crash time? · going to see a stock market crash. by “crash” i mean a 5% or even 10% drop...

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CrashTime?

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Iamgrowingmoreandmoreconcernedwearegoingtoseeastockmarketcrash.By“crash”Imeana5%oreven10%dropoccurringinasinglesessionoroverthespanof2-3days.IknowlastissueIpeggedtheoddsofthishappeningat20%,butintheylastmonththoseoddshavecreptupto35%.Thereason?Thestockmarketrigcontinues.Anditiscausingthedistortionsinthemarkettobecomeevenmoreextreme.Ahealthystockmarketralliesonheavyvolumewithrealbuyersinvestingacrossbroadsegmentsofthemarkets.Thatisnotthismarket.Notbyalongshot.TheS&P500ismadeupof500differentcompanies.AndyetjustFIVEcompaniesareaccountingfor40%ofitsgainsthusfarin2017.ThosecompaniesareFacebook(FB),Apple(AAPL),Amazon(AMZN),Alphabet(GOOGL),andMicrosoft(MSFT).Putsimply,themarketisnowbeingdrivenbyjustfivestocks.Andthosefivestocksarebeingdrivenbyamarketrig(theVIXslam/risk-parityfundrigIoutlinedinourWeeklyMarketUpdateon5-3-17).WhywouldthisleadtoaCrash?

Crash Time? May 31 2017

SHORT-TERM ISSUES

• Stocksbeingproppedupbyjustfivenames.

• Mostmarketsectorsalreadycorrecting.

• ACrash?INTERMEDIATE-TERM

ISSUES • The$USDposedtocrashintomid-’90slaterthisyear.

• TheEuroprimedforamoveto121asECBendsQElaterthisyear.

• EmergingMarketsreadyfornewbullmarket.

LONG-TERM ISSUES • ACrisisworsethan2008.• Eventualmarketcollapseof50%+inrealterms.

• Ascrambleforhigh-endcollateraltobringaboutderivativescollapse/

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BecauseCrashesoccurwhenthebroadermarketisindeclinewhileahandfulofstocksareholdingthingsup.ItiswhenthosehandfulofstocksturnandinvestorspanicthattheCrashoccurs.TakealookattheTechCrash.InthebuilduptotheTechCrash,TechStocksweretheonlythingholdingthemarketup.Multipleindexes/sectorswerealreadyinafree-fall.Transportspeakedinearly1999andhadalreadycollapsedforeshadowingwhatwascomingtoTechinearly2000.

ThesameistruefortheBanks,whichpeakedinearly1999andwereinafree-fallwellbeforetheNASDAQpeaked.

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ValuestockswerealsowellontheirwaytonewlowswhileTechwasstillrallying.

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AllthreeofthosesectorswereintotalcollapsemonthsbeforetheTechBubbleimploded.Therewerecountlesswarningsthatthemarketswereinserioustroublein1999-2000.AndonceTechstocksfinallyturned,theylost70%oftheirvalueoverthenexttwoyears.Now,IamNOTclaimingthatwe’regoingtoseeasimilar70%collapseinthemarketstoday.ButasInotedlastmonth,the1999-2000periodservesasagoodtemplateforunderstandingwhat’shappeninginthemarketsrightnow.Then,asnow,wehavethefollowingitemsinplay:

1) Stocksareinaclearbubble.

2) Thebubbleisbeingdrivenbya“narrative”(inthiscasetheTrumpeconomicagenda).

3) RetailorMomandPopinvestorshavecomeintothemarket.Andwhilethenarrativefortoday’sbubblediffersfromthatof1999(in1999itwastheInternetcraze,todayit’stheTrumpeconomicagendacraze),it’scriticaltonotethatfromamarketdynamicperspective,we’reseeingthesamemovements,namely…Techisrallyingwhileeverythingelseisindecline.ConsiderthatwhileTechstockscontinuetomarkethigherandhigher…Thebanksarealready10%offtheirrecenthighs.

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Transportsarenearly5%offtheirrecenthighs.

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Andsmallcapsare4%offtheirrecenthighs(andhavegonenowheresinceearlyDec.’16).

Mindyou,we’relookingatentireindexeshere.Let’slookatsomeindividualplays.CNBChasbeentalkingaboutGoldmanSachs(GS)asthebestfinance-relatedinvestmentformonths.It’sdownnearly14%sincelateFebruary.

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GeneralElectric(GE)isTHEindustrialbell-weatherfortheUSeconomy.It’sdownsome14%sinceearlyDecember.

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ExxonMobil(XOM),whichIpreviouslybelievedwassettorally,hasrolledoverandisnowdown11%fromitsearlyDecemberhighs.

Evenworseforstockbulls,the“growth”playsthatexplodedhigherontheTrumpelectionwinhavealreadyunwoundtheirentiremoves.

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USSteel(X):

FreeportMcMoRan(FCX)

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ThesearemajorwarningstousthattheTrumpTradeisover.Notjustover…butDEAD.Howdead?BondshaveactuallyoutperformedstockssincetheendofFebruary.Thatisnotatypo.Infact,thelong-TreasurybondETFhasnearlyDOUBLEDtheS&P500’sperformanceoverthattimeperiod.

Now,ifyoulistenedtothefinancialmedia(agreatgaugeofsentiment)you’dthinkthatthestockmarketwasinaroaringbullmarket.It’snot.Mostoftheimportantsectorsareinfull-blowncorrections.TheonlythingholdingthismarketupisaTechBubble.Andrestassured,itISaBubbleasthefollowingpointsreveal:

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1) ProfessionalfundmanagersaremoreheavilyinvestedinTechstocksthanatanytimeinhistory.

2) Apple’sstockisup80%whenitsoperatingprofitsareDOWNfrom2015andsalesinits

mostpopularproduct(theiPhone)aredeclining.

3) AmazonisworthtwotimesasmuchasWal-Mart…andgenerateslessthan30%ofWal-Mart’srevenuesandlessthan20%asitsincome.

Andmypersonalfavorite:

4) ThecombinedmarketcapofAppleandGoogleislargerthanthecombinedmarketcapsofeverypublicallytradedEUandJapanesefinancialontheplanet(H/TTeddyVallee).

Thereisnowaytolookasthiswithoutseeingamaniaisinplace.Investorsareliterally“allin”onTechasBloombergnotedyesterday.

FundstrackedbyBankofAmericaCorp.ownthehighestpercentageoftechnologystocksonrecordcomparedtotheirbenchmark.It’sasectorthat’scarriedU.S.stockstonewhighs,leadingtheS&P500Indexwithanearly20percentgainin2017.Andit’sgivingactivemanagersaboosttheyhaven’tseeninmorethantwoyears…Rarelyonestoshuntheherd,activefundsarenow71percentoverweightintheFANGcompaniesaftermakingthebiggestmovefromvaluetogrowthsince2008,accordingtoBankofAmerica.https://www.bloomberg.com/news/articles/2017-05-30/active-managers-go-all-in-on-technology-giants-as-returns-soar

Atsomepoint,thesestockswillturn.Whentheydo,we’regoingtoseeaserious“runfortheexits.”Thattimemightbestartingnow.AsIwritethis,Facebook(FB)isputtinginadoubletop.

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Amazon(AMZN)hitthepsychologicallyimportantlevelof$1,000andisnowrollingover.Ibelievethiswasafalsebreakoutandwe’regoingto$850bytheendofAugust.

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ThesameistrueforApple(AAPL).Thislooksandfeelslikeafalsebullishbreakout.Whenthesellingstarts,we’regoingbelow$120inshortorder.

Alphabet(GOOGL),alsolikeAmazon,spikedtothepsychologicallyimportantlevelof$1000.It’snowrollingover.Whenthesellinghits,we’regoingto$860.

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Andfinally,Microsoft(MSFT)hashitthepsychologicallyimportantlevelof$70pershare.Whenthesellinghits,we’regoingto$55.

WeareaddingFacebookandAlphabettoourSHORTportfolio.KEEPALLOFTHESEPOSITIONSSMALL.THESEAREESSENTIALLY“CRASH”TRADESWEAREUSINGASMARKETHEDGES.DONOTPUTALOTOFCAPITALATRISKHEREActiontoTake:SHORTFacebook(FB)ActiontoTake:SHORTAlphabet(GOOGL)IntermsofhowaTechsell-offwillimpactthebroadermarket,theS&P500hasagigantic“airpocket”downto2,300.Andthat’snotevenrealsupport.Thefirstreallineofrealsupportis2,275.Andcriticalsupportdoesn’tcomeuntil2,200.

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Thoselevelsrepresentdropsof5%or9%,respectively.Ibelievewe’llseethelatterbeforethesmokeclears.

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ThecatalystforthiswillbethemarketsrealizingthatTrump’seconomicreformsaren’tgoingtogetthroughCongressthisyear.

U.S.SenateMajorityLeaderMitchMcConnellsaidonWednesdayhedoesnotyetknowhowRepublicanswillamassthevotesneededtopasslegislationnowbeingcraftedtodismantleObamacare,butexpressedsomeoptimismonanothertoppriority,overhaulingthetaxcode…InanexclusiveinterviewwithReuters,McConnellsaidhealthcareandtaxesstilltoptheRepublicanlegislativeagenda,andheaddedthathewillnotreachouttotheminorityDemocratsoneitheronebecausedifferencesbetweenthetwopartiesaretoostark.…McConnellsaid,"Idon'tknowhowwegetto50(votes)atthemoment.Butthat'sthegoal.Andexactlywhatthecompositionofthat(bill)isI'mnotgoingtospeculateaboutbecauseitservesnopurpose,"McConnellsaid.

http://www.reuters.com/article/us-usa-congress-mcconnell-exclusive-idUSKBN18K2FD

TheRepublicanshave52membersofoutof100intheSenate….andMitchMcConnelldoesn’tevenknowhowhecanget50votesonanObamacarerepeal.AndanObamacarerepealisarelativelyeasybillcomparedtoTaxReformoranInfrastructureplan!TheTrumpeconomicagendaisdonefornow.Reformispossible,butit’sgoingtotakeaLOTlongerthanthemarketsthink.Elsewhereinthemarkets,theGoldMinerstoGoldratiohasgottenclosetoourbuytarget(thebluecircle)butwe’restillnotthereyet.Ithinkwe’llfinallyhititwithinthenextweekorso.

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Whenwedoit’s“backupthetruck”timeforGoldMiners.ThesameistruefortheSilverMinerstoSilverratio.We’vemadeprogresshere,butwe’renotyetatourtarget.WeshouldbebythemiddleofJune.

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Whenthathappens,we’llmemovingseriouscapitalintothepreciousmetalsminingsector.Thisconcludesthismonth’sissueofPrivateWealthAdvisory.ThemarketshavealreadybeguncollapsingwiththeexceptionofjustahandfulofTechstocks.However,eventhoseplaysarenowturningdownwards.AndIfullyexpectwe’regoingtoseeastampedefortheexitswithinthenexttwoweeks.We’repositionedforthis.AndI’vegotalistof“buys”thatwe’llbemakingassoonasthemarketbringsthemintoour“buyrange.”I’mwatchingthemarketscloselyandwillissueupdatesasneeded.Barringanynewdevelopments,you’llnexthearfrommenextWednesdayinourusualweeklymarketupdate.Untilthen…

GrahamSummersChiefMarketStrategistPhoenixCapitalResearch

BestRegards,

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OPEN POSITIONS

STOCKS PORTFOLIO

Pricesasof5/31/17at1:30PMReturnsincludedividends

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

NuveenMuni.Fund NVG 1/2/14 $13.12 $15.08 38% EmergingMarketBonds EMB 11/21/16 $109.82 $115.49 7% LongUSTreasuries TLT 11/21/16 $121.05 $124.44 4%

BONDS PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT PRICE

GAIN/ LOSS

RPXCorp RPXC 8/5/15 $15.48 $13.20 -15% AgriculturalCommoditiesETF RJA 1/12/17 $6.46 $6.20

-4%

ChinaETF ASHR 2/1/17 $24.98 $25.74 3%

PublicStorage PSA 3/23/17 $225.92 $214.99 -5%

ClearEnergyETF PBW 4/19/17 $4.06 $4.11 1%

BiotechETF IBB 4/26/17 $296.15 $284.42 -4%

Verizon VZ 4/26/17 $47.17 $46.53 -1%

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Pricesasof5/31/17at1:30PMReturnsincludedividends*Averagepriceof$17.50and$14.97**Averagepriceof$22.83and$22.07***Averagepriceof$37.52and$31.92

PRECIOUS METALS/ MINERS PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

Gold 3/17/10 $1,120 $1,275.00 14% Silver* 3/17/10 $16.23 $17.39 7%

GoldMinersETF** GDX 10/5/16 $22.45 $22.88 2% GoldMiningJuniorsETF*** GDXJ 10/5/16 $34.72 $31.72

-4%

WheatonPreciousMetalsCorp WPM 10/5/16 $22.59 $20.63

-8%

NewGold NGD 10/5/16 $3.88 $2.91 -25%

BarrickGold ABX 4/26/17 $16.92 $16.68 -1%

SilverMiningETF SIL 4/26/17 $34.44 $35.25 2%

SilverStandard SSRI 4/26/17 $9.94 $9.55 -4%

FirstMajesticSilver AG 5/12/17 $8.70 $8.43 -3% RandgoldResources GOLD 5/12/17 $93.25 $95.66 3%

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POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT

PRICE

GAIN/ LOSS

EuroTrust FXE 10/5/16 $108.80 $108.74 0%

CASH/ CURRENCIES PORTFOLIO

Pricesasof5/31/17at1:30PMReturnsincludedividends

SPECIAL SITUATIONS/HEDGES/SHORTS PORTFOLIO

POSITION SYMBOL BUY DATE

BUY PRICE

CURRENT PRICE

GAIN/ LOSS

FranceETF(SHORT) EWQ 9/16/16 $23.38 $29.41 -26% ItalyETF(SHORT) EWI 9/16/16 $21.56 $27.88 -29% Russell2000ETF(SHORT) IWM 12/14/16 $135.37 $135.91 0% Apple(SHORT) AAPL 3/23/17 $140.92 $152.98 -9% EnergyETF(SHORT) XLE 5/24/17 $67.63 $65.41 3% Facebook(SHORT) FB 5/31/17 $151.63 NEW SHORT Alphabet(SHORT) GOOGL 5/31/17 $987.72 NEW SHORT

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RECENTLY CLOSED POSITIONS

POSITION SYMBOL BUYDATE

BUYPRICE

SELLDATE

SELLPRICE

GAIN/ LOSS

AmericanEagleOutfitters(SHORT) AEO 5/26/16 $15.36 1/31/17 $14.59 5%CliffsNatResources(FIRSTHALF) CLF 2/8/17 $10.15 2/13/17 $12.10 19%

Ambev ABEV 11/25/16 $4.96 2/23/17 $5.93 21%Cemex CX 11/25/16 $8.07 2/23/17 $8.69 8%CliffsNatResources(SECONDHALF) CLF 2/8/17 $10.15 2/23/17 $11.13 10%

Exxon XOM 9/24/14 $95.82 3/8/17 $81.28 -8% EnterpriseProductsPartners EPD 11/31/16 $25.93 3/8/17 $27.83

9%

NaturalGasETF UNG 2/22/17 $6.57 3/8/17 $7.11 8%

EmergingmarketsETF EEM 1/12/17 $36.60 4/10/17 $39.207%

BarrickGold ABX 10/5/16 $15.54 4/10/17 $19.04 23%

UraniumETF URA 6/8/16 $15.49 4/12/17 $15.90 9% Cameco CCJ 1/4/17 $10.69 4/12/17 $11.48 7% CoalETF KOL 1/4/17 $12.59 4/12/17 $14.51 15% SilverStandardResources SSRI 10/5/16 $10.30 4/12/17 $11.32

10%

RoyalGold RGLD 2/8/17 $71.50 4/12/17 $74.14 4%

SilverMiners SIL 3/15/17 $35.81 4/12/17 $37.60 5%

USSteel(SHORT) X 2/1/17 $31.97 4/13/17 $29.42 8% CopperMinersETF(SHORT) COPX 3/23/17 $22.64 4/18/17 $21.02 7%

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RECENTLY CLOSED POSITIONS CONTINUED

POSITION SYMBOL BUYDATE

BUYPRICE

SELLDATE

SELLPRICE

GAIN/ LOSS

PeruETF EPU 12/7/16 $33.23 5/17/17 $34.775%

BrazilETF EWZ 2/8/17 $37.53 5/17/17 $39.90 6%UtilitiesETF XLU 2/8/17 $49.35 5/17/17 $51.58 5%SolarEnergyETF TAN 4/19/17 $17.20 5/17/17 $18.00 5%RoyalGold RGLD 4/26/17 $69.92 5/17/17 $79.90 14% SouthwesternEnergy SWN 3/30/17 $8.15 5/24/17 $6.76 -17% GulfportEnergy GPOR 3/30/17 $17.17 5/24/17 $15.47 -10% USOilFund USO 4/26/17 $10.37 5/24/17 $10.60 2% ExxonMobil XOM 5/3/17 $82.70 5/24/17 $82.29 0%