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Kevin Wilde
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Kevin Wilde is the chief trading strategist at alphaking.com and a Marketocracy.com Master. Investors can follow his trading advisories via his Daily AK newsletter, or have their money run for them via Marketocracy.com money management services, where Kevin's trades will be automatically entered.
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  • Party Like It's 1999... 2 comments
    May 3, 2013 5:50 PM | about stocks: QQQ, DIA, SMH

    If you would like to track updates on the charts shown below sign up at alphaking.com, click on the verification email, and get SIX months access to my on-line newsletter for free!

    I believe we are in the third phase - high risk blow off bull - of the four phase bull/bear cycle, with the black line in the first chart below showing progress of the NASDAQ this year, closely tracking the expected path of the orange line for high risk phases.

    High risk phases can last many years, though once the first big bear win lands the red line of the fourth phases begins, which is a vicious and prolonged bear market.

    The orange line suggests how the NASDAQ will trade if we remain in a high risk blow off phase all year, though the red line can start at any time.

    We are overdue beginning the corrective churn phase highlighted by numbers 2 through 5.

    Note that even during the mega blow off year of 1999 the middle part of the year saw tortuous churn. Do not underestimate the pain that can land during that churn period for those caught on the wrong side. Update continues below chart…

    (click to enlarge)

    Back in early 2009 the bull/bear cycle highlighted the turn from bear to bull was about to land, and I wrote back then to expect the mother of all bear market rallies.

    What I could never know is how many high risk blow off phases the rally would contain. If you had told me the high risk phase would last two years and end at the beginning of May in the third year, then the next chart would have been the path the NASDAQ would have been expected to make.

    The black line is what happened.

    The dotted orange line is the projected path if we remain in a high risk blow-off phase all year.

    The dotted red line to the first green arrow is how things would look if the stock market peaked here and the follow on bear market included only one down cycle, like 2008.

    The dotted red line to the second green arrow is if the bear comprised two bear cycles, like we saw in 2000-2002.

    The green arrows are the start of the follow on bull market post bear. Update continues below chart…

    (click to enlarge)

    So what now the NASDAQ 100 (NASDAQ:QQQ) and semiconductor (NYSEARCA:SMH) ETFs have broken out to confirm the rally?

    The obvious answer is a larger blow off, perhaps one as impressive as the one that finished the late 1990s bull...

    Party like it's 1999?

    Maybe, but more like is a rally to touch the upper trend-line of an expanding triangle for the Dow Jones Industrial Average that I showed in my 2013 forecast late last year (which you can read can read in the archives at alphaking.com)

    Point E sits near Dow 16,000, some 7% above current levels.

    The first series of red dots was my expectation if stocks peaked and the bull ended as we entered 2013 due to the fiscal cliff debacle.

    The dotted green line was my expectation if Congress did enough to allow the blow off bull to go on one more surging advance this year.

    The solid green line is what happened.

    The second series of red dots is my expectation - based on triangle analysis - if the stock market rally dies after touching that upper trend-line.

    Now the Qs and semis have broken out, we should hit that Dow 16,000 level pretty quickly to put an end to what will surely seem at that time a repeat of the 1999 bull ending party. Update continues below chart…

    (click to enlarge)

    Use QQQ 70.4 as a closing stop for long positions, as risk remains extremely high - and increases the higher stocks go - and the next Great Bear can start at any time.

    On the economic front, the jobs report today was plain awful - construction, manufacturing, hours worked, all lower - with stocks rallying as a more diabolical number was expected.

    This is how high risk blow act, and they all end the same way once the blow off complete - MAJOR bear market and financial crises. Other past blow offs similar to this one - 1929, 1972, 1987, 1999, 2007.

    So let's make money on this final blow off phase - and long may it last - as we party-like-it's-1999. Just don't forget how bad the hangover will be once it ends, so let's not over stay the party…

    Have a great weekend! Feel free to email any questions you may have via the Contact Us tab at Alphaking.com.

    Kevin

    If you would like to track updates on those charts you can take a six month free trial to my alphaking newsletter. Simply sign up for the 30 day trial at alphaking.com, click on the verification email, and we will adjust to six months. I run four tracking portfolios - so lots of stocks to buy and sell! - as well as a 401K advisory for those looking to make and protect money in their retirement nest-egg.

    Disclosure: I am long QQQ.

    Stocks: QQQ, DIA, SMH
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Comments (2)
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  • Joe2922
    , contributor
    Comments (409) | Send Message
     
    I had to read your daily AlphaKing Newsletter to fully understand your charts and work. I like how you show a different chart each of the 5 weekdays and explain them. Thanks for the 6 months trial. Nothing feels better than being on the correct side of the market.
    8 May 2013, 09:21 AM Reply Like
  • Kevin Wilde
    , contributor
    Comments (83) | Send Message
     
    Author’s reply » Well thanks! Don't forget to tell your friends, as what comes next is likely to life changing consequences for those caught on the wrong side.
    8 May 2013, 11:16 AM Reply Like
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