An official correction is defined as a 10% drop from the peak.

So far, at their lowest points, the Dow has fallen 7.5% and the S&P 6.1% from their peaks. That is not a correction. In fact stock markets have not had a 10% correction since 2011.

Interestingly, last Friday stocks completely shrugged off yet another disastrous jobs report and rallied.

Question is… is the sell-off done and have we bottomed?

Let’s take a look at this weekly chart of the S&P 500:

We can see that last week stocks penetrated the important support level at the 21 EMA (yellow line), but failed to close below it. The S&P has now formed a hammer candle pattern.

In technical analysis, such a “hammer” pattern which forms over support after a drop, is considered a bullish reversal. Previous times that this pattern occurred, stocks bottomed then rallied.

What about the January “bad omen” that the media has been talking about? Take a look at this 4-hour chart:

The “January omen” is that if stocks have a negative month in January, then the rest of the year will be bad for stocks.

January was a down month this year. Therefore, based on this “omen”, we should probably expect a negative year. Right?

Not really. The January omen has NO historical reliability. Besides, the January “omen” is negated when stocks go above the January lows – and stocks did just that on Friday and closed above the critical 1775 level (see above chart).

This is yet another sign that stocks have bottomed.

The smart money is not too worried either…

For the past few weeks JP Morgan has been advising clients to “stay the course and buy the weakness” rather than brace for a bigger 10% correction.

However, there is one thing which has me slightly concerned:

As you can see, the Japanese yen still remains in a minor uptrend. If stocks have bottomed, then we need to see the yen falling – at least below its 21 EMA (yellow line).

If the Japanese yen continues to surge higher (above red line) then this will be very bad for stocks and we shall see more selling pressure coming through.

Meanwhile, traders can wait for a pullback on the S&Ps to the 1775-1780 level to go long, with a hard stop either below the January lows or the February lows at 1737.

Good investing.

Transcript of Interview between Alessio Rastani and Elaine Stenson of Dukascopy Swiss Forex TV

Markets still remain very strong and bullish – so short sellers need to exercise great care. In fact – most of the best market timers are also bullish on this market.

With the exception of the dow which is the weakest index at the moment, most other stock indexes like S&Ps and Nasdaq are above the 50 MA and a key technical support – the November 2012 to August 2013 Up-Trendline.

However, it seems sentiment towards stocks are changing – so there may be a potential shorting opportunity here for traders:

According to the CFTC, commercial hedgers (these are the “smart money”) are betting heavily against the Nasdaq – with $17.2 billion bets against the Nasdaq.

Historically whenever commercial hedgers have been this negative on stocks, we have seen multi-week (sometime multi-month corrections) follow. For example, smart money was heavily betting against Nasdaq back in may/June of this year, in September 2012, and also in March of 2012 – and each time we saw a significant sell-off in stock prices.

Will it happen again this year?

I don’t think the major factor or worry on the market’s mind is the Shutdown. It is the debt ceiling which is going to cause the most headaches.

We have only 12 days till the debt ceiling decision on October 17th. A standoff on this matter could result in a significant drop in stock prices – similar to what we saw in September 2011 where the market almost 20% (although I am sceptical it will be as bad as the one we had in 2011).

We need to keep an eye on key levels in the markets.

On the futures, If the Dow breaks 15,000 and the S&Ps break 1660 – we could see some significant selling pressure coming through. This may push the Dow to 14,670 and the S&Ps to 1620.

Gold is interesting to watch – because if the situation about the debt ceiling gets out of hand, and an extended delay takes place on a decision, it could benefit gold prices. I don’t think the party will last long for gold, as I suspect that Gold will continue its downward trend once the dust settles and eventually take out the June lows near 1200.

I should add this: if stocks see a major sell-off, let’s say 8 to 10% correction, this will be a buy opportunity, as I expect stocks to continue their upward trend from November onwards. Historically November to March has been a bullish period for stocks consistently.

For more updates on stocks and markets visit LeadingTrader.com

Alessio Rastani appeared on RT (Russia Today) to voice some controversial news. “The market is rigged against you,” Alessio said whilst looking at the camera.

See also: Jail Is Not Enough For Reckless Bankers Says Alessio Rastani on RT

Max Keiser’s views on Warren Buffett and George Osborne on London Real TV.

WARNING: Explicit language used. May offend some viewers.

Also featured in video are Alessio Rastani and Brian Rose.

When it comes to investing in stocks, I’m a little “unusual” in my approach.

Whereas most people search for the “hottest” sectors to invest in, I on the other hand, am on the lookout for the most “hated and unpopular” ones.

Experience has taught me that the most profitable trades are the ones where you have to do the psychologically impossible: i.e. buy when others are scared and sell when others are excited with euphoria.

That is why I am considering buying these “hated” stocks right now…

Currently gold mining stocks are still “dirt-cheap”: they are down nearly 35% since their peak in September of last year.

One of the major reasons why gold stocks have done so badly is due to the strength of the financial banking stocks. Take a look at this chart:

The upward slope of the above chart shows that financial stocks have been outperforming gold stocks in the past six months. Since gold is seen as a hedge or “insurance” against a crisis in the financial or banking sector, it has not been doing so well.

The strong US dollar (which back in January we correctly predicted would rise in the short term) has not helped gold and mining stocks either.

However, as you’ll see from the chart below, the time is getting very close to start “loading up” on the top quality gold mining stocks:

The Gold BUGS index ($HUI) is an index of companies involved in gold mining and provides major exposure to near term movements in gold prices. It is down 35% since September 2012.

Notice that the index is getting very close to breaking above that red downward trend-line. Once that happens, I’m considering to buy more gold stocks. You’ll see that the last time it broke its down trend-line was back in August 2012 which resulted in a rally in the gold stocks.

So which stocks am I focusing on right now that are “dirt-cheap”?

Firstly, I never buy any stock just because it is cheap. I also look at the “quality” of the stock and its underlying company.

One of my favourite mining stocks is a Canada based company called Yamana Gold (AUY). I have often described Yamana as being the “Mercedes Benz” of the gold mining stocks.

Four reasons why I like Yamana is that it is the lowest cash cost per ounce of gold among its competitors (source: GSA), between 2011-2012 it out-performed all its competitors as well as the Gold ETF, it mines in politically stable regions of South America and it still remains undervalued.

In the above chart we can see that Yamana has broken its uptrend line. Therefore I would need to see it go above this line and close above $15 before I consider buying its stock.

Another favourite gold contender of mine is Goldcorp (GG) – see its chart:

Goldcorp is currently “testing” the $33 support region. It has been here three times before: twice in May and July 2012 (see blue arrows above) and once also in May 2010.

If Goldcorp can hold this level and close above $34, I’ll be a buyer in GG. On the other hand if it closes below this support level (below $32), then it is best to wait this one out.

I have also asked ETX Capital to add a few more of my favourite gold (and silver) stocks to its trading platform. I’ll let you know about those stocks when the time comes to make the trade on my alert service.

Good investing.

Alessio Rastani is a stock market trader at www.leadingtrader.com .

However, I thought I should let you know about a very angry letter I received from one of our subscribers. Here’s what she said:

“Alessio. I respect your honesty and the work you do. But I can’t believe you actually said in that interview we should have rescued the banks instead of letting them fail and collapse like Iceland. You clearly support the greedy and criminal banks!”.

I understand that not everyone agrees with me on this, but allow me to explain my point.

In the weeks after September 2011 when my “famous” BBC video went viral on the internet, I received literally hundreds of emails every single day from ordinary people all over the world.

I have lost count of how many there were, but believe it or not I read every single email.

And I want you to know something.

Some of the letters I received shocked me and made me question everything I believed in.

One letter was from Tony, a construction worker in Spain who had four children to feed. He was asking me what to do as he was so scared about losing his job and not being able to take care of his family.

Another letter was from a Celia, a 67 year old woman who told me she had lost everything in the recession except her home. She had only pennies to live on.

Or how about Samuel, a computer technician who was made unemployed after 20 years of loyal service, and now had to support a pregnant wife.

When I read these letters, it truly made me think…

There I was on TV saying how I was looking forward to making money from a recession. And yet these honest, hard working, people can barely make ends meet.

Let me get straight to the point.

It is easy to sit on a comfy armchair and say “let the banks fail” and “we were wrong to bail them out”.

But if you were to consider the consequences of such an action, there is no doubt in my mind that we would have been forced into a global depression lasting decades, worse than that of the 1930s.

OK. If you’re a billionaire like George Soros, Warren Buffett and Peter Schiff, you can survive an economic depression very well. In fact, you’ll probably make even more money in a depression.

But for the ordinary folks like the ones you and I meet every single day it would have been a far different story:

…losing their home, their job, their self-respect, forced to beg for support.

Many people who say “Iceland is the answer!” probably have not sat down for a second to read the true horror stories of the lives of many people in Iceland in 2008.

I urge you to read the first Chapter of John Lanchester’s book “Whoops!” for an example of this real life horror story.

Take the young Icelandic student who was studying at a UK University. In October 2008 she went to a bank to withdraw money to pay her University’s tuition fees. When the bank said she had no money in her account, she worried that she had run out of money. Little did she know that the entire country of Iceland had gone bankrupt!

The student was forced to quit her studies and move back to Iceland, facing a very dark and uncertain future.

How many of you reading this right now would have liked to swap places for that student? Or to find all your life savings evaporate before your eyes!

Sure, the banks who caused this crisis filled their pockets with bailout money. They got away unpunished and that is totally unjust. It makes me angry too.

But I truly believe the only way we could have averted a full blown depression was to rescue the banks and thus the savings and future of millions of hard working people.

The problem is not that we bailed the banks out. The problem is that financial institutions were allowed to become so powerful that they just became “too big to fail” (TBTF).

We still have not solved this problem of TBTF banks – and as long as bullies like Goldman Sachs run the world as they always have, we probably never will.

All the best.

Alessio

Apple…

Yes, my accountant Brian has an insane love affair with the world’s most popular Tech company. Apple is the only product he uses, the only stock he invests in and the only stock he likes trading during the day.

When I reminded him that the Android phone markets like Samsung are not that far behind, he quickly stopped me short.

“So what?” He said while pointing to his iPhone. “Apple is a quality company. There is nothing like it out there! It will stand the test of time. Other stocks won’t.”

I found it hard to disagree with Brian. However, he admitted he was a bit nervous and here’s why…

Yesterday Apple did something it has not done since February 2012. Take a look at this chart:

Apple closed below $500 for the first time in 12 months. Not only that, but it also broke a key support level as shown by the upward trendline (red line). This break of support is a bearish (negative) sign for Apple.

Apple made its highs in September at $700 – on the day the iPhone 5 was introduced. Since then it has been slaughtered. A near 30% drop till today.

So why was Apple getting destroyed?

One of the reasons put forward was that hedge funds were getting hit with margin calls.

The other more plausible reason was that most funds had made their money in Apple (doubling their returns) and could not see any further growth in the stock. So now they wanted to sell.

On Tuesday one analyst cut down his earnings forecast for Apple based on poor sales of the iPhone 5.

Whatever the reasons, the next earnings report for Apple is on January 23rd. A lousy report could send Apple’s shares in to a deeper free-fall.

However, not everyone is worried as this chart shows:

The above chart which measures how many option traders are long and short on Apple, shows option traders are still optimistic – but not excessively optimistic – on the Apple recovery.

For me personally, I think it is worth watching the chart of the Nasdaq (the index of the top 100 tech stocks) for a major warning:

It seems the Nasdaq wants to form a bearish “head and shoulders top” pattern. This is a negative sign for stocks…

Could Apple’s decline be just an early sign of more bad things to come on the Nasdaq and other major stock markets? Only time will tell and January’s Apple results may reveal the answer.

OK, so the world is NOT going to end today (as the doomsday prophecies predicted).

I landed in Washington DC some hours ago and everything is “normal”.

But maybe today and this Christmas is a time to consider something very serious…

A year ago I came across a very moving article by Bonnie Ware, author of the book ‘The Top Five Regrets of the Dying‘.

Bonnie worked with patients with serious medical illnesses for many years, and she got to see people in the last two to twelve weeks of their lives.

From her experience with her patients, she found that in the final days of their lives they shared five common regrets.

As you read this, I’d like you to think of what you could do in your life or do differently to avoid any future regrets about not having lived a happier and fulfilled life.

“When questioned about any regrets they had or anything they would do differently, common themes surfaced again and again. Here are the most common five:

1. I wish I’d had the courage to live a life true to myself, not the life others expected of me.

This was the most common regret of all. When people realise that their life is almost over and look back clearly on it, it is easy to see how many dreams have gone unfulfilled.

Most people had not honoured even a half of their dreams and had to die knowing that it was due to choices they had made, or not made.

It is very important to try and honour at least some of your dreams along the way. From the moment that you lose your health, it is too late. Health brings a freedom very few realise, until they no longer have it.

2. I wish I didn’t work so hard.

This came from every male patient that I nursed. They missed their children’s youth and their partner’s companionship. Women also spoke of this regret. But as most were from an older generation, many of the female patients had not been breadwinners.

All of the men I nursed deeply regretted spending so much of their lives on the treadmill of a work existence.

By simplifying your lifestyle and making conscious choices along the way, it is possible to not need the income that you think you do. And by creating more space in your life, you become happier and more open to new opportunities, ones more suited to your new lifestyle.

3. I wish I’d had the courage to express my feelings.

Many people suppressed their feelings in order to keep peace with others. As a result, they settled for a mediocre existence and never became who they were truly capable of becoming. Many developed illnesses relating to the bitterness and resentment they carried as a result.

We cannot control the reactions of others. However, although people may initially react when you change the way you are by speaking honestly, in the end it raises the relationship to a whole new and healthier level.

Either that or it releases the unhealthy relationship from your life. Either way, you win.

4. I wish I had stayed in touch with my friends.

Often they would not truly realise the full benefits of old friends until their dying weeks and it was not always possible to track them down. Many had become so caught up in their own lives that they had let golden friendships slip by over the years. There were many deep regrets about not giving friendships the time and effort that they deserved. Everyone misses their friends when they are dying.

It is common for anyone in a busy lifestyle to let friendships slip. But when you are faced with your approaching death, the physical details of life fall away. People do want to get their financial affairs in order if possible. But it is not money or status that holds the true importance for them. They want to get things in order more for the benefit of those they love.

Usually though, they are too ill and weary to ever manage this task. It is all comes down to love and relationships in the end.

That is all that remains in the final weeks, love and relationships.

5. I wish that I had let myself be happier.

This is a surprisingly common one. Many did not realise until the end that happiness is a choice.

They had stayed stuck in old patterns and habits. The so-called ‘comfort’ of familiarity overflowed into their emotions, as well as their physical lives. Fear of change had them pretending to others, and to their selves, that they were content. When deep within, they longed to laugh properly and have silliness in their life again.

When you are on your deathbed, what others think of you is a long way from your mind. How wonderful to be able to let go and smile again, long before you are dying.

Life is a choice. It is YOUR life. Choose consciously, choose wisely, choose honestly. Choose happiness.”

Article by Bonnie Ware, author of the book ‘The Top Five Regrets of the Dying’.
http://www.inspirationandchai.com/Regrets-of-the-Dying.html

This article brings up serious questions that I feel should makes us examine our own life.

The poor and innocent children that died in the Connecticut shooting never got a chance to live to be old enough to ask these questions.

I know there will be some people out there who will answer with “smart” clichés like “I don’t have any regrets in my life” or that “regrets are a waste of time”.

Those lines sound nice and smart, but they are wrong. We are human, we make mistakes – and we have to learn from those mistakes.

Having regrets is not something to be ashamed of. It teaches us a lesson.

For me, I can tell you that my biggest regret is that I did not spend more time with my grandparents before they passed away. I loved them both dearly.

The truth is that our biggest regret is NOT our failures, but the moments when we lost our nerve. When we saw an opportunity and we did not take it.

This Christmas, ask yourself what are YOU doing to achieve more togetherness and peace with people that you care about – and to live a more unique and happy life?

Merry Christmas and happy holidays to you!

Alessio Rastani is a stock trader at www.leadingtrader.com

But before I explain what this indicator is, allow me to make this important point:

As you know, I am a trader and I follow the market. I care about the truth – NOT my ego and not other people’s opinions.

I am committed to a relationship of 100% honesty with you.

Some so-called “experts” have an agenda to spread misinformation – such as “doom and gloom” (and believe me they make a LOT of money by selling their doom and gloom garbage).

I, on the other hand, only listen to what the MARKET is telling me. Because we professionals know that the market is always right and human beings are fallible and irrational.

Warren Buffett – the richest share investor in the world – once said that “Forecasts may tell you a great deal about the forecaster but they tell you nothing about the future.”

He is right. Most “experts” want to be proven right and therefore ignore any evidence that is contrary to their belief.

Now back to the contrary indicator…

You may recall a few weeks ago I quoted John D. Rockefeller when he said that the best opportunities are when “blood is running down the streets”.

In other words, when everyone is scared and too afraid to enter the market, that is the best time to buy.

Well here is where it gets interesting…

According to research by SentimenTrader, a website dedicated to measuring market sentiment, Barron’s weekly financial magazine sent out a survey asking fund managers’ expectations on stock markets.

And the Big Money (i.e. the fund managers) responded with a very bearish (negative) outlook.

I know what you’re probably thinking. Can Big Money be a contrary indicator? The answer is yes, but only when they shift too far in one direction.

Take a look at this chart (below). It shows what the stock market did between 1998 and now after every time Big Money got too pessimistic on stocks:

Chart Courtest of http://www.sentimentrader.com

As you see, the stock market not only rallied but it rallied hard after the pessimism reached extremes – such as now. The indicator has been proven to be correct over the last 14 years.

This would indicate that stock markets have most likely bottomed and that it is a good time to buy stocks.

Many other things would support this view as well. For one thing it is a known fact that markets tend to rise in the run up to Christmas. It is a cyclical nature of the markets.

Further, stock markets managed to rebound from a very important support level recently. Take a look at this chart of the S&P 500 (ES):

The S&P 500 (ES) “bounced” from its virtual floor at 1350 as shown by the blue arrow. These “trendline supports” usually do a good job of holding the market.

But the other important question is – what if we are wrong? What if this is not a bottom for stocks and they continue to make new lows?

It is always a wise decision to “hedge” against a market fall.

For example, you will see from the below chart that even though we started buying stocks last week (green arrow) we started “shorting”stocks from mid-October to last Friday (as shown by the red and purple arrow). This way we can also profit from a falling market.

So now we have almost a win-win situation so that no matter what happens the risk is minimised.

Right now the market is still in the beginning of what we call the Bernanke Asset Bubble. All the monetary easing and printing the Banks are doing will push up the price of stocks (and metals) to unimaginable heights in the coming few years.

We may not see any “growth” in the economy (and we won’t) but remember the economy lags behind the stock market.

Let me know your own views – even if you disagree with me – by leaving me your comment below.

Alessio Rastani is a full time trader at www.LeadingTrader.com

I have always wondered whether there is a link between the stock market and the US Presidential election result. Can the markets in any way “predict” who will be the next US president before the US election result in November?

Well, if history repeats, it seems there is a “statistical” way that we can predict who will be the next US president.

Before I go any further, let me say that I am NOT political and I have absolutely NO biases or affiliations to ANY political party. It does not matter to me who wins the next election. I made my own personal views known a year ago as to who I believe REALLY rules the World and America.

The Stock Market Correlation

According to a study by the European Journal of Social Sciences (EJSS) there is an interesting correlation between the stock market and the actual election result. This was published in a paper titled The Stock Market and Presidential Election Polling.

Take a look at this table which shows how the stock market acted in the final month immediately before the election and the actual election result:

Every negative change in the stock market over the final month before an election in the past 80 years has resulted in a change in party.

The analysis found that “every negative change in the stock market over the final month before an election in the past 80 years has resulted in a change in party.

A positive change tends to be good for the incumbent party, whereas a negative change makes the incumbent’s party vulnerable to losing.”

The stock market under analysis was the S&P 500, the index of the 500 largest companies in the world. The “incumbent party” in 2012 would be the Democrats under President Obama.

So let’s take a look now at how the stock market acted in the final month before the election, the period from 30th September to 1st November 2012 (i.e. October 2012).

Take a look at this monthly chart of the S&P 500 Index (SPX):

The S&P 500 index (SPX) closed on a negative in the month immediately before the election (as shown by the blue arrow).

The above chart shows that the stock market had a negative month in October (as shown by the blue arrow). The S&P 500 index closed at 1440.67 on September 30th 2012 and opened at 1412.20 on 1st November 2012 (the period measured by the Study). That is a 1.98% decline in the final month before the election.

Therefore if the analysis by the Study is correct, it would mean that since the stock market closed on a negative in the month of October 2012 – the final month before the elections – Obama’s presidency is vulnerable to losing.

So if history repeats, Mitt Romney will be the next US president.

The above data may not be altogether convincing. The EJSS admits that even though “it appears that downturns in the market have led to changes in the winning party… there is no statistically significant evidence for this” (my emphasis).

But is there other data which could support this conclusion? Maybe data from who is contributing the most to the individual candidates?

Who Are the Banks Betting On?

I recently came across this piece of information from a very useful website OpenSecrets.org which shows who are the top contributors to the presidential candidates, Barrack Obama and Mitt Romney.

Goldman Sachs is the top contributor to the Romney campaign. However, Goldman Sachs was the top contributor to Obama in the 2008 election.

According to Open Secrets, the top contributor to the Romney camp is Goldman Sachs with $994,139. It should be remembered that Goldman Sachs was Obama’s main contributor in the 2008 election (according to the Washington Examiner).

Conclusion

The correlation between the stock market and the US election results as found by the European Journal study is certainly interesting.

If Obama wins a second term in 2012, it will be the first time in 80 years that the correlation has failed.

Furthermore, will the fact that the majority of the big banks like Goldman Sachs and JP Morgan are supporting Romney and not Obama play a significant factor in the election result? I cannot be sure.

In my view, the race and the outcome of the Presidential elections still remains open and a very close one. I cannot say that I have any idea who will win the election.

Let me know your own views about the above findings. Do you find any patterns or reasons that I have missed here? Do you find any of the finding discussed in this article convincing? Leave me your own comment below.

Alessio Rastani is an independent and full-time stock and forex trader at LeadingTrader.com