In the news, U.S. and Chinese officials are “close to finalizing” some parts of a trade agreement after high-level telephone discussions on Friday, the U.S. Trade Representative’s office and China’s Commerce Ministry said.

This seems to bode well for the stock market, with prices already creeping up to test the prior highs.

So will we see new highs? And how bullish are these new highs?

Unless there is a drastic turn of events, I am pretty confident we will see new highs.

However, the question of how sustainable these new highs are are more difficult to answer.

For example, there are other factors to consider, such as whether both sides stick to the agreement and the trade war does not escalate again.

There is also the Trump impeachment which is going on.

And there is also the softening of the US economy, which will also affect markets negatively.

So it is a matter of balancing the positive and negative catalysts, and deciding which are more important in the short-run and long-run.

Unfortunately, I am not seeing many long-term positive catalysts.

After more than 10 years of patient waiting and accumulating my cash reserves, I am finally seeing some possible signs of the start of a market correction.

If you have been watching my videos, you will know that my ultimate investing strategy is to wait for a big crash before going all-in to scoop up cheap stocks for the long-term.

Many people have been asking me if the crash is over, but since there is no consensus, things could go either way at this time.

 

General Market Trend:

This chart here shows the worst case scenario for the S&P 500 (weekly chart), and if the market really does go all the way down, then it will trigger the entry prices for many of my entry prices for the stocks which I intend to buy.

However, as prices are unpredictable, I plan to scale in and buy in bits and pieces, adding to the positions which I already have.

 

Let’s take a look at some of the potential drivers for 2019.

Bullish factors:

  • US policies to boost economy ahead of elections
  • Tech advancements to improve productivity
  • Brexit cancelled?

Bearish factors:

  • Interest rates increasing and more hikes to come
  • Trade war with China
  • Nuclear threat of North Korea
  • Brexit woes
  • Falling U.S. corporate profit margins
  • Record high U.S. corporate debt
  • Illiquidity in the U.S. corporate bond market
  • Extreme, costly climate events
  • A eurozone crisis
  • Europe needs negative interest rates to fight recession
  • Loss of jobs due to tech advancements and automation
  • High inflation in emerging markets

 

My preferred sector is the tech sector, especially after my 1-month trip to Silicon Valley last year.

 

Why Focus on the Tech Sector?

  • As more jobs get automated, the surplus gains will go to the big tech companies
  • Tech companies will expand by buying up the best of the non-tech companies
  • I read somewhere that in 10 years there will only be 100 companies, and in 50 years there will only be 10 companies
  • I prefer to pick the big ones because they will “eat up” the smaller ones

My Top Picks & Entry Price Levels:

  • Facebook (FB) – Entry price: $80
  • Google (GOOG) – Entry price: $750, $600
  • Amazon (AMZN) – Entry price: $1000, $700
  • Apple (AAPL) – Entry price: $130, $100
  • Microsoft (MFST) – Entry price: $85, $60
  • Netflix (NFLX) – Entry price: $200, $125
  • Tesla (TSLA) – Entry price: $250, $180
  • Baidu (BIDU) – Entry price: $130, $90
  • Alibaba (BABA) – Entry price: $110, $85
  • Tencent (700) – Entry price: $220, $170

Do note that these are the “worst-case” scenario prices, and it is quite likely that prices may never reach there, so I plan to accumulate along the way and add to my portfolio.

 

Other notable potential IPOs in 2019:

  • Slack
  • Palantir
  • Stripe
  • Airbnb
  • Lyft
  • Uber
  • Didi Chuxing
  • Toutiao

 

I am pretty confident the next wave of financial and economic gains will go mainly into the tech sector, with the focus on applications of AI, machine learning, data science into every aspect of our lives. The biggest winners will be those who own the algorithms.

That said, there will also be risks, such as increased regulation or anti-monopolistic backlash, which could negatively affect the stocks.

Good luck, and get ready to buy and hold for the next 10 years! 😀

 

If you’ve been reading the news, you will know the US stock market is at an all-time high, and quite possibly one of the longest bull runs in history. According to Zerohedge, this is the longest bull run since the great pyramid boom of 2580 B.C.

Article: https://www.zerohedge.com/news/2018-08-22/longest-bull-market-great-pyramid-boom-2580-bc

Also, the US economy seems to be doing pretty well, especially with the booming tech sector, and even the banks are hitting record profits.

Article: https://www.zerohedge.com/news/2018-08-23/us-bank-profits-hit-record-60-billion-q2

But I think the big question on everyone’s mind is this:

 

Is this a Good Time to buy Now?

If you believe that markets follow the boom and bust cycle, such as the 10-year cycle, you will know that we are “overdue” for a big correction. Logic dictates that we aim to buy after a big crash to get the best value (and most potential upside), hence buying at the all-time highs might not seem like a good idea to many people.

 

If you look at the current chart of the S&P 500, you will see that the price is just testing the prior highs, which means that it is at a very critical point.

If prices get rejected at this level, it could end up forming a double top reversal pattern, which is very bearish and could see a decline to the 2280 levels.

For the strong uptrend to continue, prices need to confidently break above the prior highs and stay above that level.

 

What Could Go Wrong?

With escalating political tensions with many countries, and the trade war with China, a confluence of negative factors could adversely affect the fundamentals of the US economy.

Article: https://www.zerohedge.com/news/2018-08-23/trade-war-escalates-us-china-slap-each-other-fresh-16-bn-tariffs

With the risks in mind, I will not be aggressively accumulating positions at this time, and will have to focus more selectively on key sectors.

 

Since the crash of 2008, and the recovery which started in 2009, the stock markets (especially the US markets), have been on a steady uptrend.

Chart: S&P 500 index (weekly chart)

Many of us have heard about the 10 year cycle, where the market is supposed to crash once every 10 years, for example the Asian markets during the 1997 currency crisis, and the global markets in 2007 during the subprime crisis.

However, in 2017, we did not see any significant crash or correction, which have led many analysts to rethink the theory.

So, in 2019-2020, should we be expecting a delayed crash, or are we experiencing a structural change in the markets?

If we observe the supercycles of major human technological innovations, we see that each major wave of progress is driven by a major technological innovation, such as the steam engine in the 1700’s or the internet and IT advancements in the 1900’s.

And based on the cycles, we could be in the early stages of the 6th wave, which is going to be driven by the upcoming huge advancements in applications of big data, artificial intelligence, virtual reality, augmented reality, internet of things, and blockchain technology.

Source: The Market Oracle

This means that we could be on the cusp of a super bull market, if these technological advancements are able to create a quantum leap in productivity for businesses and a huge jump in the standards of living across the globe. All these would translate into stronger stock prices, which instead of crashing the market, would propel it to new heights.

However, there are also major concerns:

  • Unequal gains across companies: the major tech companies may soon dominate all industries via the application of new technologies.
  • High unemployment: If machines take all the jobs, what are humans going to do?
  • High debt and leverage of US and European economies
  • Political risks: clash of superpowers (US and China)

In summary, many retail investors are wary of entering the stock market now because it is at all time highs and has already “gone up a lot” since 2009, hence they are waiting for a “big crash” before going in.

However, this big crash may not come if successful widespread application of new technologies and innovation are able to drive a quantum leap in productivity.