New Year = New Exchange Opportunities
The nice thing about the exchange is that the fight between bulls and bears is endless. Therefore, there are always good opportunities to earn money. Due to the upward trend, the majority of market participants should be in positive territory for 2017. Only those stock marketers who thought the long equity trend was excessive and were betting on falling prices were likely to have trouble. This way of thinking cannot even be discussed. Statistically speaking, there has never been such a long upward trend for stocks. The seemingly endless trend does not, however, fall from the sky. As long as the key interest rates are excessively low, money will be flushed into the financial markets. An interest rate close to zero percent means nothing other than the money is worth nothing. And as long as this remains the case, the stock trend will continue to be cheered on.
There will certainly be a large number of contraindicators in the coming months that predict a potential crash. This is normal, and the warning words of many stock market gurus will probably also become louder.
Nobody knows exactly when a crash can occur. Therefore, it is not worth questioning the current trend. If stocks go up, they go up, and it's possible that the major stock indices will double again. One should not forget that due to the ridiculously low key interest rates, the normal valuation standard was overridden.
A crash tip:
Special attention should be paid to the Chinese Donate stock market. The industrial sector in China is completely over-indebted. There are extreme distortions due to political influences. The real market economy looks different, and Chinese politicians even tolerate shadow accounting systems. In the long run, of course, that's not a good thing. Should there be a global stock crash, the spark will probably come from China.
A look at the Shanghai Composite shows an underperformer compared to the S & P500. This is not without reason.
AAII survey (dated 10.01.18)
The bullish attitude of market participants confirms the survey data of the AAII (American Association of Individual Investors)
Bullish 48.7% à -11.1%
Neutral 26.3% à + 1.6%
Bearish 25.1% à + 9.5%
The strong proportion of bulls decreased considerably compared to the previous month. That was also necessary because the market was completely over the top. The numbers show that short-term traders have switched from the bull camp directly to the bear camp. Looking at the ratio of bulls to bears (48.7% to 25.1%), the proportion of bulls is still too high. So the stock market is still slightly over the top. The ratio is 1.94 in number. However, the historically normal ratio was only 1.26.
A forecast can be made based on the values: At least for the next month, the prices should only increase slightly. There is no conviction for a strong upward movement because the majority of bulls are already invested. The course rhythm will probably appear slightly "disturbed": 2 days up and then 1.5 days down.
Image: Weekly chart of the S & P500 with the ADL
With the Advance Decline Line (ADL) the difference between the rising and falling shares is calculated. Basically, every movement of the index should be confirmed by the indicator. If there is no confirmation, this means that the majority of the shares are behaving differently.
The S&P index with its 500 shares shows that there can only be one direction: upwards. The course and the Advance Decline Line run from the bottom left to the top right. There are practically no breaks in the year. A regression trend channel is shown in the course of the index. The trend channel mathematically limits the prices. The price has even stepped out of the trend channel since the start of the year and the price is above the top line. It indicates that additional trend dynamics have entered the market.
Trend analysis of the largest Dow Jones companies
Short-term = trend analysis of the past 40 daysMid-term = trend analysis of the past 40 weeksLong-term = trend analysis of the past 40 monthsTrends Name short-term medium-long long-term AppleflatlonglongGeneral ElectricshortshortflatIBMlongflatflatJohnson & JohnsonlonglonglongMongflatflatl<>Table: Dow Jones Mighty
The table above shows the largest companies in Dow Jones Industrial by market capitalization. These companies are extremely important to assess the upside potential of the US stock market. The top table shows the trends at three different time levels.
Three of the companies continue to show a pronounced upward trend, which should continue in the coming months. The six big players of the Dow Jones Industrial give a good indication for the next half year: LONG
Focus on Visa - Buy shares?
Some readers will now ask themselves what is special is on the stock? First of all, we can see that the stock is in a constant upward trend. That is an advantage. Visa is one of the largest credit card providers in the world. The main market is in the United States, and the current stock appreciation is closely linked to the U.S. Presidency. The key word is: tax cuts. Since the beginning of Donald Trump's term in office, the US President has tried to push through his tax plans in the US Congress. He succeeded at the end of 2017. Trump intends to free American businesses and citizens by more than $ 2200 billion. In the future, his desired tax system should only contain three tax rates: 12%, 25% and 35%.
At the same time, Trump wants to bring money out of the country back to the United States. This is not easy, because the money was not always legally earned and taxed. There will probably be exemptions in the future to increase the incentive.
The tax reform is a stroke of luck for all credit card companies. As soon as the citizens are relieved, more money is available for consumption. It is traditionally common in the United States to pay by credit card. Accordingly, the higher the tax relief, the more Visa earns.
Another sales boom is just around the corner. In China there are plans to open the Chinese market to foreign card providers. The volume of established Chinese credit card providers is $ 7,600 billion. Visa wants to cut itself off from this market. China is a huge market, which offers enormous price potential for Visa shares.
Financial Data of VisaYears201420152016201720182019Revenues127021388015082183582010122238 DollarKGV = price-earnings ratio (the lower the better. Average for the DAX = 15)
Figures 2018 and 2019 are estimates. Source: finanzen.net
The Visa share is highly valued. The KGV speaks a clear language. Probably some bargain hunters would rather have a P / E ratio of 18. Hoping that the price will drop in the next few years and that the stock would therefore be cheaper is unrealistic. The company's sales potential is far from being exhausted. On the contrary, with the tax cuts in the United States and access to the Chinese market, sales could double in the next ten years. In line with this, the share price should also be able to double. There will probably be no cheap Visa shares to buy over the next few years.
Image: Weekly chart of Visa shares
Convincing trend movements in Visa shares
The upper chart shows the important price movements of the past years. A total of three striking upward trend channels can be identified. The channels are drawn as regression channels based on the striking lows and highs. The wider a channel, the more emotional and indecisive the market participants were during the period. It is good to see how the market went up in 2015, but overall the strength was lacking. The subsequent second trend channel is narrower and indicates a calming phase. From 2017 there will be a dynamic upward trend channel that shows very little resistance from the bears. Anyone who opposes this trend with short positions should be run over with a higher probability. The logic is simple: if the price cannot fall, it must move up in line with the trend.
For the stock with the stable upward trend, I note a stop loss at $ 94.
Visa share: WKN: A0NC7B or US symbol V
Target price: USD 150.00
Interim target: USD 130.00
Stop loss: USD 94.00
If you want to benefit from the short-term stock recommendation, you can buy the stock directly or work with derivatives. Note that derivatives include leverage and therefore increase the profit and loss potential. In extreme cases, a total loss is even possible.
Stop loss: The stop loss is initially set as an initial stop and has the function of a maximum Loss limitation.
Price target: The price target is the exit point for the forecast market movement.
Interim target: When the intermediate target is reached, the position is in profit. At this point we take a partial profit and we sell 50% of our position. At the same time, the stop loss is adjusted to the personal entry price. This enables us to close our position without loss, even if the market later turns against us.