The 'Melt Up' Is Heating Up

The 'Melt Up' is heating up... You don't want to be on the sidelines... Tech stocks are crushing the Dow... Nasdaq 15,000 this year?... Two contrarian bullish indicators... Bitcoin $10,000 now... What's happening with cryptos...

The 'Melt Up' is picking up speed...

That's what True Wealth Systems editor Dr. Steve Sjuggerud told more than 21,000 viewers during last night's special Melt Up event.

Regular Digest readers know all about Steve's thesis... that he believes we'll see one last euphoric rise in stocks – a Melt Up – before the next major market top.

As Steve said last night, we're not there yet... but we're getting closer every day.

Stocks have gradually been making new highs for a long time – and Steve believes 2020 could be the best year for stocks in a decade, maybe longer.

You'll know we're in "mania" territory when your barber... your mother-in-law... your Uber driver... or anyone else who you don't normally talk stocks with... starts asking you about the market or telling stories about an unbelievable gain in a single position.

Until then, Steve says you want to be part of the final run-up to the next top... It might be the last great wealth-building opportunity for many individual investors – and it hasn't happened yet.

Now, for those who don't know, Steve is a pretty laid-back guy...

So when he gets behind something and talks like this, we pay particularly close attention...

And we haven't seen him this worked up about a prediction in quite a while.

As Steve said during last night's event...

I don't normally say stuff like this, but if you've ever had that fantasy where you make enough money to retire in a beautiful beachfront mansion years before you thought it would be possible, this is probably the only real chance you'll get in the next few decades to make that fantasy a reality.

And...

I can tell you without losing a minute of sleep at night that this is not a time in history to be sitting on the sidelines.

And...

This is truly a unique moment in time. For a lot of people, it's also a very scary time too. Because after this Melt Up takes place, we could be looking at very low stock market returns for many, many years ahead.

Steve has nailed every twist and turn of this current bull market. (Viewers saw a great chart documenting his calls beginning in 2012.) And last night, he went on to detail exactly why he has such conviction that the major U.S. indexes will continue to march higher... what you should do now to take advantage... and how you'll know the right time to "get out" with huge profits in hand.

If you skipped the big event, you're in luck... We've put together a replay with everything you missed. Click here to get started.

We don't want to give away too many details, but tech stocks were a big part of Steve's discussion...

The tech-heavy Nasdaq Composite Index is inching closer to a milestone level – 10,000. In fact, Steve said last night that he believes the index could even hit 15,000 this year.

And major tech stocks like Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN) – which combine to make up an astounding 25% of the Nasdaq – are leading the way higher at a significant market-beating pace.

In his free DailyWealth e-letter yesterday morning, Steve noted that the same thing happened during the previous Melt Up in stocks back in 1999. As he explained...

The following chart shows this well. It compares the overall stock market – the Dow Jones Industrial Average – with the tech-heavy Nasdaq during the last 12 months of the bull market...

Tech stocks tracked in line with the overall market for most of 1999. Then, they took off – soaring more than 100% in less than six months.

Today, the same chart looks very similar. As Steve continued in yesterday's DailyWealth...

No one's been paying attention. But tech stocks have been crushing the boring Dow Jones Industrial Average over the last year. Take a look...

... This, my friend, is the definitive signal of the Melt Up. The tech boom of the 1990s started with a general market rally... But it wasn't until the Nasdaq started outperforming that things really heated up.

That's happening right now. And it tells me the Melt Up is here.

Others around our office are seeing more evidence that this bull market has more room to run...

Stansberry NewsWire editor C. Scott Garliss pointed out two important pieces of data to us earlier this week.

As regular Digest readers know, Scott spent 20 years trading for some of the top investment banks in the country before bringing his experience to Stansberry Research.

And as he has shown in recent Digests here and here, he's locked into which factors institutional money managers weigh when making allocation decisions... and more important, how individual investors can best position themselves accordingly.

Both pieces of bullish evidence Scott shared with us are "contrarian" indicators... which we like.

The first is the most recent weekly survey from the American Association of Individual Investors ("AAII"). This is a group of 2 million members who are polled every week about whether they're "bearish," "bullish," or "neutral."

The percentage of those who are bullish increased a little bit last week, but the number (35.2%) still remains well below the historical average... And all three trends remain "well within their typical historical ranges."

In other words, there's nothing out of the ordinary going on. According to Scott, that shows the bull market has more room to run. And it certainly doesn't show the type of euphoria that typically defines the last leg of a "Melt Up"...

The second piece of data Scott noted this week is how automated-traded hedge funds – otherwise known as "algorithmic funds" – are positioned right now. These "algo" funds make up anywhere from 60% to 70% of all market activity today, according to Scott.

In particular, Scott likes to track algorithmic futures funds from the Commodity Trading Advisors ("CTAs")... In the last 10 years, their assets have risen by 36% to roughly $360 billion.

That's a lot of money on its own. But because these funds are likely three to five times leveraged, Scott said their market impact is actually closer to $1.1 trillion to $1.8 trillion.

According to Scott's research, these funds are currently betting on volatility and bonds... and they're underexposed to stocks, at only 40%. In other words, they're betting the market is going to crater...

We won't get into all the details in today's Digest of how these funds are triggered to buy and sell certain assets. (Scott did that in the Stansberry NewsWire right here.) But the salient point is that they're another great contrarian indicator for individual investors.

For instance, the CTAs' automated funds were long in October 2018... just before the market collapsed nearly 20% heading into the end of the year. And they were short as much as they could at the bottom that December... before stocks reversed course again.

Algos are followers, not leaders. As we know from "flash crashes" of the past, the daily volume of algo trading often changes according to volatility and can spark overreactions. As Scott wrote...

These models are built for slow and steady moves in the markets, not for rapid swings. If the market moves up, the CTA models say "buy" and when it moves down, the models say "sell."

When these funds are 100% long on stocks, Scott says that will be his signal to "get out."

Finally, remember bitcoin? Well, it recently hit $10,000 again...

The first successful cryptocurrency once again cracked a major milestone earlier this week. It's an important psychological level (a nice round number and halfway to the 2017 all-time high of roughly $20,000). And it also marks a key technical level...

DailyWealth Trader co-editors Ben Morris and Drew McConnell have been tracking bitcoin over the past few years. And after noting a buying opportunity in bitcoin last month, they're considering a formal recommendation. As they wrote to their subscribers on Monday...

You can see that bitcoin now trades back above its summer 2019 lows, which are also right around its old, November 4 high (the blue line). Bitcoin is breaking out...

Now that bitcoin trades back above its November high, it has formed a "higher high."

That's what the numbers show today.

But we're curious if anything has fundamentally changed in the crypto world...

Or if this is simply still pure speculation.

In search of answers, we checked in with Crypto Capital editor Eric Wade. And he educated on us on what's been going on in the cryptocurrency markets lately...

In short, according to Eric, yes... some big developments in the space are serving as a tailwind for bitcoin. As he explained to us in a private note yesterday afternoon...

I'm on record saying the next two big macro themes to play out will be "Better Products" and then – and only then – we'll see "Mass Adoption." We're moving into that "Better Products" phase now...

During the last two years, the blockchain industry has been hard at work turning the technology into more useful products. And now, in early 2020, we're seeing a rally based upon investors starting to adopt those "better products."

These include products and services that allow bitcoin and crypto holders to earn interest on their investments... "lightning" network transactions that take seconds to complete with virtually no fees... and Internet browsers that strip out advertisements but still allow content producers to get paid for their work.

Plus, bitcoin's next scheduled 'halving' is coming up in May...

Crypto enthusiasts know that these events happen roughly every four years. And in the past, they've boosted bitcoin's market price.

"Halving" was designed by the pseudonymous Satoshi Nakamoto when he or she developed bitcoin and its underlying blockchain code. It's designed as a way to limit inflation.

In short, during a halving, bitcoin miners' rewards for verifying a transaction (adding a block to the blockchain) is cut in half. That creates more demand for the same amount of supply... The maximum number of bitcoin that can ever be created is 21 million (another Nakamoto design).

These halving events are a key talking point for bitcoin bulls. As Eric told us...

Crypto investors are looking at the possibility that bitcoin will be getting more scarce at the exact time that the whole industry is rolling out exciting new products that stand a real chance of attracting more investors.

Even the Federal Reserve is now talking about cryptos...

Lael Brainard, a member of the Fed's board of governors, said earlier this month that the central bank is considering the design and issuance of a government-backed cryptocurrency... People started calling it "Fedcoin."

And this week, Chairman Jerome Powell said during Congressional testimony that the Fed is in the early stages of researching "digital currencies"... Bitcoin supporters took this news as validation.

At the same time, Powell indicated that the U.S. dollar is doing just fine. "Having a single government currency... has served us well," he said. But as he also acknowledged, "It's very much incumbent on us and other central banks to understand the costs and benefits and tradeoffs associated with a possible digital currency."

So, this brings up the big question – should you own bitcoin or any other cryptocurrency?

If you tuned into our 2020 preview event last month, you might remember that our founder Porter Stansberry said, "I think everyone should own some bitcoin." Porter also said that investors should own it before everyone else and their in-laws are able to do so with ease.

But before you go to Coinbase or another crypto exchange and start tossing money into your account, know that we haven't changed our advice about how much of your overall portfolio you should allocate toward bitcoin and other cryptocurrencies like the so-called "altcoins."

Keep it small... and only put in what you think you can afford to lose. And remember, you'll likely have to stomach big price swings along the way... Bitcoin and other cryptos are extremely volatile.

We'll let Eric have the final word on the smart approach to investing in this space...

A lot of investors see that cryptos are having a nice rally and they think they've missed their opportunity to buy. I disagree. The trend is now strongly bullish, but be prepared for volatility...

Successful crypto investors approach this new, exciting asset class with respect for the huge swings and therefore, make sure you only invest a small percent of your portfolio but make sure you DO invest a small percent of your portfolio.

If you're just getting started, invest no more than you would into one very speculative stock.

If you want to hear more of Eric's expert thoughts on bitcoin and other cryptocurrencies... and get instant access to his entire model portfolio (including 10 positions that are up at least 100% right now)... we encourage you to check out his Crypto Capital advisory.

And it's a great time to do just that...

Right now, we're offering a special deal on Crypto Capital. You can get a one-year subscription at 50% off the regular price. It's one of the best offers we'll ever make for Crypto Capital. But this opportunity won't be around forever. Get started right here.

New 52-week highs (as of 2/12/20): AllianceBernstein (AB), AbbVie (ABBV), Amazon (AMZN), Blackstone Mortgage Trust (BXMT), DocuSign (DOCU), Western Asset Emerging Markets Debt Fund (EMD), Alphabet (GOOGL), Hannon Armstrong Sustainable Infrastructure Capital (HASI), Ingersoll Rand (IR), iShares U.S. Aerospace and Defense Fund (ITA), JD.com (JD), Kinder Morgan (KMI), Lonza (LZAGY), Motorola Solutions (MSI), Nvidia (NVDA), New York Times (NYT), Parker-Hannifin (PH), ProShares Ultra Technology Fund (ROM), Sea Limited (SE), SolarEdge Technologies (SEDG), Splunk (SPLK), ProShares Ultra S&P 500 Fund (SSO), TAL Education (TAL), T-Mobile (TMUS), The Trade Desk (TTD), ProShares Ultra Semiconductors Fund (USD), ProShares Ultra Financials Fund (UYG), Vanguard Real Estate Index Fund (VNQ), and Vanguard S&P 500 Fund (VOO).

In today's mailbag, one subscriber shares a "thank you" for Steve. We also received a few questions about a replay of last night's "Melt Up" event... Again, if you're interested, you can watch it right here. As always, you can send your thoughts, comments, and questions to feedback@stansberryresearch.com.

"I jumped in the first day Steve recommended the 'Melt Up Millionaire' portfolio on Oct. 25, 2018. I have been an Alliance Member for years and listen to Steve wholeheartedly because he's always right. So far, I have made over $250,000 on just this portfolio alone. That's not counting all the other portfolios I use in Stansberry. Thank you, Steve." – Stansberry Alliance member Kat

All the best,

Corey McLaughlin
Baltimore, Maryland
February 13, 2020