% of his net worth into crypto assets.

That means this asset class still has plenty of room to run and there's still time for you to join the ride. What I'm about to share with you could be very valuable. Like the internet before them, cryptocurrencies have the potential to reshape the economy and they offer a rare opportunity for ordinary individuals to make life changing gains.

The Cryptocurrency Ecosystem

To kick off your education, you need to understand there are two types of crypto assets: cryptocurrencies and utility coins (also called app coins). Think of cryptocurrencies as the digital equivalent of traditional fiat currencies such as dollars, euros, and pounds.

You can use them as a medium of exchange or to store value. The only difference is they're exchanged over the blockchain. Think of utility coins as crypto equities. They're like buying shares in IBM, Walmart, or Apple. Instead, you're buying a stake in a blockchain venture.

Cryptocurrencies and utility coins are similar in that they both operate on a blockchain. The blockchain is like an online public ledger. It's used to track cryptocurrency transactions [Blockchain is a public ledger of all cryptocurrency transactions executed. It's a shared network that can move value around and represent property ownership.]

Now that you know the two types of crypto assets, let me explain how each works.

A New Form of Money

Cryptocurrencies are the crypto asset that most folks are familiar with. So, we'll dive into this one first. The most common cryptocurrencies is Bitcoin. It was created to act as alternatives to fiat (paper) money. Two frequent questions we get are why would anyone buy a cryptocurrency that's backed by nothing and can be created by anyone.

These aren't only fair questions, but smart ones. Here's the thing to remember about money: It's whatever people mutually agree it is. In the past, beads, cowrie shells, silver, gold, and of course paper, have all been used as money. You'll notice that none of them have any intrinsic value.

At the end of the day, a sack of flour has more practical value than a $100 bill or even a bar of gold.

And yet, we value both far more than a sack of flour. That's the mutual agreement we've all come to.

When you think about it, it's not that rational. How does a piece of green paper or a bar of yellow metal hold more value to a human than a sack of flour that can be used to feed a family for weeks?

Because we all agree it does.

In my opinion, paper currency may be the most irrational form of money in human history. At least you can decorate yourself with gold, silver, beads, and cowrie shells. Not only that there's a limit to how much gold, silver, and shells that can be found. There's no limit on the amount of paper money that can be created.

The closest thing to true money (outside of food) is gold. Gold meets several historical rules that we use to judge value. It's prized for its beauty. It's difficult to find. It's expensive to extract. It's also a scarce resource. But there are problems with gold, too. We have to trust that the refineries that certify the gold's purity are telling the truth.

Gold is also difficult to transfer (think of carrying around bags of gold coins or chests of gold bars). And that makes it virtually useless as a practical medium of exchange in daily life. What I mean is you can't buy a new car, house, or even a book with gold bars.

Here's How Cryptocurrencies Are Creating Value

Well designed cryptocurrencies have many features that humans look for when measuring value. Let's talk about them now.

Pre-Programed Scarcity

Cryptocurrencies like Bitcoin are pre programmed to create a set amount of coins. Once this limit is reached, no new coins will be created. This creates scarcity. For instance, the algorithm that governs Bitcoin will create no more than 21 million Bitcoins.

Think about this, there are 35 million millionaires in the world. That means if every millionaire wanted to own an entire Bitcoin, they wouldn't be able to. There literally is not enough to go around. Contrast that with paper money.

With paper money, there's no limit to how much can be created. However, gold is finite. That limits how much new gold can be refined each year. You can see that cryptocurrencies actually have more in common with gold than with paper money.

Difficult to Counterfeit

Cryptocurrencies rely on a technology called the "blockchain." This blockchain uses cryptography to secure transactions. These complex mathematical algorithms make counterfeiting cryptocurrencies almost impossible. Now, compare that to cash. It's estimated that almost a quarter billion dollars of counterfeit paper money sloshes around the U.S. every year.

What about gold? Fake gold will never fool an expert. But counterfeit gold could be passed off to someone with an untrained eye. Cryptocurrencies share two important criteria that give value to traditional assets: scarcity and irreproducibility (hard to counterfeit). These are necessary to create value. But you need something else, too.

A Final Criterion

For a thing to have value, it needs one final thing: Some form of utility. Even art (which some will argue is worth little more than the sum of its parts), creates massive utility by stirring deep emotions in the hearts of people that can appreciate it. That emotional response is a very valuable form of utility. It's the reason people spend billions on art annually. So, what type of utility do cryptocurrencies provide?

Rapid Transfer of Funds

Unlike the transfer of gold or even cash, cryptocurrencies can transfer value almost instantly. And they can do it at very low costs. On the Bitcoin network, you can send $50,000 for about $3. The receiver will get it in about 10 minutes.

Compare that to a traditional wire transfer. The fastest I've seen a wire hit is 24 hours. The cost to send a domestic wire can vary from $35 to $70. International wires can eat up 1%-15% of the total amount of money sent. As far as sending gold, it takes 3-14 days domestically and is very expensive. So, being able to quickly send money anywhere in the world is a very valuable utility that cryptocurrencies possess.

Free from Government Control

Over the years, both gold and cash have been either confiscated or severely restricted through capital controls. Capital controls are government restrictions on your ability to access or move your money.

Even here in the U.S., we have capital controls. For instance, you can't just stroll through airport security with more than $10,000 in cash.

Unless you declare it, you're breaking the law. Even though it's our money, the government insists we report when and where we're moving it. This is an outrageous demand that we accept because there are no alternatives. That is until cryptocurrencies came around.

With cryptocurrencies, we are in complete control of our own funds. We can store them on our own devices free from government intervention. If you store your cryptocurrencies properly, it is impossible for the government to confiscate or control them. This is a truly liberating utility that is very valuable.

Highly Secure Decentralized Payment Network

One common criticism of cryptocurrencies is that anyone can make one. How can something have value if you can create a currency with just a few lines of code? This criticism is spot on.

But remember, anyone can buy a printing press and start making his or her own paper money. What stops people is that no one would use it. The same is true in crypto. Only currencies that gain widespread adoption actually take off.

One of the ways we measure this widespread adoption is by looking at the number of computers that are in a cryptocurrency network. For instance, more than 7,000 separate computers are running the Bitcoin blockchain.

That widespread adoption is a vote of confidence by the market. It's a way for us to objectively identify "good" cryptocurrencies from bad ones. As the network of users grows, so does the volume of cryptocurrency being transacted. This in turn creates a network effect that snowballs.

For instance, $143 million per day of Bitcoin changed hands in 2016. Today, it's over $4 billion per day. The widespread use of this currency is giving it value. Thousands of people are coming together and agreeing to exchange goods and services for Bitcoin.

That is the true test for any currency. Are people accepting it? The answer is a resounding yes. For these reasons, we believe you'll see more people continue to adopt cryptocurrencies like Bitcoin. They offer utility that neither cash nor gold can. Just a few of those companies already accepting Bitcoin or other cryptocurrencies are....Overstock.com, Microsoft, Intuit, PayPal, DISH Network and many more.

A Second Type of Crypto Asset

Earlier, I told you there are two types of crypto assets. The first is cryptocurrencies (which I've just explained to you). The second type of crypto asset goes by several names. Some folks call them "application coins" others call them "utility coins."

The terms are interchangeable. So, what is a utility coin? A utility coin is a crypto asset that is used to secure or deliver a service. Our biggest gains have come from investing in utility coins.

That's why I want to spend the rest of this email talking about them. If you can understand how utility coins work, you can make a fortune in them. In my Palm Beach Confidential service, I have readers that are transforming $300 investments into six figure windfalls by getting in early on utility coins.

Three Themes Driving the Value of Utility Coins

Over 2017, I've been to conferences in Silicon Valley, Boston, Austin, Las Vegas, New York City, Berlin, London, and Copenhagen. During these conferences, I've met with hundreds of people. I've met crypto project founders, venture capitalists, government regulators, central bankers, Fortune 500 executives, hedge fund managers, and digital currency miners.

These are the three primary themes that are driving their research, development, and investment decisions:

• Fat protocols
• Interoperability
• Scaling

If you don't know what these terms mean, don't worry. I'll explain each for you right now.

Theme 1: Fat Protocols

What is a "fat protocol"? I had to ask myself the same question. I stumbled upon this theme at the Consensus 2017 event in New York City in late May. And I heard about fat protocols in more detail in Berlin. Let's start with protocol. In the technology world, a protocol is a set of rules.

For instance, the internet is governed by two protocols: TCP and IP. TCP stands for transmission control protocol. This is a set of rules that governs the exchange of packets of data over the internet. IP stands for internet protocol. This is a set of rules that governs sending and receiving data at the internet address level.

IP by itself is something like the postal system. It allows you to address a package and drop it in the system, but there's no direct link between you and the recipient. TCP/IP, on the other hand, establishes a connection between two hosts, so they can send messages back and forth for a period of time.

Nobody owns TCP/IP. But imagine if someone did. How valuable would the protocols be?

Think about this. According to a Harvard Business Review article, more than half the world's most valuable public companies have built business models on TCP/IP. That's $5.4 trillion dollars in value traced right back to TCP/IP. Think of the biggest names in the internet space: Amazon, Google, Facebook, Priceline, eBay, Netflix, Uber, etc... They are applications, not protocols.

In short: Applications (or "apps") are computer programs that run specific tasks. They include simple desktop apps like calculators, clocks, and word processors to mobile apps like media players, games, instant messengers, and maps. Google's YouTube, Facebook's Messenger, and Microsoft Word are examples of popular web applications. Companies own their applications.

Protocols are the rules computers use to communicate with each other. TCP and IP are examples of widely used protocols. Unlike applications, no one owns computer or internet protocols. For instance, the Ethereum platform has created a protocol for the issuance of crypto tokens (among many other things).

Ethereum has created rules that make it easy to launch and manage digital tokens. That's why more than 50% of new tokens coming to market are using the Ethereum platform. As more projects are launched on the Ethereum network, the demand for ether tokens increases. Said another way, the more the protocol is used, the more valuable the ether tokens become.

These protocols are called "fat" because most of the economic value and profits will be captured at the protocol level. All the tokens launched on the Ethereum platform are only worth $6.8 billion. But the Ethereum platform itself is now worth $34 billion.

Even as more and more companies go "public" on the Ethereum platform, we think Ethereum will be more valuable than the applications that end up running on it. The reason is that the more the protocol is used, the more demand is generated for the underlying protocol token. That's how utility coins like ether gain their value.

Theme 2: Interoperability

Hundreds of new blockchain ledgers are emerging. On top of that, there are hundreds of established centralized ledgers and payment networks. These established payment channels are used by banks and payment providers. We're talking about giants like JPMorgan, PayPal, Visa, and MasterCard.

As the world migrates from a centralized to a decentralized model, how do you get these different networks to communicate with one another? This is a huge problem. That's why we think the next boom will be in companies that allow different ledgers to "talk" to each other.

Imagine there's an English speaker, German speaker, and French speaker in the same room. And no one speaker understands any other speaker. This is the problem right now with blockchains and payment networks. They all "speak" different languages. But what if somebody could create a technology that would allow these different languages to understand one another? In the tech world, this is called "interoperability."

The Difference Between Financial Ledgers and Blockchain Ledgers

Today's financial system requires a lot of overlap. Financial institutions spend a lot of time and money maintaining their systems and even more time and money making sure their systems agree with other systems on common facts.

This is done so that there is no single point of control or single point of failure. The solution is decentralization. It eliminates single points of failure and the necessity for each institution to duplicate the data. The table below highlights the differences between a traditional ledger and a blockchain ledger.

Imagine a version of eBay or PayPal that can work with virtually any digital or fiat payment system. That's the goal of interoperability. Here's the key takeaway, The utility coins that are building in easy to use interoperability will be the ones that become highly valuable.

Theme 3: Scaling

While in Berlin, I met a group of executives from drug giant Merck. These folks oversee Merck's European innovation group. They are tasked with identifying and getting management "buy in" on implementing innovative technology. They have a terrific grasp of the blockchain. They know it could potentially save Merck millions of dollars in costs.

The problem is none of the current blockchain platforms scale. Meaning they just can't operate at the speed and level of complexity Merck requires. This is a common complaint. I've heard it from executives in London, Boston, Silicon Valley, New York City, and now Berlin.

The two most popular blockchains, Bitcoin and Ethereum, can only handle seven and 15 transactions per second, respectively. Like the old 56k telephone modems of the '90s, that's awful. But it would be a mistake to think that it will stay that way forever.

Just as those modems eventually transformed into the high speed internet we enjoy today, it's only a question of time before Bitcoin and Ethereum crack the scaling problem.

Bringing It All Together

The future for cryptocurrencies and utility coins is bright. As more people look to take control of their money, they'll turn to cryptocurrencies like Bitcoin and others. As I track the developments in fat protocols, interoperability, and scaling, I'm seeing more and more widespread adoption of utility coins like ether and many others.

But remember: These are still very early days. We'll see massive volatility ahead. It's unavoidable. The key to thriving in the chaos of the early days of a new technology is to remain rational. Friends, hear me when I tell you that it is irrational to expect the crypto market to be stable. Any market this new is highly unstable. The way we manage and profit from that instability is to use small position sizes. With crypto assets, we rely on asymmetric risk.

With crypto we can swing for the fences without putting the rest of our existing wealth at risk. This is a rare opportunity for ordinary people to make life changing gains without having to take life changing risk. That means we risk a small amount of money for a massive potential payoff. This strategy is working well for my readers.

The best part is this trend is just beginning. Right now, the entire crypto market is valued at about $195 billion. Novogratz, the hedge fund billionaire I mentioned earlier, sees the entire market growing to $5 trillion. That's 2,400+% upside ahead. That means we have many more opportunities in front of us to make life changing gains. So get out there. At the very least, buy some Bitcoin and Ethereum.

Remember, you don't have to own a whole Bitcoin. You can own just a fraction of a coin.

And as all these developments unfold – along with others like them – I'm confident that one day you'll be grateful you took action.

Let the Game Come to You!

Teeka Tiwari

Editor, Palm Beach Confidential

New Law Could Send Bitcoin and Cryptos Skyrocketing Higher By January

I have a new message and update from my trading partner Teeka Tiwari of the Palm Beach Research Group, make sure you are keeping up with him this week.....

A few weeks ago, I told my team that we needed to get the word out about a major Bitcoin development. Something that could be very bullish for cryptocurrencies. I won’t get into all the nitty gritty. But in short, a new bi-partisan law is working its way through Congress as we speak, and is targeted to go into effect by January 1st. When it does, it could send Bitcoin and a handful of lesser-known cryptos soaring in the coming weeks and months.

Why do I say that?

Because when the same law was passed in Europe, Bitcoin jumped 80% in two weeks. And when a similar law passed in Japan earlier this year, it helped send the entire crypto market over 100%, and break out to all time highs. Now I believe we’re about to see the same thing here. Only when this happens in America, the returns could dwarf what we’ve seen from smaller areas.

That’s why I’m holding this free webinar....

I want to give you all the details on this development and explain how to take advantage of it to potentially make 5, 10, even 20 times your money, as those who follow my work have already been able to do. In fact, I’m so bullish that this new law could send Bitcoin soaring that I’m buying $1 million dollars of Bitcoin and giving it all away during the event.

You’ll get all the details Thursday night. The event is completely free, but you must register in advance to access it and claim all the free training that comes with it. You can do so automatically here.

Sincerely,
Teeka Tiwari

P.S.  As soon as you register, you’ll gain access to my new “Crypto Academy” training site. It features “over the shoulder” video training on how to invest in any cryptocurrency. A special report on on my investment strategy (the exact strategy I use to deliver multiple 1,000% plus winners) and several more pieces of research.

P.P.S  When you register automatically by visiting here now, you’ll also reserve a spot to a Live Q&A with me – where I’ll answer everyone’s most burning questions (please keep in mind, I cannot give personalized investment advice).

Visit Here to Automatically Register Right Now

How to Adapt Your Trades Automatically for Choppy Conditions and Big Trends

Have you noticed we’re getting a lot of brutally sharp reversals in the markets lately? It’s so frustrating because most traders get caught on the wrong side over and over again. So called safe trend trades get destroyed while betting on bold reversals is working like clockwork.

What’s going on?

For years, it was possible to just buy any dip in stocks and crank out winner after winner. But those days are long gone. If you try that now, you’ll burn through your account in the blink of an eye. These days’ trends reverse on a dime, but at the same time, you can’t just blindly pick tops and bottoms either.

Anyone who was short stocks recently learned that lesson the hard way when the market rocketed to new all time highs. The bottom line is that those outdated strategies no longer work. If you want to generate consistent profits in these volatile conditions, you’ve got to adapt. And that’s why this short video by renowned trader John F. Carter is so exciting

You’ve just got to see the breakthrough strategy that allows him to catch massive price swings without breaking a sweat.

See for yourself >>> Click HERE to Watch <<<

If you haven’t heard of John before, he’s a best selling author and trader with over 25 years’ experience. He’s developed a world wide reputation for catching explosive trends in stocks, options, and even futures, too.

So I hope you attend on September 6th, 2016 at 7:00 PM Central for a special webinar called, “Hunting for Tops and Bottoms - Low Risk Setups for Trading Precise Turning Points in Any Market”.

Here’s just some of what you’ll learn....

  *  A simple 3 step process to identify major market turning points in any market

  *  How to find low risk, high probability trades in today's volatile market conditions

  *  Why it’s finally possible to catch tops and bottoms in real time on almost any chart

  *  Why these ‘Bold and Beautiful’ reversal trades can be safer than ‘comfortable’ trades

  *  How to avoid getting suckered into the costly traps that most traders fall into

  *  How to adapt your trades automatically for choppy conditions and big trends

  *  How to know when a support or resistance level is likely to hold or not

And that’s just the tip of the iceberg.

I’m looking forward to this special event and I expect I’ll be taking a lot of notes, too. There may not be a replay and this event will almost certainly fill to capacity – so register now and be sure to show up a few minutes early. Unless you’ve already mastered trading these volatile swings, this could be the most important training you attend this year.

To claim your spot just Click HERE

See you next Tuesday,
Ray's Stock World


P.S.   If you have not downloaded John's free eBook do it asap....Just Click Here

Why Corporate America Can’t Prop Up Stocks Much Longer

By Justin Spittler

Corporate America is bracing for tough times. Since you’re reading an investment newsletter, you likely own stocks. And if you’re like most investors, you keep up with how the companies you own are performing. You might even listen to quarterly “earnings calls,” which are when CEOs present results and give their outlook on the business.

Most of the time, CEOs act as cheerleaders on these calls. If business is bad, they’ll say business is good. If business is good, they’ll say it’s great. And CEOs are notoriously optimistic about the economy. After all, thousands of investors and analysts listen to these calls. CEOs know their stock can crash if they’re pessimistic about the business or economy. Because many CEOs will say anything to make their stock go up, we don’t put much stock in their words. We pay much more attention to their actions. And right now, large U.S. companies are acting like very tough economic times are ahead.

Business investment fell 2.2% last quarter..…
This metric measures how much companies spend on property, plant, and equipment. It was the third straight quarter that business investment fell. That hasn’t happened since the 2008-2009 financial crisis. We wouldn’t see this if the economy was headed in the right direction. Companies would be building more factories. They’d be buying more machinery. They’d be spending more money on research and development.

Instead, companies have cut back on investments. This tell us they don’t see many good opportunities. That’s a bad sign for the economy, yet stocks keep rallying. The S&P 500, Dow, and NASDAQ have all recently hit new record highs. At this point, you’re probably wondering what’s keeping stocks afloat if it’s not the economy.

Companies have spent about $2.5 trillion on “share buybacks” since the financial crisis..…
A buyback is when a company buys its own stock from shareholders. This can lift a company's stock price.
According to investment bank Goldman Sachs (GS), buybacks have been the biggest driver of U.S. stock performance since the financial crisis. Buybacks also reduce the number of shares that trade on the market.

This boosts a company’s earnings per share. But buybacks don’t make a company more profitable. They only make profits look bigger “on paper.” Companies have been buying up their own stock for two reasons: 1) They don’t see many growth opportunities. And 2) it’s incredibly cheap to borrow money.

The Federal Reserve has held its key interest rate near zero since 2008..…
The Fed cut rates to encourage households and businesses to borrow and spend more money. Mainstream economists thought this would “stimulate” the economy. It didn’t work. The U.S. economy has grown at an annualized rate of just 2.1% since 2009. This makes the current “recovery” the slowest by far since World War II.

The Fed did get folks to borrow huge sums of money. U.S. corporations have borrowed more than $10 billion in the bond market since 2007. Last year, they issued a record $1.5 trillion in bonds.
Buybacks are a big reason companies borrowed so much. MarketWatch reported last week:

Companies have been taking on piles of debt to finance buybacks, leading the total debt on the S&P 500 to grow 56% during the past five years.

According to Yahoo! Finance, companies in the S&P 500 funded 22% of last year’s buybacks with debt. This year, debt paid for 39% of share buybacks.

Corporate debt is now dangerously high..… 
According to Barron’s, corporate debt now equals 45.3% of gross domestic product (GDP). The only time this key ratio has ever been higher was in 2009, when it hit 45.4%. If the economy was doing well, this wouldn’t be such a big problem. Companies would be making enough money to pay their debts.

But right now, Corporate America is struggling to make money. Profits for companies in the S&P 500 are on track to fall for the fifth straight quarter. That hasn’t happened since the 2008-2009 financial crisis.
There’s no telling when this earnings drought will end either. According to research firm FactSet, analysts expect third quarter corporate profits to fall 1.7%. The third quarter ends on September 30.

Keep in mind, the U.S. economy is technically in a “recovery” right now. Imagine what will happen to corporate profits during the next recession. The more profits fall, the less money companies will have to prop up their shares with buybacks.
  
Companies have already started to cut back on buybacks..…
According to Business Insider, buybacks fell 18% last quarter. This sharp decline in buyback activity followed a near record breaking first quarter, in which companies in the S&P 500 spent an incredible $166 billion on buybacks. That’s the second most ever, and the most in one quarter since 2007. We don’t know exactly why companies are suddenly spending less on buybacks.

Maybe it’s because corporate profits are drying up. Maybe companies are starting to realize they have too much debt. Or maybe it’s because stocks are expensive. According to the popular CAPE ratio, stocks in the S&P 500 are 62% more expensive than their historic average. Since 1881, U.S. stocks have only been more expensive three times: before the Great Depression, during the dot-com bubble, and leading up to the 2008-2009 financial crisis.

Like any investment, buybacks only make sense when stocks are a good deal. With stocks as expensive as they are today, buybacks are a terrible use of money.

Without buybacks, there won’t be much to keep U.S. stocks from falling..…
If you own stocks, take a good look at your portfolio. We recommend that you get out of any company that needs buybacks to retain shareholders. We also encourage you to put 10% to 15% of your wealth in gold. As we often say, gold is real money. It’s preserved wealth for centuries because gold is unlike any other asset. It’s durable, easy to transport, and easily divisible.

Gold is also the ultimate safe haven asset. It’s survived economic depressions, stock market crashes, and full blown currency crises. When investors are nervous about stocks or the economy, they buy gold.
The price of gold has jumped 27% this year. It’s beat the S&P 500 4-to-1.

If you don’t already own gold for protection, we encourage you to do so immediately..…
According to Casey Research founder Doug Casey, the financial system is held together by “chewing gum and bailing wire” right now. When the public wakes up and realizes this, “they’ll flock to gold… just as they’ve done for centuries.” Doug thinks this could cause the price of gold to easily soar 200% in the coming years.

You could make 2x, 5x, or 10x that much money in gold stocks..…
Yesterday, we showed you how leverage works in the resource market. As we explained, this powerful force is why gold stocks can soar even if the price of gold doesn’t rise by that much. This year, gold’s 27% jump caused the VanEck Vectors Gold Miners ETF (GDX), which tracks large gold miners, to soar 128%.

Some folks might see that and think they missed their chance to buy gold stocks. But regular readers know gold stocks can go many times higher. During the 2000-2003 bull market, the average gold stock rose 602%. The best ones returned more than 1,000%. We expect even bigger gains in the coming years. To learn why, watch this short presentation. In it, Doug explains why we’re headed for “the biggest gold mania” he’s even seen.

By the end of this video, you’ll know why there’s never been a better time to own gold stocks. You’ll also learn how to make the most of this new gold bull market. We’re talking gains of 1,000%...2,000%...even 5,000%. Those kind of returns might sound impossible. But as you’ll see, Doug's hit many “home runs” like this throughout his career. And for the first time ever, he's showing the world exactly how he did this.

To learn Doug’s SECRET to making giant gains in gold stocks, watch this free video.

How Will Negative Interest Rates, the War on Cash, and “Helicopter Money” Affect the Markets?

Today, we have something special to share with you. Instead of the usual “Chart of the Day,” you’ll find a six-minute video presentation put together by our colleagues at Palm Beach Research Group.

In the video below, Palm Beach Research Group co-founder Tom Dyson and Palm Beach Letter editor Teeka Tiwari discuss how radical government policies are affecting global financial markets. As Tom and Teeka explain, these central bank “experiments” will have severe side effects. They could even push the price of gold to $5,000. To learn why, watch the video below.

If you like what you saw from Tom and Teeka, we encourage you to sign up for their “speed round” training series. Click here to get started.

The article Why Corporate America Can’t Prop Up Stocks Much Longer was originally published at caseyresearch.com.

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