VRA Letter: The DNA of Our New Bull Market. I'm Getting a 1995–2000 Vibe. Something Special This Way Comes.

Good Thursday morning. Do you believe in history repeating?

I’m Getting a 1995–2000 Vibe.

From 1995–2000, Nasdaq rose from 750 to 5132, soaring 584%. Over a 3 year time frame more than 500 companies went public that more than doubled on their first day of trading. 

I took 3 companies public during that 5 year period but almost no one cared because they weren’t tech stocks. 

It was a magical time to be alive but if you weren’t growing your clients accounts by 10%/month they were looking for another broker. 

High stress, high reward. 

And folks, as Tyler and I outlined in ‘The Big Bribe’, we see a striking number of parallels that point to another magical time frame to be an investor. 

We have entered an era of innovation that will likely prove to be unprecedented. New tech and discoveries that make our lives better and with it, bring on a long period of deflation, with lower rates and inflation that come with it. 

We think we’ve entered a second dot-com-like melt-up.

The DNA of Our New Bull Market

The VRA Investing System sits at 8/12 screens bullish and is nearing a move to 9/12 screens bullish. Our new bull market is exhibiting “textbook” bull market action. These trading events and patterns are important and here’s why; if this is in fact the birth of a new bull market, as we have believed from the 10/13 lows, then we have a long ways to run as measured in both time and percentage gains. We’re talking “years” to run with broad market gains similar to the 5 year run of dot-com (1995–2000). 

1) the October 13, 2022 capitulation lows were a classic reversal event, checking all of the boxes of a bear market bottom. 

2) From the 10/13 lows the markets began to ramp higher. Significantly, they were led by our most important groups; semis, tech, housing and transports. When these 4 groups are leading the market higher the very last thing you want to be is short stocks and the very first thing you want to be is aggressively long. 

Below is the chart we’ve been laser focused on from October, the relative strength chart of the semis to S&P 500. The semis lead in both directions. Not some of the time but all of the time, certainly in our post QE world.

3) Investor sentiment was heavily bearish for the last 7 months, from the 10/13 lows. As contrarians it’s been a near perfect set-up for a major move higher. We will note however that sentiment is now flipping to bullish. Not a reason to sell by any means but this is also when short term pauses take place (as we’re seeing in Nasdaq and Nasdaq 100). This is perfectly normal bull market action. 

Here’s the latest from AAII Investor Sentiment, a survey I have voted in since 1988. Bulls have jumped to 44% with bears slumping to 34%. Seeing similar sentiment changes elsewhere.

4) As this bull market move higher has developed, its left little doubt about its nature. These returns should dispel any questions that the bear market is over and a new bull has begun.

5) Highly important: as we featured to our VRA members earlier this week, it was important (and we expected) that the small caps, transports, energy and value stocks (yes even bank stocks which we have avoided for a decade) would begin to move higher. A rotational bull move market would begin to emerge. This is how a rising tide lifts all boats. 

Right on cue, over the last 5 days the Russell 2000 (small caps) are up 9%, with energy stocks, trannies and bank stocks showing serious signs of life. In addition, market internals are beginning to show signs of being “garlic strong”. Again, we expect to go to 9/12 screens bullish soon. Frankly, 10/12 bullish screens might be the case next week. These are significant upward revisions. We expect that a massive bull market is underway. Dot-com-like move higher

VRA Bottom Line: we continue to witness textbook early bull market action. We will continue to use pullbacks to add to our overbought ETF positions and will continue to use monthly dollar cost averaging to add to our 10-Bagger positions.

Until next time, thanks again for reading.

Kip

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