Why the Bull Market Is Likely to Continue
Sjug's 'Melt Up' thesis is breaking into the mainstream... The market is undeniably 'frothy'... Why the bull market is likely to continue... Introducing our first-ever bitcoin event...
If you had told us even a few months ago, we wouldn't have believed it...
Earlier this year, True Wealth editor Steve Sjuggerud shared some big news with his readers.
The moment he had been waiting years for had finally arrived. The final phase of the bull market – what he called the "Melt Up" – was starting. As he wrote in a special report titled "The True Wealth Investing Script for 2017"...
The "Melt Up" is here. This is great news. You see, the biggest gains in stocks often happen during the final stage of a bull market... what I call the Melt Up.
And it has taken FOREVER for it to get here... Stocks have gone up for seven straight years... one of the longest runs in history.
And after seven years, you might think that the big gains are behind us. You might think that you missed out. But that's not the case. The Melt Up is finally here. And that means the biggest gains are still to come.
This was anything but a popular idea at the time...
Many analysts were questioning how much longer the bull market could run, but not even the most bullish investors suggested the biggest gains could be yet to come.
In fact, many of Steve's own subscribers – who had profited from his advice for years – told us they didn't believe a Melt Up was even possible.
But that is suddenly changing...
Steve's Melt Up call is now breaking into the mainstream.
Several notable investors have highlighted his research in recent months. And as you can see in the graphic below – courtesy of our friend Jason Goepfert of SentimenTrader – his Melt Up terminology suddenly appeared all over the financial media last week...
What should we make of this?
As one astute subscriber notes in the mailbag below, these headlines – along with some short-term indicators we mentioned earlier this week – suggest the market is getting a little too "frothy." A sharp correction wouldn't be unexpected here.
But we suspect the Melt Up isn't finished just yet... As we've discussed, Steve's research shows the market's "vital signs" remain healthy. And while short-term measures of investor sentiment are at bullish extremes today, we still haven't seen the widespread euphoria that often accompanies the end of a Melt Up.
In short, as Steve puts it, this still doesn't "feel" like a top.
Steve's latest contrarian call has nothing to do with stocks...
Instead, he believes one of the most-hated assets on the planet today – the U.S. dollar – could be starting a significant rally. As he explained in our free DailyWealth e-letter on Monday...
"The dollar jumped to more than two-month highs against the yen and seven-week highs against the euro on Friday," Reuters news service reported on Thursday.
Nobody's been talking about it. But I think we're seeing a potentially major tidal shift for the U.S. dollar that will take us through the rest of this year, at least.
Since January, the U.S. dollar had been in a downtrend. People got used to it. Nobody cared.
But over the last month, a tidal change has happened... The dollar stopped its plunge... and started going up.
As Steve pointed out, this doesn't change his big-picture stance on the dollar. He still expects it will be a lousy performer over the long term. But he believes it could have significant short-term upside... so much so that he even recommended a bullish dollar trade to his True Wealth subscribers recently...
The chart here shows it clearly...
The U.S. Dollar Index had been falling since January. But then, about a month ago, it reversed course. Take a look:
Why is the dollar moving higher?
As Steve noted, the "experts" will give you all kinds of reasons. But the real reason is simple: Traders had gotten far too bearish on the dollar. By September, everyone who wanted to sell the dollar had already sold. More from Steve...
I don't trade currencies very often in my True Wealth newsletter. But I did this time. The situation in the dollar was becoming too extreme NOT to trade it.
So how do you bet on a rising U.S. dollar? The simplest way, believe it or not, is to bet on a falling euro.
In September, when the dollar reached a hated extreme, the euro reached a point where it was more "loved" than it had been in a decade.
You can view sentiment extremes like this by looking at the Commitment of Traders (COT) report. The COT report tells us what futures traders are doing with real money. And it's one of our favorite contrarian tools...
When futures traders all bet on the same outcome, they tend to get it wrong. So if they're all bearish... or if they're all piling into a trade... I like to do the opposite. And futures traders LOVE the euro today.
Take a look to see what I mean:
As Steve noted, the last two times traders were this bullish on the euro – and therefore, bearish on the dollar – were in 2011 and 2013. And in those cases, the euro plunged by 17% and 21%, respectively, over the next year and a half.
Those are dramatic moves for a currency... And he believes a similar – or even bigger – move is likely this time. But Steve showed readers how to earn even bigger returns from this trade...
So how can you get into this trade – with even more potential upside? Through the ProShares UltraShort Euro Fund (EUO). EUO is a "double inverse" fund. For every 1% daily fall in the euro, EUO goes up by 2%, and vice versa.
As you might guess, EUO delivered outstanding returns after 2011 and 2013 – the last two times euro speculators were this optimistic. The fund earned 32% and 53%, respectively, over the next year and a half. Those are incredible gains in a currency.
The dollar and the euro are in a unique situation right now. I think the simplest way to take advantage of this opportunity for big returns is through EUO.
Introducing our first-ever bitcoin event...
If you've been with us for long, you likely know we've never recommended bitcoin or any other so-called "cryptocurrency." The reason is simple...
Many of our analysts have been highly skeptical of "cryptos." And even those of us who have been optimistic about the technology have had serious concerns about the risks to investors.
As Porter often writes in the Friday Digest, our goal at Stansberry Research is to give you the information we would want if our roles were reversed. Unlike some of our competitors in the financial publishing industry, this means we won't recommend anything we wouldn't feel comfortable recommending to friends and family, or putting in our own portfolios.
Cryptocurrencies simply didn't meet this standard.
However, that could be changing...
In recent months, the industry has seen some critical developments take place. And several of our analysts – including Porter himself – are taking a second look at the investment case.
To be clear, we remain cautious... We still believe there are substantial risks associated with investing in cryptocurrencies. You could lose every penny you put into them. But we can't deny the substantial upside potential.
In short, we believe it's time for every investor to learn more about these digital assets. And next week, we'll be holding our first-ever live cryptocurrency event to help you do just that...
On Wednesday, October 18, at 8 p.m. Eastern time, Porter will sit down with two of the most successful cryptocurrency experts in the world to explain the most important things you need to know now... and answer any questions you might have.
We'll share more about our thoughts on cryptocurrencies in tomorrow's Digest. In the meantime, you can learn more about next week's event right here.
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New 52-week highs (as of 10/10/17): AbbVie (ABBV), AMETEK (AME), American Express (AXP), Allianz (AZSEY), Boeing (BA), Alibaba (BABA), Baidu (BIDU), Biogen (BIIB), Bristol-Myers Squibb (BMY), Berkshire Hathaway (BRK-B), CBRE Group (CBG), WisdomTree U.S. SmallCap Dividend Fund (DES), iShares Select Dividend Fund (DVY), WisdomTree Japan Hedged Equity Fund (DXJ), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), Euronet Worldwide (EEFT), Eaton Vance Enhanced Equity Income Fund (EOI), iShares MSCI Japan Fund (EWJ), Barclays ETN+ FI Enhanced Europe 50 Fund (FEEU), ETFMG Prime Mobile Payments Fund (IPAY), Lockheed Martin (LMT), iShares MSCI China Index Fund (MCHI), Nvidia (NVDA), PNC Financial Warrants (PNC-WT), ProShares Ultra Financials Fund (UYG), and Invesco High Income Trust II (VLT).
In the mailbag, two readers write in about the Melt Up. Have you seen Steve's thesis go mainstream? Send us your findings at feedback@stansberryresearch.com.
"It looks like Sjug's 'Melt Up' term has made its way into the mainstream media! Impressive to say the least. Great job on both the recommendation (my China portfolio up 46%, Melt-Up portfolio 24%) as well as leading the marketplace. When I read the original thesis, every piece of it rang true. This is also the first time I have ever taken a complete model portfolio as is and invested in it. A bit scary originally as the portfolio dipped there in the beginning. I will say, a lesson I took from that was to have more patience. It's easy to get caught up in buying on the recommendation. But, I continue learning that patience, plus chart analysis, leads to much better entry points quite often.
"Anyway, great service! My portfolio and I both really appreciate the information you guys offer." – Paid-up subscriber Bill Kadlec
"Hat's off to Steve Sjuggerud for getting out in front of this 'Melt Up.' Almost daily now, I'm hearing the exact same term to describe the market from others. Just this week Randall Forsyth used it in Barron's and today Ed Yardeni is forecasting a 'Melt Up' according to CNBC. Of course, with the move the market has had, and consensus building around the 'Melt Up,' it's probably time for a garden variety correction. I'll use it to cover my shorts, which are profitable overall even today with the market at all-time highs. Then I'll be positioned to ride the continued 'Melt Up.' Thanks Steve!" – Paid-up subscriber John R.
Regards,
Justin Brill
Baltimore, Maryland
October 11, 2017