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8.23.2017 - Free Investment Newsletter Bookmark

Norway did it,
I’ve been telling you all;  about the Central banks of the world buying up stocks and propping the markets up. Hell, the Swiss National Bank owns more Facebook than Zuckerburg does.  Well, on the heels of all that, we also have to consider the sovereign wealth funds that are also heavily into buying stocks.

On Monday, the market was feeling pretty heavy. We thought it was going to bounce pretty well after the Thursday and Friday sell off, but it wasn’t happening. In fact, we were down about 75 more DOW points when all of a sudden we started to rise. In fact, we ended the day slightly green. What happened?

This happened:  An article out of Bloomberg hit and this is what’s in it:

Norway’s $970 billion wealth fund has been ordered to raise its stock holdings to 70 percent from 60 percent in an effort to boost returns and safeguard the country’s oil riches for future generations. Any short-term view on growing risks will play little part, according to Trond Grande, the fund’s deputy chief executive.

We don’t have any views on whether the market is priced high or low, whether bonds and stocks are expensive or cheap,” he said in an interview after presenting second-quarter returns in Oslo on Tuesday.
Well folks there it is. Right in your face they tell you they don’t care about whether stocks are expensive or cheap. They don’t care about P/E’s or price to book, or price to sales. There’s NO price discovery any more.

  When Central banks can print money out of thin air and buy tangible assets with the counterfeit money, why would they care if the stocks are expensive or not? They wouldn’t and they don’t.
So here comes the Norwegian wealth fund. They’re now buying 275 million a DAY worth of equities. It’s awful hard for a market to correct, when CB’s are buying billions worth and that’s aided by wealth funds buying their billions more.
Now you see why the market holds up through any and everything.  Almost clash with Russia over Syria? Market goes up. North Korea Threatens Nukes? Market goes up.  Trouble in the White House? Market goes up.  When you don’t care about buying “value” and you’re doing it with printed money... nothing matters.
The Question is, how long will they do this? Because one thing I’m certain of, is that if they stop, if they end their asset buying, we’re going down.  So what’s their plan? Buy until the DOW hits 25K? 30? 50?  Or just until they get their global SDR’s finished up and we go into the reset?  I’m not sure folks. All I’m sure of is that we know the reason why the market is so high, what I’m not sure of is how far they’ll push it.
Remember when markets used to function on fundamentals? Price, value, growth, dividends, etc?  That’s all dinosaur speak now. All that matters now, is being in the right stock ahead of a big buy by the Swiss National bank, or the Norwegian wealth fund.  How very sad. The market...is broken.
The Market:
My theory was/is that after topping out on August 7th, we’d start to see a series of lower lows and lower highs.  So after that Aug 7th closing high, we fell about 300 DOW points. Then we rallied up...but only got 200 back.
Then last Thursday and Friday hit.  We fell like a rock, falling lower than the August 10th closing low.  They came in this Monday a little tepid, but managed a slight green close, and then Tuesday they poured on the juice.  We had a 200 point up day taking us to 21,900. 
So what we have is a top, a plunge, a run up that didn’t reach the top, another plunge lower than the last, and another run up that so far...hasn’t even made the last level where it ran out of gas. Lower lows, lower highs.
I’ve been telling my Insiders Club members that we need to see the S&P get over ( and hold) 2468 , and the DOW has to get over 22,024 and hold, for us to believe we’ll set new all time highs again.
I don’t think we’re going to make it. If we can’t retake those two levels, we will probably see a controlled descent lower, a “stair step” lower, so to speak.  Don’t forget folks, we haven’t even had a 5% wiggle in over 20 months.  I think it’s time.
Why? Well, September is historically the worst month. Secondly we’re going to have all this noise about debt ceilings and running out of money. Then there’s always that worry about October, as very wicked crashes seem to favor that month.
So, I think they’re finally going to let us get a wiggle. That’s my premise. Granted I could be all wet and the Norwegian Wealth fund steps in tomorrow and buys 500 million worth of SPY, and the SNB steps in and buys 1 billion worth of SPY and we’ll be soaring to new highs.  But, judging by the fact that today there wasn’t any follow through to yesterday at all, and in fact we fell 87 DOW points and 8 S&P’s, my “stair step” lower theory is holding up so far.
Tomorrow is important. First off, the movers and shakers will be out at Jackson Hole Wyoming, rubbing shoulders and talking about policy. Then Friday Janet Yellen will be giving a speech. We could move up or down a lot depending on what any of these lunatics says.
But it’s also important technically. If the DOW can’t get past yesterday’s close up at 21,900, and instead falls more... we could be looking at a plunge that takes us below the 50 day moving average at 21653.
It’s a tense time folks. Be wary, be cautious. I have had no short term positions on for the past 3 sessions, because I figured we’d get a big bounce but it might not hold. Well, we got a big bounce and today we gave back almost half of it.  Watch those levels I posted. Get big bullish over 2468/22,024. Remain wary below that.  Good luck and I’ll see you all on Sunday. 

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