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Investors That Do Not Understand The Power Of Seven Will Lose Money in 2015

Investors and traders around the world continually search to find or increase their edge in the financial markets to boost profits. The next few months are going to be critical for investors because the number seven is now in play for the stock market.

What does this mean?

In magical lore seven is a magical number., While all numbers are ascribed certain properties and energies, seven is a number of power, a lucky number, a number of psychic and mystical powers, of secrecy and the search for truth.

Seven is used 735 times in the bible and if you total up all words including “sevenfold” and “seventh” there is a total of 860 references.

The origin of seven’s power lies in the lunar cycle. The moon has four phases lasts about seven days. The Sumerians gave the week seven days. Life cycles on earth also have phases demarcated by seven, and there are seven years to each stage of human growth, seven colors to the rainbow, seven notes in the musical scale, seven petitions in the Lord’s Prayer, and seven deadly sins.

More importantly for investors the number seven and multiples of seven have a powerful influence on money. The US stock market is now trading in the seventh year window and it should not be taken lightly.

While I could go into a lot more detail about how I use seven in my algorithmic trading strategy to swing trade the S&P 500 index. This article focuses on the investing outlook.

See this video about seven… http://youtu.be/W8B14NSIWc8

I am fortunate enough that I have been trading since 1997 and have seen the how the stock market cycles affect human behavior and businesses specifically the financial newsletter industry which I have been involved in since the first day my trading career.

The stock market appears to be nearing a critical turning point that will change the lives and behaviors of investors for years to come.

The good news is that I have experienced four of these turning points and human behavior shifts in my career before and we currently entering the fifth turning point. I feel obligated to share this valuable insight with those of you who read my work. The next major market move could have a dramatic impact on your wealth and retirement years.

 

Insight on Investor Behavior and Business

Being heavily involved in the financial newsletter industry I have not only seen but survived several of these major cycles which forced many newsletters to go out of business. The cycles at play here are the market trend and the behavior of traders and investors.

The combined forces of these two cycles are what cleanse the newsletter industry of poor quality services. It becomes almost impossible to obtain new clients without word of mouth/referrals from happy users and if the quality of the newsletter is poor, eventually they lack enough users to make it feasible to operate. Unfortunately it’s the brutal truth, and over the last couple years I am seeing newsletters and even to top trading magazines that have been around for decades closing their doors.

The business cycle can easily be explained by observing the chart below of the SP500 index. In short, when the stock market has been rising for six or more months investors start to become confident in that they can make money on their own. And in fact they can if they buy and hold during a bull market.

But what happens as the market continues to rise for many years is that more and more investors and traders realize they can make money on their own.  The longer the uptrend remains intact the less will need the help of a trading and investing newsletter making it difficult to get new customers in this highly competitive industry.

Currently investors are behaving almost identical to what I saw during 1999 – 2001, from 2006 – 2007, and now 2014 – 2015 market tops.

Did you notice anything with those market tops? They are 7 years apart…

Let’s now take a look at the best times in the business cycle where traders and investors are in desperate need of help and start subscribing to multiple paid financial newsletter services. The strongest times for business took place during 2002 – 2003, and again in 2008 – 2010. This is when investor not only lost most of their wealth, but their faith in how they invest, who they invest with, and the stock market as a whole.

Did you notice any there also? They are 7 years apart also…

spx-7

 

Investors 7 Year Financial Outlook

Those of you who follow me know that I do not pick market tops or bottoms. Rather I focus on identifying trends and cycles in the market and only trade and invest with the active confirmed trend.

You also know that trying to pick market tops and bottoms is a suckers game and a sure fire way to lose a lot of money and build a serious complex that the market is manipulated, not tradable, and that it may be time for you to give up on trading all together.

Well, I am here to say that the market is tradable, and can generate traders and investors a boat load of money once you understand how and why it moves. Most importantly you need to understand money/position management and be patient for consistent long term gains.

Take a look at the chart below for a clear visual of 7 year cycle highs and lows at play.

 seven

 

While I do not invest based on this major seven year cycle I do actively trade a smaller market cycle which provides roughly 35 – 65 trades per year. This strategy allows me to profit during these major bull markets and also during the multi-year bear markets when the majority of investors are losing boat loads of their hard earned money.

The reason I do not invest in the seven year cycle is because the market can still have 30+% price swings within bull and bear markets and that type of volatility is beyond what I am comfortable with. Also because I can actively invest with my automated trading system so I don’t need to lift a finger or watch the stock market each day, week or month.

I hope you found this report useful in some way, and I ask that you share it with others.

Chris Vermeulen
www.TheGoldAndOilGuy.com

Crude Oil Slides to Multi Year Lows and What to Expect

Looking back to 2007 (seven years ago) we have seen the price of crude oil perform incredible price swings. No matter the time frame in which we observe price when an extreme price spike takes place due to news/event, statistics show that half if not all the event driven price spike will eventually be negated in the future.

The perfect example of this is the rubber band affect. If you pull an elastic band in one direction, eventually when it breaks or it’s released, the band will retrace back to the norm and then go in the opposite direction. You can see this on the chart from 2008 high of nearly $150 to the 2009 low of $40. Price then lost is momentum and has been somewhat range bound from 2011 – 2014 right in the middle at $95 per barrel.

Observing the price chart of oil below there are many technical indicators and patterns at play. The first important pattern to identify is the series of higher lows shown with the green trend line sloping upwards.

A rising trend line that has multiple pivot lows (bounces up the trend line) the price of oil creates what I call a perfect storm for waterfall type selloff. This is exactly what we have seen over the past 3 months.

Each time one of the pivot lows are breached, the stop loss orders are triggered for investors. This causes a flood of sell orders forcing price lower to fall below the next pivot low etc… This may look and sound easy to trade, but keep in mind this is a monthly chart, and short term traders are not trading this long term time frame. Only investors would be focusing on a move that would take months to a year to unfold.

The second key indicator to look at is the 61.8% Fibonacci retracement level. This level typically acts as a support level for a small bounce usually. Because the 61.8% level is also in alignment with a previous consolidation, and a pivot low, both which have been highlighted on the chart, I suspect a bounce around the $65 level should take place.

The final potential bottom could take place near the 2009 low. It is a long way away but anything is possible and what we think is most unlikely to happen is exactly what the market does sometimes.

crudeoil

 

Crude Oil Conclusion:

In short, I think what crude oil is doing is healthy and needed for several reasons. If I let my bias/option shine through, I feel the big oil and gas companies have been taking advantage of us with their ridiculously high gas prices over the last seven years.

The multi-billion dollar, cash rich corporations need a little wakeup call.  And the hair cut in their share price should be great for investors. This allows them to build or re-enter new positions at a better price with a higher dividend yield.

I will be watching the hourly and daily charts for a bottoming/bounce formation in the next week. But any bounce could be short lived as sellers appear to be aggressive still.

Receive my personal trade alerts via email and SMS text alerts at www.TheGoldAndOilGuy.com with a 50% Black Friday Offer Today

Chris Vermeulen

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The Big, Bold and Ugly

Since July of 2014 the big cap stocks have continued to make new highs as investors dump more and more money into the stock market. Overall bullishness on the stock market is now at extremely high levels which typically happen before a major stock market correction and sometimes start a full blown bear market.

While the average investor continues to become more and more bullish, the market breadth/health has been rapidly deteriorating. Unless you are market savvy you would not know how weak the market actually is and this always leads to strong losses and drawdowns for the uninformed investor.

What we know and most do not about this rising market, is that the big cap stocks in the SP500 index appear to be holding the overall market up and masking the weakness. So as investors become more bullish at these lofty levels putting more money into generic funds that push the SP500 higher, we see strong selling and unwinding of the more leveraged position like small cap stocks.

Over the past couple years the SP500 has formed a series of bullish corrections and running corrections. But the current formation is that of a bearish mega phone pattern and these typically point to lower prices.

SP500 BIG CAP STOCKS:

spy1

 

THE BOLD STOCKS:

I have always liked to follow the NYSE index because its a basket of 1900 stocks with 1500 of them being U.S companies. Its breadth/strength makes it a much better indicator of the market performance than the more narrow indexes with less stocks.

While this index remains in a bull market, it only looks as though it’s a few months away from a possible reversal and confirmation of a new bear market.

nyse

 

THE UGLY:

If you have ever read Stan Weinstein’s book then you know he followed GM share price closely. He believed that what GM did, the stock market would follow, to some extent. GM was/is an early leader of the US economy and stock prices in general.

The chart below paints a clear picture of the Stage 1 Accumulation in 2011- 2012, and also of the Stage 3 Distribution phase in 2013 – 2014. GM shares have traded down literally from the first week of the year and have now broken below critical support. Things could get interesting…

GM1

 

MY TRADING CONCLUSION:

In short, I remain bullish on the stock market with both my short term and investing outlook but I am very cautious and have closed out several large positions recently. Cash is king and I plan to protect, rather than invest my nest egg when risk is higher than normal.

Short term trading where trades only last 3-10 days is the way to go at this stage of the game. Some recent winning ETF trades with my ETF newsletter www.TheGoldAndOilGuy.com have been in SCO, a quick bounce trade in UCO, REM, and our current trade as of last week EEM.

The majority of my investment capital is traded with my automated trading system. It trades the S&P500 index directly in my brokerage account catching these 3-10 day swings in the market saving me time while reducing my emotional attachment to the market.

blackfriday1

Chris Vermeulen

Canadian Venture Index – Gold & Penny Stocks

Last week I met with a local professional trader who specialized in trading only Canadian stocks. While he mainly trades the 75 large cap stocks on the TSX which have the liquidity requirements he needs, he also trades penny stocks on occasion.

When he pulled up the TSX Venture index and reviewed our outlooks, we both came to a similar conclusion on what to expect moving forward.

We all know what happens to boats when the tide goes down… This index shows very clearly why most penny stocks have been losing value the last three years. Money has and continues to flow out of these equities and if fighting this major trend it will likely cause you frustration and financial pain.

See my gold forecast and charts from a year ago: Click Here

Overall gold and silver mining stocks are now entering a key long term investment level, but don’t jump the gun and buy yet…

Knowing that most of the largest moves based on percent happen during the last 10% of the trend, we must expect micro-cap stock prices will be extremely volatile for many months. Another 30-60% hair cut could still be ahead.

tsxjunior

 

Canadian Equities Market:

The TSX Composite is heavily resource-weighted and this market has lagged its counterparts around the world in the last year. This year the Canadian index played catch-up as seen in the chart below and was the strongest index in 2014 until this recent correction.

These equities may hold up well when the US market starts to top/correct. This is because the TSX’s is heavily weighted in late-cycle stocks (resources), it’s not unusual for the Canadian market to lag in the early stages of a bull market in the USA, catch up in the late stages, and then outperform toward the end.

tsx1

Trading & Investing Conclusion:

In short, I think 2015 will be the start of a new micro-cap stock bull market. Sure it could take more than a year to base and start to rally, but the time will come when ridiculous amounts of money will be made in this corner of the market.

We all hear stories about how a couple thousand dollars in a particular stock would now be worth $250,000, $1,000,000 etc… well times like that will happen again. But we must wait and watch for this perfect storm to unfold.

Starting in Dec/Jan I will start sharing my top 12 micro gold and silver stocks along with my trades/positions in them as I take them.

Be sure to join my gold newsletter at: www.TheGoldAndOilGuy.com

Chris Vermeulen