Adaptive Fibonacci Suggests A Deeper Bottom Will Setup – Part I

Our Adaptive Fibonacci Price Modeling system suggests a much deeper price move is in the works and the current price rally will likely end near resistance levels identified by the Adaptive Fibonacci Price Modeling system.  We are posting this research post for friends and followers to help them understand the true structure of price and to allow them to prepare for what we believe will become a much deeper downside price move in the future.

Fibonacci Price Theory teaches us that price moves in waves within up and down price cycles.  The recent peak in price, near February 25, 2020, has resulted in a very deep -36% price collapse in the S&P 500 (ES) recently.  This downside move has been mostly straight down, excluding a brief retracement in early March.  The strength of this downside price move suggests a moderate upside price recovery will take place before the next downside leg sets up.

S&P 500 Weekly Chart of 2008-09 Credit Crisis Market Collapse

Throughout the 2008-09 Credit Crisis market collapse, prices staged multiple recovery attempts within the downward price trend.  The first, after the initial -20.88% selloff in late 2007, resulted in a +14.83% price recovery that lasted for over 15+ weeks.  The second recovery, near the end of July 2008, resulted in a +9.56% recovery after a nearly -17% price decline.  After this brief recovery in July 2008, the price collapsed by a massive -44% from August to November 2008.

Daily S&P 500 Chart

This Daily ES chart highlights the first two levels of resistance at 2700 & 2870 that could stall the rally and prompt a downside price move in the future. Support is currently at 2450.  We believe the 2700 level will act as a soft ceiling in the ES where price may attempt to rally, briefly, above this level, which it did yesterday, then pull back and pause as selling pressure re-enters the market.  The 2870 level may act as a hard ceiling where price may attempt to reach this level, but immediately reverse back to the downside.

Overall, we believe continued selling as a result of forward global economic expectations is the most obvious outcome where a deeper price bottom will setup sometime later this spring or early summer.

Weekly S&P 500 Chart

This Weekly S&P 500 chart (ES) shows a possible outcome for price going forward if another downside move starts.  A new downside price move to levels near to, or just below, the 2015~16 low price range is not unreasonable. From this level, we believe a “Flag” formation will setup creating an extended price bottom pattern down at those extreme lows.  We believe this “Flag” formation will end near August~October 2020, just before the 2020 elections and prompt the beginning of a new upside price recovery in the US and global markets.

This is a large forward-looking projection and you may be rolling your eyes, but they are very possible. In fact, last year we predicted the months and price levels in which gold and oil would start new major trends, and we did this 8 months before they took place, similar to what we are proposing here.

Concluding Thoughts:

The rotation in price setup by this brief upside price move will set up a new Fibonacci downside and upside price target range.  We believe it is essential for price to continue this type of rotation as the eventual bottom sets up in the US and global markets.  We believe the true price bottom will happen only after the virus event has subsided and global economies begin to start functioning like normal again.

Currently, there is simply too much of a world-wide disruption to expect that the bottom has already set up near last year’s (2019) brief price lows.  The scale and scope of the current downside price collapse do not properly reflect the total scope of this global virus event yet – it is still a reactionary move in price that has yet to properly digest the total scope of the global economic disruptions. There is a chance for stronger bounce/rally in the next few weeks/months if the virus can start to be contained, and that will continue to mimic that of the 2000 tech bubble. Believe it or not, there is a big similarity to what happened then, to what is happening now in terms of price action and market sentiment. Read article and see these charts.

In other words, we believe more selling will be seen in the global markets and more economic contraction will take place until we are safely beyond this virus event.  The longer the global economic shutdown continues, the more likely we are to see a deeper price bottom in the future and the more likely we are to see more extensive economic collateral damage across the world. No matter which way the markets move we will follow and trade the price action and profit. That is the benefit of following price vs trying to trade prediction, fundamental data etc..

In Part II of this research article, we’ll dig deeper into the underlying components that support our research.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during a time like this, you could lose 25-50% or more of your entire net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how and one of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

Is Natural Gas Ready For An April Rally?

Our researchers have been following Natural Gas for many months and believe the current price level, near $1.65, is acting as a continued historical support level (a floor in price).  Our researchers also used one of our data mining tools to attempt to identify if any opportunity exists in NG over the next 30 to 60+ days for skilled traders.  The purpose of this data mining tool is to explore historical price activity and to determine if there is any true price “bias” that exists within certain months.

For example, if we could determine that Natural Gas tends to rally in April by a 2:1 ratio (historically) and that the rally in NG is typically somewhere between $0.50 and $1.50 to the upside, then we could attempt to use this information to set up a trade that allows us to attempt to profit from this potential future trend bias.  A 2:1 ratio would indicate that, historically, the price rallied 10 times and didn’t rally 5 times over a span of 15 instances.

Our data mining utility reported the following data for April, May, and June in Natural Gas.

Monthly Natural Gas Price Chart

If we look at the APRIL data, the POS bars = 17 and the NEG bars = 8 – that sets up a slightly greater than 2:1 ratio of advancing price over declining price in April.  The “Total Monthly Sum” across 25 instances of data is $1.12 whereas the Average for the POS price activity comes to just $0.24.

This suggests that in April, we have a fairly high opportunity for some upside price activity in Natural Gas based on this data – a nearly 2:1 advancing price ratio (historically).  Yet it also means that advancing price may only rally $0.35 to $0.75 from any price bottom – so we have to be aware of risks that may exists with a small price advance from the current low levels.

If we take a look at the MAY data, the POS bars = 13 and the NEG bars = 11 – that sets up a 1.18:1 ratio that suggests a very slight advantage to the possibility that continued upside price activity will happen in May.  Yet, the upside price advantage shown my the “Total Monthly Sum” data suggests a very big opportunity for a breakout rally in May (+$2.40).  The way I interpret this data is to understand that May is roughly 60/40 biased to the upside whereas if any upside move takes place in April, a continuation of that trend in May could be incredibly profitable with a proper strategy.

Take a look at the JUNE data and try to come up with an interpretation yourself.  The POS bars / NEG bars represent a less than 1:1 ratio.  The Total Monthly Sum ($0.21) is not a very substantial price advance.  The data is somewhat indecisive or inconclusive in suggesting any real price advantage in June for trading.

Yet, we have a very clear advantage in April and May.  So, how are we going to approach this trade setup?

Weekly Natural Gas Chart – Cycles & Support

Currently, NG is testing very deep price levels within the BLUE support range box.  Aggressive traders can attempt to look for opportunities within this range but must understand risks are still high for continued moderate price decline before a bottom sets up in April.  Skilled traders would wait for the bottom to set up and possibly look for opportunities in ETFs as a means to limit risks on initial positions – attempting to scale into the trade comfortably.

Once the rally in NG really sets up and breaches the $1.98 level moving higher, then we believe we have a very real rally on our hands that may see price levels back above $2.75 eventually.  The $1.85 to $1.99 price level will act as resistance as price attempts to move higher.

Why are these types of setups so important to skilled traders?  Historical price structures and patterns, like this data mining pattern, help to clearly illustrate strategic advantages in certain markets for skilled traders. Determining how to set up a proper trade knowing this data is also important.  Risks exist with every trade you make and I’m sure we’ve all learned a lesson or two about making a hasty trade and not thinking about it?

Our research team believes April and May 2020 could be very exciting for Natural Gas.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during a time like this, you could lose 25-50% or more of your entire net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how and one of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

Two Leading Indicators for Crude Oil Point To Higher Prices

On Friday morning I created these charts on the price of crude oil, the energy sector stocks (XLU), and also the Canadian Dollar, which I think paint a clear picture of what to expect for the price of crude this coming week.

I always like to look at the leading indicators of the asset which I am interested in trading. For those trading the price of crude oil you should be watching what the energy stocks are doing or the sector as a whole. I use XLE ETF for this. I also will show you the Canadian dollar and what it is going later in this post.

Energy stocks are a way for traders to leverage the move in oil so the smart/big money tends to move into these stocks before the underlying commodity (oil) will start to change direction.

Price of Crude Oil – Daily Chart

Oil has been trading sideways for a couple of weeks. The range may not look big but just note that it’s a roughly 25% range from the bottom to the top of the blue box. The key take-aways here is simple. Oil is still trading at the bottom of the chart and trading sideways. What we will be looking for is a breakout of this zone in either direction which should induce a strong rally or selloff to the expected price levels of $34, or $14. These moves are likely to happen quickly over a 2-3 day period to expect an explosive move.

Price of Energy Sector Stocks ETF (XLE) – Daily Chart

Energy stock generally leads to the price of oil by a few days. The important points on this chart are that price has rallied off the lows, and is forming a bull flag pattern which means higher prices are expected.

Much like crude, a break in either direction in XLE can be traded, but the pattern which has formed puts the odds in favor of an upside breakout and rally of roughly 12%.

Price of Canadian Dollar – Daily Chart

The Canadian dollar is very tied to the energy sector, both the price of oil and energy stock because we are a resource-rich country, with oil being once of our top resources.

As you can see in the chart below the Canadian dollar it too has formed a bull flag pattern and looked primed and ready for another rally higher. The currency market, in general, is massive and when a large asset class is showing signs of reversing you better pay attention.

When I see a currency forming strong pattern to give us an expected price breakout direction, I like to look at what that is telling me. What companies or commodities will this move affect? In this case, money is moving into the Canadian dollar expecting oil to bottom and rally which should help increase the value even more.

I Talk Live On TV about These Trade Setups

If you want more details on this trade setup just watch this clip from TraderTV where I talked with Brendan Wickens in detail.

Concluding Thoughts:

In short, this coming week is most likely going to be much wilder than last week. While I didn’t cover on the other asset classes just know that precious metals, the major stock indexes, bonds, and oil have al built powerful patterns. Breakouts of these patterns will trigger big moves 10-25% in some cases, so get ready for fireworks this week!

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during a time like this, you could lose 25-50% or more of your entire net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how and one of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up!

For years, many Gold Bugs (investors who’ve been advocating buying Gold and Silver at low prices as a hedge against future global economic risks) were shunned as conspiracy theorists and nuts. How could these people believe Gold and Silver were solid investments when the Global equities markets were rallying 5% a year consistently – what could go wrong?

Over the past two weeks, I have personally received multiple phone calls and emails from friends and associates asking how these people can suddenly “buy physical metals”. In one case, this individual was purchasing Airline and Food Services stocks in late February thinking this move would be short-lived and telling me how the airlines would recover quickly after this is all over.  Now, that person wants to know my secret contacts for buying physical metals.

If you know any Gold Bugs, you know we’ve built relationships with suppliers, friends and other Gold Bugs throughout the year. Believe it or not, I can still buy physical metals from a few of my closest associates in the industry. Eric Sprott is a fan of my precious metals forecasts and talked about my work a few times publicly.

Yes, the prices have begun to skyrocket a bit – Silver especially.  But I can still buy physical metals because I have a deep resource of friends and suppliers.

What’s going to happen over the next few weeks is that more and more average people are suddenly going to realize they should have been buying metals as security against risk.  Paper metals are going to explode as well, but physical metals will demand a premium that is much higher than paper/spot price. Right now, one ounce of Silver is going for about $21 to $25 per ounce in physical form (depending on my sources).  The current SPOT price of silver is $14.50. That means the premium for physical Silver is between +45% to +75% right now in the open market.

Daily Gold Chart

This Daily Gold chart highlights the upside Fibonacci price targets using our Adaptive Fibonacci Price Modeling system.  We believe the next upside price target for Gold is $1825. A higher upside price target is visible on this chart near $1950 and we believe Gold prices will reach this level eventually.  But we believe the current $1825 level is the immediate target.  This would represent an immediate +10 upside price advance and would establish NEW HIGH prices for the past 9 years.

Silver Daily Chart

This Silver Daily chart also highlights our Adaptive Fibonacci Price Modeling system and shows an upside price target of $17.25.  Remember, the current physical demand for Gold and Silver has skyrocketed over the past 2+ weeks. The Spot price is really not indicative of the open market price of physical at the moment.  If Spot Silver moves to $17.25 as we predict, that would be a +19% upside price advance.  If Silver advances to $18.25, that would be a +26% upside price advance.

You should also take a look at our silver chart from 1999 and what happened then, and should happen again now as well.

Silver Bugs are loving the setup right now because they know the pattern that sets up in the Metals market when a crisis hits.  First, Gold begins to rally faster than Silver and the Gold to Silver ratio spikes higher.  Then, once the shock-wave of the market crisis subsides, the metals begin a fairly usual price advance where both Gold and Silver advance – in unequal forms.  This is when the real fun for Gold & Silver Bugs begins.

Gold to Silver Weekly Ratio Chart

THE SILVER LINING

Take a look at this Gold to Silver Weekly Ratio chart.  This chart measures how much one ounce Silver it takes to purchase one ounce of gold at current prices.  Notice that spike in the ratio back in 2008?  That was the spike in gold prices relative to Silver prices as the top formed in 2008 and the “shock wave” struck global investors.  What happened?  Everyone tried to pile into the Gold trade and ignored Silver for about 6+ weeks.

Then what happened to the Gold to Silver Ratio?  It COLLAPSED from levels near 85 to a bottom hear 31.  That means the price of Silver advance almost 3x faster than the price of Gold over that span.  In order for the ratio to fall from near 90 to levels near 30, that indicates a very expansive price increase in the price of Silver.

Now, take a look at what has happened just recently in the Gold to Silver Ratio…  another massive price spike.  This time, the spike reached levels near 120 (Yikes).  Can you guess why Gold and Silver Bugs are so excited right now? If another price advance takes place in precious metals which is similar to the 2008~2011 rally, Gold may see a 300% to 500% rally and Silver may see a 450% to 900% rally over the next 2 to 3 years.

View chart by TradingView.com

This is no joke.  Physical metals are why Gold and Silver Bugs believe the value of having it in your hands is much better than owning an IOU from a broker or bank.

Get ready for some incredible price moves in the metals markets and congrats to all the Gold and Silver bugs out there.  Our analysis says our patience and accumulation of physical metals will soon pay off in a big way.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter. If you are a long-term investor with any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal this week!

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

End Of Week Technical Take on Indexes, Metals, Currencies, Oil: April 3, 2020

See what to expect today and next week as we have some huge moves about to start up again. Chris Vermeulen of http://www.TheTechnicalTraders.com shares his take on all the major asset classes in this quick but high-level view on key assets.

Indexes, Metals, Currencies Video Analysis for 03.04.20

 

Stock Market Has Entered a 25-35year Crisis Cycle Re-evaluation Event

We can only imagine what many of you are thinking and feeling right now.  Shock?  Concern?  Despair?  Some of you have already emailed us asking about the US and Global markets to find out what our predictive modeling systems are suggesting.  Today, we’re going to show you what the longer-term Adaptive Fibonacci Price Modeling system is suggesting for the S&P and NASDAQ.

First, we want to ask you to slow down, take a few seconds to realize we will recover from this virus event and the smart thing to do is protect your family, protect your assets, and prepare for the future.  Market crashes happen only 2-3 times in a lifetime and they, not the end of the world or financial system.

This event is different than the 2000 or 2008 market crash events.  Each of those past events was somewhat localized events that disrupted a segment or portion of the global economy.  Yes, the 2008 event was bigger than the 2000 event, but the localization of the event still presented a similarity that provided a moderately quick recovery process.

Next, we want you to attempt to understand this virus event is a bit different than the most recent crash events.  A virus pandemic of this nature will likely result in a much broader economic contraction and various collateral damage processes as it transitions across the globe.  Currently, our research team is attempting to watch for the early signs of these collateral damage processes to determine if a broader global market collapse is going to take place.  At this time, we must all try to prepare for what is unknown and could happen in the future.

The longer-term generational cycle (the roughly 85-year Strauss-Howe Theory suggests societies navigate a long term cycle that repeats itself, roughly, every 85 years).  This societal evolutionary theory centers around the concept that people repeat many of the same failures learned by previous generations – roughly every 85 years.  What was learned in the 1920s~1940s will have been forgotten in the 1990s~2020 and many of the same mistakes will be made.

One of our researchers, Brad Matheny, authored a book in March 2019 that analyzed these super-cycles and accurately predicted this market crash could happen as early as August or September 2019.  Within this book, Mr. Matheny made great efforts to illustrate how important it is for everyone to become aware of these bigger market cycles and to prepare for what was likely to come near the end of 2019 and into early 2020.

Additionally, smaller market cycles take place within the bigger super-cycles. This example of the 8.6-year business cycle highlights the repetitive nature of these broader market cycles.  Think about how 10 of these smaller business cycles equal the much larger 85-year generational cycle.  Now, think about how each stage of the roughly 20~21 year generational cycle has played out over the last 85 years.

This screen capture highlights the phases and structures of the broader Strauss-Howe generational theory.  Pay very close attention to how structured the process is and what to expect in the future.  Also, notice that we entered a CRISIS phase in 2005.

Past cycles have lasted more than the average 20~21 years.  Longer cycle lengths are not uncommon within the broader 85-year super-cycle when larger societal events take place.  Thus, this current CRISIS phase could last 25 to 35 years before a new HIGH phase sets up.

The reason we are bringing all of this together within this article is because we want to clearly stress forward and future expectations as well as to make our longer-term market concerns very clear to all of you.  If, as the generational cycles suggest, we have entered a CRISIS phase and are moving toward a HIGH phase, then we are in the midst of a phase that can be very destructive to institutions and society as a whole.

“According to the authors, the Fourth Turning is a Crisis. This is an era of destruction, often involving war or revolution, in which institutional life is destroyed and rebuilt in response to a perceived threat to the nation’s survival. After the crisis, civic authority revives, cultural expression redirects towards community purpose, and people begin to locate themselves as members of a larger group.”

These super-cycles and the broader “collateral damage” issue is what leads our researchers to believe the US and Global markets may continue to target much deeper price support levels before finding a bottom.  Even though the US and global central banks are doing everything possible to avoid a contagion economic collapse, we believe many people have “forgotten” about these broader market cycles and may be shocked to learn the COVID-19 virus event is happening in the midst of an 85-year generational Super-Cycle that predicts a true price bottom (new HIGH phase) may not set up until 2030~2035.

Let’s take a look at where our Adaptive Fibonacci Price Modeling system is suggesting the markets may bottom..

Daily S&P 500 Futures Chart

We’ll start by exploring this Daily ES chart which highlights two key Fibonacci downside price targets: 1683 and 1225.  Look for the GREY and RED lines near the bottom of this chart and look for the BLUE/RED and GREY SQUARES near the right edge of this chart.  These SQUARES are the DAILY Fibonacci downside price targets as calculated by our Adaptive Fibonacci Price Modeling system.

Also, pay attention to the CYAN price channel that we’ve drawn on this chart highlighting the current downside price channel that has setup.  It is our opinion that price will likely attempt to stay within this price channel as it moves deeper to target these support levels – eventually attempting to set up a bottom near either of these deeper Fibonacci support levels.

Weekly S&P 500 Futures Chart

This Weekly ES chart highlights the Weekly Adaptive Fibonacci Price Modeling system’s results – which are almost exactly the same as the Daily targets.  This is very important if you understand that the Fibonacci price structure is supposed to be structured in a universal means throughout all price activity.  Thus, if the Daily and Monthly Fibonacci Modeling system is targeting the exact same levels – then this carries much greater importance to us.

The same downside targets in the ES are 1683 and 1225.  These represent a continued downside price move of -32.75% or -50.25% from current levels.  The YELLOW lines we’ve drawn on the chart represent what we believe the bottom may look like if the first level of support, 1683, acts at a bottom.  We do believe a bottom will set up in a FLAG formation that may take many months to complete before any real rally begins.

Weekly Nasdaq Futures Chart

This Weekly NQ chart points to an even deeper price bottom.  The downside Fibonacci targets are 3900 and 1865 (-48.59% and -75.15% below current price levels).  These deeper price targets suggest the NASDAQ market may become unusually volatile over the next 12 to 24+ months.  We believe this could become an unforeseen risk for many global investors that believe technology will recover faster than many other market sectors.  If our research is correct, the NASDAQ could collapse to far deeper levels than the S&P or the Dow Industrials.

How could the NASDAQ collapse like this?  Remember the “collateral damage” aspect and think about what it would take for these technology companies to loose their financial support?  Companies like Twitter, Uber and dozens of others operate with negative annual cash-flow – they depend on spending money they can’t earn to stay in business.  If this cash reserve vanishes – what happens?

The process of getting to these lows can come in many forms – yet the targets are still there for us to understand and prepare for.

On the weekend I wrote an interesting post sharing a trading experience I had during the 2000 bull market and how there are some similarities in price patterns and psychologically with traders as we have right now. It’s worth a read.

Watch for the global markets to continue to target recent lows.  On the NQ chart, above, we’ve drawn some CYAN lines near recent lows to illustrate these levels.  If the global markets do collapse to the Fibonacci levels we are predicting, then a much bigger contagion event is taking place along with the generational cycles and an unraveling of many institutional processes and functions.  Remember, we may continue within the CRISIS phase of the Super-Cycle for another 3 to 10+ years.  The COVID-19 virus event may be just the trigger of this collapse – but the writing has been on the wall for many decades.

Be very cautious buying into these dips at the moment.  We have been warning about this event for a while. Just last week we published a short guide and our basic trading and investing strategy on how to profit from bear market cycles – explained. Our researchers predicted August/September 2019 as the “critical date” and urged “move to cash” at that time to protect your assets from this event – few listened to us while the markets continued to push higher.

Luckily, on February 23rd we closed out all of our remaining positions for our active ETF trading account with our subscribers. Our trading accounts are sitting at a new high watermark and we avoided the market crash and took advantage of the 20% rally in bonds.

Maybe more people will listen to us after reading this article and prepare for what may come in the near future?  Maybe some of you will grasp the idea that these Super-Cycles are real and learn this may become the greatest opportunity of your life with our help.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter. If you are a long-term investor with any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

Concerned That Asia Could Blow A Hole In Future Economic Recovery

Thinking somewhat far off into the future, our researchers believe China/Asia could become the next Black Hole in the global economy.  China recently released its March PMI number which came in at 52.0 – showing moderate expansion in Chinese manufacturing.  The February Chinese PMI level was 35.7.  We strongly believe China wants to show some strength in their perceived economic recovery and that these PMI numbers are somewhat “manufactured for effect”.

We believe the real economic toll taking place in China/Asia will continue to unfold over the next 3 to 6+ months as the historic expansion of wealth and the exported foreign investment from Wealthy Chinese continues to contract over this time.  In a very similar manner to what happened in the US when the Japanese economy contracted in the 1990s – as wealth creation processes collapse, these foreign investors suddenly start to liquidate assets trying to protect their “home-country assets”.

(Suggested Reading: https://www.barrons.com/articles/china-pmi-data-coronavirus-51585666441)

We’ve recently posted an article suggesting the US Real Estate market could suddenly find itself in a real measurable collapse and we believe the foreign investors, speculators and speculative renters (Air BnB and others) will suddenly find themselves in a very difficult situation.  You can find our Real Estate article here.

As the COVID-19 virus event continues to unfold, the data from global nations will quickly identify any outlier factors and data points related to China/Asia and how they are reporting their data.  Chinese economic data has raised suspicions for quite some time with global analysts.  It seems highly unlikely that the Chinese economy rebounded from an almost complete shutdown in February and most of March to a moderate manufacturing growth level at the end of March 2020.  Meanwhile, throughout the rest of the globe, economies, and manufacturing levels are contracting as the COVID-19 shutdown continues.

We believe the disparity between the global markets and the numbers China continues to proffer will quickly result in a complete lack of confidence in future data related to any Chinese economic activity or future expectations. We also believe the global capital markets will make an immediate shift away from risks associated with any falsified data originating from China by mitigating forward risks in investments and currency market exposure over the next 3 to 5+ years – possibly longer.

What happens when global events like the COVID-19 virus event takes place is that capital immediately attempts to identify extreme risks and attempt to move to safer environments.  Currencies are no different.  Global markets, investment, and manufacturing are increasingly exposed to risks related to the shifting markets and any false or otherwise “outlier” data being reported right now.  The bigger players can’t afford to take risks and will take active measures to protect their futures and investments.

(Suggested Reading: https://www.cnbc.com/2020/03/31/asia-markets-china-official-pmi-coronavirus-global-economy-in-focus.html)

Our opinion is that the Chinese PMI level of 52 for March 2020 is an outlier data point.  This virus event started in early January in China and almost all of February and March were when the globe suddenly became aware of the risks and infection spread.  Even though China may have attempted to ramp up manufacturing over the past 2+ weeks to appear to be “back to normal” – it makes no sense to us that manufacturing in China actually “expanded”, based on historical levels, that quickly.

Watch how quickly global economies and currencies work to mitigate the risks related to perceived “outlier data”.  We believe most of Asia will continue into an economic contraction over the next 3+ months and we believe the FOREX market will relate the immediate risk concerns related to Asia/China/global market expectations.  In other words, watch the currencies to see how global investors perceive risks associated with true economic activity.

The World Bank many not have a deep enough piggy bank to back the extended risks of an Asian Economic contraction lasting 6+ months.

(Suggested Reading: https://www.marketwatch.com/story/world-bank-says-coronavirus-outbreak-may-take-heavy-toll-on-asias-economy-2020-03-30)

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter. If you are a long-term investor looking for signals when to own equities, bonds, or cash, be sure to look into my Long-Term Investing Signals.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

Weakness Appears To Be Setting For This Weeks Economic Data

As the world reacts to the global economic slowdown because of the COVID-19 virus event and the massive stimulus programs and central bank efforts to support the global economy, investors still expect weakness in the US and foreign markets.  We believe this expected weakness will not subside until news of a proper resolution to this virus event is rooted in the minds of investors and global markets.

Hong Kong and China are currently concerned about experiencing a “third wave” of the COVID-19 virus within their society.  As the economies open back up to somewhat normal, people are very concerned that a renewed wave of new infections will suddenly appear and potentially result in another shut-down event or infectious cycle?  We believe all nations are watching what is happening in Hong Kong and China as they attempt to reopen their economies.

The rest of the world is still battling the rising infection rates and dealing with the economic shutdowns that have brought the global economy to its knees.  Europe, Japan, Canada, and the US are all experiencing vast disruptions to their economies and commodity prices and demand expectations are collapsing as a result.

Nearly a week ago, we issued a research article that suggested our proprietary Fibonacci Price Modeling tool’s key resistance levels may become a very valid ceiling for any price recovery.  It appears this is happening in the markets as the NQ Daily chart, below, shows.

Daily Nasdaq (NQ) Chart

The NQ resistance level, near 7880, has acted as a soft ceiling in the NQ over the past 4+ trading days.  Today, the NQ briefly rallied above this level, then rotated downward below this level again to confirm this key resistance level.  We believe this critical Fibonacci resistance level may continue to act as a price ceiling over the next few trading days and push prices lower as economic news and expectations hit the news this week and next.

The next downside price target for the NQ is 6565 – new price lows.

If you have not seen this important technical analysis on the Nasdaq which I posted a couple of days ago, be sure to see these charts.

SP500 (ES) Weekly Chart

This ES Weekly chart illustrates another key resistance level near 2679.  Although the ES price has not rallied up to reach this critical Fibonacci resistance level, we still believe this level is acting as a price ceiling and that the ES will weaken as future expectations are confirmed by earnings data, economic data and other collateral damage to the global economy.

We are still very early in understanding the total scope of this virus event.  The US and other global central banks are attempting to front-run any weakened expectations as a result of this virus event.  We continue to believe the extended collateral damage to the consumer, business and other aspects of the economy are yet to come.  Most recently, consumer delinquencies have begun to skyrocket and the news is being printed about landlords and renters being unable to satisfy obligations on April 1st.

This is part of the reason why we believe further caution is warranted at this time in the markets.

Our research team believes a deeper price low will likely set up over the next 30+ days to establish a true price bottom.  As we’ve warned, we believe extended collateral damage to the US and global economy will soon become better understood and the extended shutdown of the US and other economies only manages to complicate any positive expectations for a bottom.

We believe a deeper price low will set up within the next 30+ days and we urge skilled traders to pay attention to the broader expectations of the markets.  Earnings data and other economic data will continue to stream into the news centers over the next 30+ days.  Don’t get too aggressive with trying to buy a bottom in the markets just yet.  Be patient and wait for the markets to show you when the bottom has really setup.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter. If you are a long-term investor looking for signals when to own equities, bonds, or cash, be sure to look into my Long-Term Investing Signals.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

 

The Selloff Structure Explained – Fibonacci On Deck

Many traders become very emotional when the markets turn Bearish and fail to properly understand that price structure is still driving market price movement.  This morning, I highlighted this structure to my subscribers attempting to alert them to the possibility that the markets could recover moderately over the next 3 to 5+ days attempting to set up the next “waterfall” downside price event.

On January 29, 2020, I posted a research article detailing my belief that a “waterfall” type of event was setting up in the markets.  This article was nearly 30 days prior to the peak in the markets.  It explained how events take place and how markets tend to develop a moderate recovery phase between selloff price declines.

January 29, 2020: ARE WE SETTING UP FOR A WATERFALL SELLOFF?

Skilled traders should notice the size and levels of each selloff event in the chart (above) and pay very close attention to how price initially collapsed from the peak, then recovered nearly 50% in early and late November before finally setting up a deeper waterfall price collapse in early December.

Our research team believes the US stock markets may attempt something similar over the next 3 to 5+ days as the Covid-19 economic outcome continues to process through the global markets.

The US and other Central Banks have taken broad steps to attempt to overcome the negative economic outcomes related to the Covid-19 global shutdown.  Their biggest concern is that consumer activity could diminish and banking/credit firms could come under severe pressures because of a consumer collapse.

There are over 35 million US low-wage jobs that may become at-risk because of the Covid-19 virus event.  We believe the true economic contagion of the global virus event may now be known until well into April or May 2020.  Yet we believe these at-risk, low-wage jobs are prevalent throughout the globe and foreign nations, such as Asia and Europe, may experience a similar consumer economic contagion over the next 6+ months.

We believe the data related to the Covid-19 economic crisis will not fully be known until well into April or May 2020.  Because of this, we believe the US stock markets may recover to levels near the 50% Fibonacci Retracement levels on these charts before attempting a series of further downside price moves.  Skilled traders should not become overly emotional right now and pay attention to the structure of the price action as well as other technical conditions in play at the moment.  Our objective is to execute trades with a highly targets success rate – not to trade on emotions.

SPY Daily Chart

This SPY Daily chart shows the SPY would only need to rally 18.70 points to reach the 50% Fibonacci retracement level on this chart.  This could happen very quickly given how close the price actually is to this key Fibonacci level.  If that were to happen over the next 3 to 5+ trading days, the downward sloping price channels from our TTCharger modeling system would move lower to meet price near 278 – which would set up a new resistance zone and possibly a new wave of selling.

INDU Daily Chart

This INDU Daily chart shows the Dow Jones would have to rally about 2025 points (to levels near 23,886) to reach the 50% Fibonacci Retracement target.  If this were to happen, the sloping price channels on this chart would likely move lower to meet price near this 50% target level – presenting a very clear resistance zone for a new wave of selling to begin.

Remember, it is not about emotions or attempting to try to force the markets to adopt your “belief”.  Skilled traders attempt to identify risks, opportunities and realistic technical setups that allow them to objectively determine where and when the markets are providing a real opportunity for success.

We may be just a few days away from the next major wave of selling, yet any trader who jumped into an emotional trader over the past 5+ days expecting the markets to continue to break down is likely under a fair amount of stress right now.  Learn to read the charts and the structure of price more effectively and you’ll find the answers are already on the charts in front of you.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

If you are a more active trader and swing trader visit my Active ETF Trading Newsletter. If you are a long-term investor looking for signals when to own equities, bonds, or cash, be sure to look into my Long-Term Investing Signals.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

 

Three Charts Every Trader and Investor Must See

Understanding the stock market and its potential through the use of technical analysis and historical price events has been proven repeatedly to outperform all forms of fundamental trading styles. The following is a story that walks you through my experience, the shift in my mindset and how I came to the conclusion that the three charts I share in this article are critical to your understanding of to make money in today’s market!

When I first learned to trade, I got all caught up with researching companies and finding the ones with the best earnings and future growth. I did that for several years after studying and following many “professional traders” who said it was the best way to trade and invest long term. We lost our shirts during the 2000 bear market by continuing to trade on fundamentals as stocks fell in value week after week. Even the companies that showed quarterly earnings growth fell in value – none of it seemed to make any sense to me, and it was very frustrating.

Losing money when buying the best companies made no logical sense, making me step back from the markets and ask myself, ‘what am I doing wrong here‘. People today are asking themselves the same question given today’s dizzying markets:

· Telsa shares fell from $971 a share down to $347, whopping 63% drop, in only a few weeks and then rebounded again too xx

· Netflix is down 30%, even though people are stuck at home desperately trying to find things to watch)

· Amazon has fallen 26% in the past couple of weeks despite soaring demand for their delivery services

· GDXJ, the gold miners sector that is typically a safe haven during times of volatility, crashed 57% even though gold is usually a safe haven during times of volatility.

So, what was I doing wrong? I started calling and visiting traders who were making money during the bear market to see what they were doing, and 100% of them were doing the same thing – Trading with Technical Analysis. I wasn’t doing anything wrong, per se. I was simply using the wrong tools and analysis for success!

What is Technical Analysis? In short, it’s the study of price, time, and volatility of any asset using price charts and indicators. Traders use technical analysis to find cycles and patterns in the market and trade on the analysis of preferred indicators as opposed to the fundamentals of a company and/or the economy in general.

When you start studying technical traders, you will notice every trader has a particular time frame, a preferred set of indicators, and trading frequency that fits their unique personality and lifestyle. Their brains can see the charts in ways you and I may not see them to predict future price direction over the next few hours, days, weeks, or months ahead. I quickly learned there are infinite ways to trade using technical analysis.

I was very surprised by how much these pro traders allowed me. While standing over their shoulders, I was looking at their charts to try to divine their high-level strategies and learn how they think, analyze, and trade. It was amazing how different each of them traded the market. Some traded currencies; others traded stocks, indexes, options, futures, etc. Most were day traders, swing traders, or a mix of the two. But none of them gave me their secret sauce. That is why I turned 100% of my focus to technical analysis. I was excited at the prospect of being able to profit from both rising and falling prices and no concern for anything other than price action reduced my research time dramatically. It was and is the biggest AH-HA moment of my life and a turning point for my career as a trader.

The year was 2001, when I made the shift to technical analysis. I unsubscribed from everything fundamental based. I canceled my CNBC, stopped listing to news, and stopped reading other people’s reports altogether. My goal was to create my own technical trading strategy that best suited my personality and lifestyle. I would have to discover the securities I was most comfortable trading, the frequency I would trade, and the type and amount of risk I was prepared to take.

I traded options, covered-calls, currencies, stocks, ETFs, and futures. From day trading to position trading (holding several months), I tried it all, hoping something would click for me to pursue at a much deeper level. Day trading, momentum, and swing trading were my sweet spots. Having three of them was a bonus as I know some traders only ever master one in their lifetime if they are lucky. I grew a liking for trading the major indexes like the DJIA, S&P 500, and Nasdaq… great liquidity with big money always at play.

Along my journey, I realized that if I could predict the overall market trend direction for the day or week, then I could day-trade small-cap stocks in the same direction as the index, knowing 80+% of the stocks follow the general stock market trend. I could generate much larger gains in a very short period of time. As time went on, I became comfortable predicting, trading, and profiting from the indexes, and my new trading strategy began to emerge.

I was fortunate enough to start learning about the markets and trading in college with a $2,000 E-Trade account, and then retiring (kinda) in 2009 at the age of 28. I built my dream home on the water, bought cars and boats, and spent time traveling with my growing family. I love trading and sharing my analysis with others – it is better than I had ever imagined and why I continue to help thousands of traders around the world.

I contribute 100% of my trading success and lifestyle to the fact that I embraced technical analysis, where my strategy involves nothing more than price movement, position-sizing, and trade risk management techniques. All these allow me to easily reduce exposure, drawdowns, and losses with proper position sizing and protective strategies. My strategy is represented by human psychology and historical trading, as expressed in the three charts below.

Chart 1 – Human Psychology Is What Drives Price Action

This chart is my favorite as it explains trader and investor psychology at various market stages. It also includes a simplified market cycle in the upper right corner, letting you know where the maximum financial risk is for investors and the highest opportunity for a trade.

Chart 2 – 2000 Stock Market Top & Bear Market That Followed

The chart may look a little overwhelming, but look at each part and compare it to the market psychology chart above. What happened in 2000 is what I feel is happening this year with the stock market sell-off.

In 2000, all market participants learned of at the same time was that there were no earnings coming from their darling .com stocks. Knowing they were not going to make money for a long time, everyone started selling these terrible stocks, and the market collapsed 40% very quickly.

What is similar between 2000 and 2020? Simple really. COVID-19 virus has halted a huge portion of business activity, travel, purchases, sporting events, etc. Everyone knows earnings are going to be poor, and many companies are going to go bankrupt. It is blatantly clear to everyone this is bad and will be for at least 6-12 months in corporate earnings; therefore, everyone is in a rush to sell their stock shares and are in a panic to unload them before everyone does.

Chart 3 – The 2020 Stock Market Top Looks To Be Unfolding

As you can see, this chart below of this year’s market crash is VERY similar to that of 2000 thus far, it’s based on a similar mindset, which is the fear of losing money, which causes everyone to sell their positions.

I am hopeful that we get a 25-30% rally from these lows before the market starts to fall and continue the new bear market, which I believe we are entering. Only the price will confirm the direction and major trend to follow, and since we follow price action and do not pick tops or bottoms, all we have to do is watch, learn, and trade when price favors new low-risk, high reward trade setups.

It does not matter which way the market crashes from here, we will either profit from the next leg down, or will miss/avoid it depending on if we get a tradable setup. Either cause is a win, just one makes money, while the worst-case scenario just preserves capital in a cash position, you can’t complain either way if you ask me.

Before you continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

Concluding Thoughts:

In short, is if you lost money during the recent market crash, then you likely have not mastered a technical trading strategy and do not have proper trade management rules in place. All traders must manage risk and trades to be sure you lock in profits and limit losses when prices start pullback or collapse. Without either of these, you will not be able to achieve long term success/gains, and that’s a fact.

While we can all make money during a bull market when stocks are rising, if you cannot retain or grow your account during market downturns, then you may as well be a passive buy and hold investors. You are better at riding the emotional investor rollercoaster without wasting your time and effort as a trader if you are not going to spend the time and money to learn to follow someone to become a successful trader. Without proven trading strategies or someone to follow, you are more likely to underperform a long-term passive investor.

I get dozens of emails from people every week trying to trade this wild stock market and use leveraged ETFs, which doing so during these unprecedented market conditions is absolute craziness if you ask me.

These people think that because there are big moves in the market, they should be trading. That big money should be made trading them, which drives me crazy because it could not be further from the truth unless you are a scalp or day trader. To me, in this market condition, it’s about preserving capital, not risking it, in my opinion.

A subscriber to my market video analysis and ETF trading newsletter said it perfectly:

“Always intrigues me how many amateur surfers get to the north shore beaches in Hawaii, take one look at monster waves and conclude it’s way too dangerous. Yet the amateur trader looks at treacherous markets like these and wants to dive right in!!” Richard P.

I have to toot my own horn here a little because subscribers and I had our trading accounts close at a new high watermark for our accounts. We not only exited the equities market as it started to roll over we profited from the sell-off in a very controlled way.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts, visit my ETF swing trading visit my website at www.TheTechnicalTraders.com.

Chris Vermeulen
Founder of Technical Traders Ltd.

 

Is Gold Mirroring 1999 to 2011 Again?

Our research team continues to dig into underlying patterns and set up in the global markets to assist skilled technical traders in understanding the current Covid-19 virus event and other key technical data.  Recently, we’ve authored a number of detailed research articles that we believe helped prepare traders for the events of the past 30 to 90+ days.

Today, we are writing about a pattern our research team is seeing in the Gold/Silver ratio which is correlated to the price movement of Gold.  What does this mean and how can we profit from this setup?  Let’s get started trying to explain this chart pattern/setup.

Gold:Silver Ratio Chart From a New Angle

This first chart highlights the pattern we have identified and how we believe a similar pattern is setting up again in the current market.  The setup of the pattern is explained in the text below, but quickly scroll down and look at the first chart and the pink shaded areas “A” to get an idea of what we are talking about.

Prior to “A” Pattern Setup

_ After a moderate price decline in Gold (1996 through 2001), a bottom sets up as the price of Gold begins to base near support.

_  The Gold/Silver ratio (BLUE), falls throughout this pattern setup as both Gold and Silver prices decline somewhat in unison.

The Setup “A”

_  Gold prices begin to rally moderately while pushing the Gold/Silver ratio higher over an extended period of time (from 1999 to 2003: about 4 years).

_ The Gold/Silver ratio peaks and begins to decline in mid-2003 as the price of Gold continues to rally at a bit more accelerated rate.

_ Gold prices begin a parabolic upside price advance in early 2006 after the Gold/Silver ratio collapses about 18% to 20% from the peak level near 82.50.

We believe a similar type of pattern is setting up right now in the metals market and we believe both Gold and Silver will engage in a price advance over the next 10+ months that may be similar to the post-A set up in mid-2003.  If you are familiar with what happened in the metals market at that time, Silver began to advance at a faster rate than the price of Gold advanced.  This is what caused the Gold/Silver ratio to begin to collapse.

Silver Monthly chart from 1993 to 2004

This Silver chart from 1993 to 2004 clearly shows how the price of Silver was reacting throughout the setup prior to “A” and after “A” in the chart (above).  Silver began a moderate price advance in 1993 from a level near $3.50 and advanced to a level near $7.50 in 1998.  Then, it began a downside price move to reach new lows in 2002.  At that point, the markets changed.  Gold and Silver began to advance almost in unison with Gold still advancing slightly more than Silver until early/mid-2003.  Once Silver broke dramatically higher, in late 2003-04, the Gold/Silver ratio started breaking downward instead of upward.  This is the pattern we are seeing in the metals market right now.

We believe the recent rotation in the metals market and the dramatic price divergence between Gold and Silver are setting up another similar type of pattern that could prompt both Silver and Gold to rally upward from current levels by at least 200%.

Current Silver Monthly chart

The extremely deep price retracement on this Monthly Silver chart (below) highlights what we believe is a deep washout low price rotation that is setting up the “disconnect” as we have tried to explain in the Gold/Silver ratio chart and historical Silver chart (above).  Yes, Gold also moved dramatically lower over the past 2+ weeks illustrating the shock to the markets that took place as the Covid-19 virus event disrupted the US and global markets.  But our researchers believe this dramatic washout low in Silver is setting up a much bigger pattern, longer-term than most people understand.

Recently, news that global precious metals suppliers have received a tremendous surge of orders for the physical stock over the past 2+ weeks (source: https://www.msn.com).  In fact, many global suppliers and mints are simply “out of stock” at the moment.  This surge in demand changes the dynamics of the market and how we look at the washout low in Silver.

If demand continues to surge, which we have no reason to doubt at this stage of the Covid-19 virus event, and Silver begins to rally as it did in 2002~2005, then the Gold/Silver ratio will begin to collapse just as it did in 2003~2007 (see the first chart – Post “A”).  This means the demand for metals is skyrocketing and Silver has suddenly become a more “in demand” physical metal than Gold.

Current Gold Weekly Chart

We believe the next phase of price action in Gold is a move above $1990 as demand for metals continues to surge.  This would represent a 100% Fibonacci price expansion of the last price rally from the lows set in September 2018 (near $1168).  It would also represent a rally from the current level of at least +22.50% in Gold.  Subsequently, if Silver begins to rally at a greater rate than Gold over this same span of time, Silver could rally to levels above $22 representing a +53% price rally according to our Adaptive Fibonacci Price Modeling system (the CYAN target on the chart above).

Pay attention to the Gold/Silver ratio and the price of Silver compared to Gold over the next 30 to 60+ days.  If our research is correct, the current low price of Silver will be a distant memory in less than 60 days and a tandem price advance in both Gold and Silver will propel the metals much higher.  How much higher?  From 2003 to the peak in 2011, Gold rallied 450% (from $350 to over $1900).  Over that same span of time, Silver rallied 1024% (from $4.50 to just under $50).

If we are right about this pattern setup and the future opportunities it may present, we could see Silver trading above $160 per ounce within 4 to 7 years.  Can you guess where Gold would likely be trading if Silver rallied 1000% from current levels?  We already have our positions established and our targets setup.  Don’t miss this next big move in the metals.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Trading Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

 

What Is Next & How To Trade SP500 & Nasdaq (2000 Top Flashback): March 27, 2020

See how this year’s market action is nearly identical to that of the 2000 market top. Chris Vermeulen of http://www.TheTechnicalTraders.com shares his take on the chart pattern, but also why the chart pattern and crash happened and what is next. In short, everyone knows earnings are going to be bad, just like they knew in 2000.

S&P 500 and Nasdaq Video Analysis 27.03.20

 

Virus Curve, Market Crash, and Mortgage Massacre

In this last segment of our multi-part research article, we want to highlight our expectations of the Covid-19 virus event and how the next 6+ months of global market activity may play out.  We’ve covered some of the data points we believe are important and we’ve touched on the collateral damage that may be unknown at this time.  Today, we’ll try to put the bigger picture together for investors to help you understand what we believe may be the 12+ month outcome.

As the global central banks and US Fed attempt to come to the rescue, the reality is that monetary policy works better when consumers are able to actually go out and engage in spending and economic activity.  If the Covid-19 virus event contracts global consumer activity, as it has recently, for an extended period of time (4 to 6+ months), then we have a real issue with how QE efforts and consumer activity translate into any real recovery attempt.

The real risks to the global markets is an extended risk that the Covid-19 virus creates a contracting economic environment for many months/quarters and potentially fosters an environment where extensive collateral damage to corporations, consumer activity, credit/debt markets, and other massive financial risks boil over.

News is already starting to hit that QE is not helping the deteriorating situation in the Mortgage banking business.  Remember, this is the same segment of the financial industry that started the 2007-08 credit crisis event.  News that mortgage lenders and bankers are already starting to experience margin-calls and have attempted to contract their exposure to the risks in the markets (a bit late) are concerning.  This is a pretty big collateral damage risk for the global markets.

Additionally, as we expected, applications for new mortgages have collapsed to their lowest level since 2009.  Until consumers feel confident in their ability to get out, engage in real economic growth and take on home loans they know are relatively secure in their ability to repay – there is going to be a continued market contraction.  The next phase of this contraction is a price reduction, forced selling/foreclosures and a glut of assets waiting for a bottom.

“Home-purchase applications dropped by 14.6% while

refinancing applications plummeted 33.8%… “

I think the most important aspect of this global virus event is to remember that we will survive it (in some form) and we will live to rebuild after this event completes.  Yet, the reality is that we were not prepared for this event to happen and we don’t know the total scope of this Covid-19 virus event.  We simply don’t know how long it will take to remove the threat of the virus and for societies to reengage in normal economic activity – and that is the key to starting a real recovery.

Hong Kong has recently reported a “third wave” of Covid-19 infections.  I believe we should attempt to learn from places like Hong Kong, where news is moderately accurate and reported via social media and other resources.  If we want to learn what to expect in the US and how the process of containing this virus may play out, we need to start learning from other nations that are ahead of us in the curve.

It appears that any attempt to resume somewhat normal economic activities while the virus is still active spouts a new wave of infections.  This would suggest that the only way to attempt to reengage in any somewhat normal economic activity would be when a vaccine or true medical cure is in place to allow nations to attempt to eradicate the virus as these waves continue.

The price collapse in 2008-09 represented a -56% decline from top to bottom.  Currently, the S&P has fallen by just over 35%.  We don’t believe the bottom in the US stock market has setup just yet and we do believe there is a greater downside price risk ahead.  We don’t believe the housing market will be able to sustain any of the current price levels for much longer.  We believe the collateral damage of this event is just starting to be known and we believe a greater economic contraction is unfolding not only in the US but throughout the globe.

Skilled traders need to understand the total scope of this event.  We’ve attempted to highlight this risk in this article and in our “Crunching Numbers” research article (PART III).  An economic contraction, like the Covid-19 virus event, could contract global GDP by as much as 8 to 15% over an extended 16 to 36+ month span of time.  Are we concerned about the Real Estate market?  You Bet!  Are we concerned about global markets?  You Bet!  Are we prepared for this as traders? You Bet!  Are the central banks global nations prepared for this? We certainly hope so.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

 

Concerned About The Real Estate Market? Me Too – Part III

Our continuing research into the state of the Real Estate market suggests the Covid-19 virus event will likely put extreme pressure on many sectors within the US and global markets.  This, Part III of a multi-part research article, will highlight many of the key economic data points that will soon be released and how these numbers may shock the markets.  Additionally, as consumers and businesses prepare for an extended shutdown, it is important to understand the psychological process that takes place in the minds of people.  PART I, PART II

Initially, people naturally hope for a quick and reasonable solution.  As the process continues where an extended shutdown of the US economy persists, consumers and business managers change their expectations from optimism for a quick resumption of economic activity to “how do we survive this extended closure event”.  This is when traders and investors really need to pay attention to what is happening in their local and national economies.   One of the most important things to consider throughout an event like this is to watch how your local economy is operating and what is happening with local consumers.  This will help you understand what is happening elsewhere.

Demand for certain items will continue almost as normal.  We call this the Personal Consumer Essentials.  These items are typically things like toilet paper, toothpaste, over the counter medications, underwear, food, and water.  These are the types of purchases that must continue for average people to survive this type of event.  Luxury items, vacations, extras, and other purchases may suffer throughout this process.

The first 30 days will likely be a transition period for many consumers.  Remember, this is still the “hope” phase where consumers and business managers believe the entire thing will be over in 15 to 20 days and everything will go back to normal.  We really need to start to watch how China is engaging in trying to restart their economy and how other nations are dealing with the virus contagion.  Maybe the US will regain economic activity faster than other nations – maybe not.  The key to all of this is when consumers and business managers feel confident enough to engage in opportunistic growth investments and purchases – not just survival purchases.

Let’s take a look at some of the key economic data that will be presented over the next 15+ days…

Consumer Spending

If consumer spending falls below 0.5% for an extended period of time, the largest part of the US GDP calculation will have essentially vanished (consumers).  This will result in decreased economic activity, taxes, income and have far-reaching economic complications across the globe.  It is our belief that the initial phase of the US shutdown sparked a decent wave of consumer spending for survival supplies.  As we move further into this shutdown event, we believe Consumer Spending could easily fall below 0.5% for an extended period of time – possibly many months.

Jobless Claims

We expect Jobless claims to skyrocket.  We are hearing from local sources that the true number of unemployed in the US as a result of this virus event could be well above 4+ million right now.  It will take time for these people to process into the system – so this will be an interesting number to watch.  This number could send a shock-wave throughout the investment community as an extended rise in the jobless claims values would suggest a very deep recession is setting up.  No jobs, no income, no asset appreciation  – it’s simple.

Personal Income

Personal Income has fallen into severely negative territory only a few times over the past 30+ years.  We believe income levels will play an important role in understanding the true scope of this potential economic event and how to plan for a potential Real Estate collapse in the future.  If you are following our logic in posting these data points, you’ll quickly understand that Consumer Spending is related to a psychological consumer belief (either opportunistic or survival).  This psychological belief is related to having a job and a solid source of income.

In the past, we’ve often referred to the global economy as a “living being” operating in a localized environment – like a plant.  Typically, if the environment is healthy and abundant, the plant adopts a “growth phase” where it attempts to flower and expand into the environment.  If the environment is unhealthy, the plant changes into a “survival phase”  where it attempts to shed unneeded shoots and stems while trying to simply survive the unhealthy environment.  The plant can’t get up and walk to a better environment – it is forced to operate in either of these modes because it has no other choices.

Within a global event like the Covid-19 virus event, we are like these plants that I’m describing.  We can’t pack up and move to a better environment – we just have to deal with the phases and processes that are taking place within our environment – hoping to survive enough to be able to grow when the environment gets more healthy.

If personal income collapses, consumers will shift into a survival mode much quicker.  This is similar to the environment turning completely toxic over just a few days.

Non-Farm Payroll

Non-Farm Payroll data will also help us understand how toxic the economic environment has become in the US.  We purposely included the 2008-09 data on this chart to show you how the payroll data turned negative in late 2007 and early 2008 – well before the collapse really started to happen.  With the Covid-19 event taking place, we believe the process will be much quicker and violent.  If the nation-wide shutdown continues for more than 60+ days and/or the spread of the virus is not under some type of containment within the next 60 to 90+ days, the damage to the jobs market could be extensive.  That translates into the Real Estate market as very bearish.

Mortgage Rates

Even though the Fed has dropped interest rates, consumers may not be willing to engage in purchasing homes while this Covid-19 virus event continues.  Home prices are extremely high compared to historical values.  The Case-Shiller home index (below) suggests a move down to the 140~150 level would not be unreasonable – even with interest rates near ZERO again.

Case-Shiller National Home Index

If we are correct and an immediate and rather deep price decline takes place in the US housing market, it will set up a “race to real value” in terms of the market attempting to find what we call the “equilibrium” within the supply/demand curve.

A decrease in the Case-Shiller National Home Price Index to levels near 150~160 would represent a nation-wide price collapse of about 25~35% in the housing market.  Certain segments of the housing market may fall by even more extreme levels whereas other segments may fall by smaller amounts.

We believe the economic reaction related to the Covid-19 virus event will result in a “shock wave” type of collapse as the March 2020 (Q1) data is released in April and May 2020.  We believe the revised expectations and continued battle to contain the virus will continue to place extreme pricing pressure on certain asset values.  Commercial and Residential real estate is some of the largest price assets anyone could purchase and they’ve experienced a solid 8+ year price advance.  It does not seem illogical that a 20% to 30% decline could take place as a result of this Covid-19 virus event.

When you consider the real process of combating this virus event and the destruction that will take place across the US and the global economy over the next 6 to 12+ months, it is very likely that both commercial and residential real estate will fall from current lofty levels to price levels that are closer to the equilibrium of the supply/demand curve.

We also believe that foreclosures will continue to stack up – even if the banks are told not to process foreclosures for a 12 month period of time.  This does not stop the flow of consumers unable to continue their mortgage obligations – it just stops the banks from engaging in near foreclosure activity for a period of time.  The hope is that the markets may settle a bit before banks open the flood gates and start processing these faulty mortgages again.

In the next, last, portion of this research article, we’ll try to share some predictive analysis that may help you understand where the US stock market may find support and where the US real estate market may find a bottom.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

We Are Concerned About The Real Estate Market – Part II

Hedge funds and banking institutions may already be feeling the pressure to attempt to contain the losses that are piling up (source: bloomberg).

An extended decline in the global markets will continue to place pressure on institutional financial markets, banks, hedge funds, and other traditional lending and investment firms.  Investors will start to pull investment capital away from risk (out of the markets and funds) and may expose some of these larger institutions’ excessive leverage and risk exposure in the process.

This is almost exactly what happened with Bernie Madoff when his firm, Bernard L. Madoff Investment Securities, collapsed in December 2008.  As long as there was no pressure on his firm from clients pulling out capital or asking too many questions, he was allowed to continue running his Ponzi scheme.  Once investors started pulling capital out of the firm and questioning the transactions/reports, it became evident that it was all a house of cards and would come crashing down quickly.

If larger investment firms and hedge funds are attempting to “buy the dip” at this point in time, we believe they are making a grave mistake.  We believe the downside risks associated with the Covid-19 virus event are just starting to unfold and the collateral damage that may come from this massive global shutdown that is currently taking place will be unprecedented.  We don’t believe there has been anything like this happening in any recent history – even WWII pales in comparison to this event.

News is starting to hit the wires about large investment firms and Real Estate investment companies sounding the alarm. The fear is evident in the short content of a news article.

“Loan repayment demands are likely to escalate on a systemic level, triggering a domino effect of borrower defaults that will swiftly and severely impact the broad range of stakeholders in the entire real estate market, including property and homeowners, landlords, developers, hotel operators, and their respective tenants and employees,” he wrote.

Just take look at the foreclosures in the major cities starting to spike in the maps below. This was before the virus closed down most businesses, and everyone losing their jobs. Give the fact that 70% or more of the world lives pay-check to pay-check, foreclosures and real estate values are likely to plummet lower to an extreme similar to how overpriced they are now.

I have talked about his in some presentations, and in videos in the past how real estate is grossly overvalued and when the music stops, prices will tumble. Huge opportunities for those who can preserve their capital until the recession matures enough will be able to buy real estate, businesses, and equipment for pennies on the dollar, but this will take another 1-2 years from now I imagine, but it will be great for those with money on hand when things get ugly.

Current Los Angeles Foreclosure Map
(Source: Zillow.com)

Current Los Angeles Foreclosure Map

Current San Francisco Foreclosure Map

Current San Francisco Foreclosure Map

Current New York Foreclosure Map

Current New York Foreclosure Map

Many of you may remember my Crunching Numbers article from just a week ago where I attempted to model what I believe would be the likely outcome of US GDP over the next 5+ years?  Well, it now appears others are following up with their own predictions for US GDP.   Based on some of the expectations within this Bloomberg article, my predictions pale in comparison to these comments.  Source: https://www.bloomberg.com

Now, let’s try to be realistic about how this entire process is likely to take place.  We know the economy will find a base (at some point) and attempt to recover from this virus event.  The question is what does that base look like and where is the bottom?

We won’t really know where the bottom is in the global markets until most of the unknowns have been processed, most of the collateral damage has been identified and processed, and consumers realize the bottom is in sight.  At that point, there is a real chance that the global markets will begin a recovery process that may eventually push to new all-time highs.

What we’re concerned about right now is the Q1 and Q2 economic activity and how that relates to consumer markets, credit markets, existing business enterprises and the potential collateral damage to hard assets like homes, commercial real estate and other foundations of wealth.  We believe the first few dominos of this event will be the collapse of jobs, earnings, and consumer spending.  The longer the global stays in a mostly shutdown economic environment, the greater the risks these critical numbers will implode – possibly taking with it the rest of the economy.

We believe the suspension of Foreclosures for a potential 12 month period may not reduce the total number of foreclosures across the US, we believe it may compound the problem.  The suspension effort is designed to help people stay in their homes if their incomes become threatened or lost.  But the reality is that a Foreclosure suspension will simply start to build larger and larger numbers of properties in foreclosure (waiting for the suspension to be lifted) while home prices potentially collapse.

We’ll dig into more data in Part III of this article and attempt to illustrate the data we believe will point to a clearer picture of how all of this may unfold in the near future.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

Concerned About The Real Estate Market? Us Too – Part I

The current global Covid-19 virus event has upended everyone’s forward expectations related to the US and global economy.  Recently, President Trump has announced a 12-month reprieve for homeowners who find themselves without income, or a job, because of the US National Emergency related to the Covid-19 pandemic (source: https://www.npr.org).  All of the recent repositionings of the global markets and forward expectations got us thinking about “what happens after 8 to 12+ months?  How will the US and global markets attempt a recovery process – if at all?”.  Today, we are going to try to start digging into the data that we believe is relevant to the future in terms of hard asset prices (home and other property) and more liquid asset prices (global financial markets).

First, we want to preface this article by stating that humans are somewhat predictable in terms of how they will react in emergency or panic situations like this current Covid-19 pandemic.  Initially, they will react to protect what is vital to them (family, assets, safety).  This same thing happened in the 2008-09 credit market crisis market collapse.  Then, after a bit more time, people change their thinking and start to adapt to the situation as it unfolds.  We believe that 30 to 60 days from now, as more information becomes available and consumers globally are more capable of addressing the true longer-term risks of this virus event, a social process will begin to take place where valuations and expectations will adjust to the new perceived outcome (whatever that may be).

The global stock market has collapsed nearly -35% based on our Custom Indexes.  The SPY has collapsed -32.25% since February 23, 2020.  During the 2008-09 Credit Crisis, the SPY collapsed -57.50% before finding a bottom near $67.10.  We believe this initial price decline in the global markets is just the first downside price collapse of what may become many.  Ultimately, we believe the 2015/2016 lows will become the ultimate support for this downside move in the US markets.

SPY Weekly Chart

Custom Real Estate Index Weekly Chart

Custom European Index Weekly Chart

The data that is currently being reported and posted is data from January and February 2020.  Current expectations for March data look grim (at best).  Jobless claims, hours worked, and other economic data for the US and global markets may shock investors and the general public for many months to come.  In 2008-09, these types of large economic contraction numbers were not uncommon.  We want to prepare all of our friends and followers that we believe the next 6 to 12+ months could somewhat mirror what we saw in 2008-09 – be prepared.

If our assumptions are correct, the reprieve in Foreclosures and Mortgage repayments for US consumers may not do much to resolve the ultimate problem.  The problem will quickly revolve around the issue of how quickly the US economy can resume somewhat normal functions after the virus event subsides.  We believe the reprieve offered to US consumers will assist in making the data a bit more tolerable for a short period of time, but ultimately any extended disruption in the US and global economy will result in extended risks in hard assets like homes, commercial property, and future valuation expectations.

(Source: realtytrac.com/statsandtrends/foreclosuretrends/)

This multi-part research article will dig deeper into the data and expected data to help you prepare for what may be likely in the markets (hard and soft).  Now is the time to prepare for what could become one of the biggest disruptions in the global markets and global society we’ve ever seen.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

 

Cash Is King, Not Gold, Not Bonds

Exactly one month ago, on February 20th, the SP500 made an all-time high and reversed its trend to the downside. What a wild ride the last month has been across virtually all asset classes.

Out of all the major indexes, commodities, and currencies, only one asset and trade moved higher. It’s no surprise given the title that cash or the US Dollar is the asset of choice having rallied over 9% while everything else fell with bonds down 22.75%, stocks 30%-40%, gold miners 58%, and crude down 62%.

My team and I have talked about this rotation to safety into USA/US Dollar since the lows back in 2018. During the recent stock and commodity price crash, we have seen where investors are dumping their money. It’s not gold, it’s not bonds, but the US Currency. Stocks and commodities are being sold around the globe, and that money is buying up the US dollar.

US Dollar Rises Above the Rest
Proof the Greenback is Still the #1 Currency World Wide

Daily S&P 500 Index – Support, Bottoming signal, and Resistance

The 30+% correction in the ST&P 500 index has been an extraordinary event. Those who have proven trading strategies and abide strictly to position, and risk management rules have been able to not only avoid the market crash but profit and reach new account highs. While those who trade for the thrill, expect oversized gains regularly, and who don’t have a clear trading plan or position management are suffering from the recent selloff.

Ok, so let us jump into the charts. As a technical analysis and trader since 1997, I have been through a couple of bull/bear market cycles. I have a good pulse on the market and timing key turning points for short-term swing traders and long-term investors.

As you will see from the chart below, I keep things easy for you to see visually and get the idea of what to expect moving forward. The green line is a very significant long term support level on the S&P 500 index. Knowing that price has fallen straight down to this level gives us a much higher chance of a bounce at a minimum.

Trade Tip: The faster the price moves to a critical support or resistance level, the higher the chance you will have a bounce back from that level for a candlestick or three.

The pink arrow on the chart points towards a candlestick pattern, which I call Tweezers. These should be seen as a possible reversal signal.

Lastly, is the red resistance zone. I know it’s a huge range, but at this point, it’s the area we will zero in on once/if price starts to near that level.

30 Minute S&P 500 Trading Chart

This chart is the 30-minute chart of the index and only shows regular trading hours between 9:30 am ET and 4 pm ET. While this is only 1/3rd of the trading day for futures, it is when the majority of contracts/shares are traded, so that is my main focus for analysis.

Since 2001 I have been building and refining my trading strategies to make them somewhat automated. This chart below shows my trend colored chart, which is the basis of my trading for almost all asset classes. What the S&P 500 does directly relates to how I trade or avoid other asset classes.

Recently, we created a market gauge showing you visually where the market is within its 30-50 day price cycle.

When the trend changed, and the bars turned orange on Feb 25th subscribers, and I closed our equities position because they were now out of favor. This allowed us to avoid the market crash through trend analysis, and from our trailing stop order.

First Wave of Safety Was in Bonds

The two charts below of bonds show the same trend and trades but share some different trading tips.

The first 30-minute chart shows a pink line, which was our trend trade. The strategy is to look for large patterns, wait for a trend change, and then take advantage of the new trend. This trade we entered mid-January.

The key points from this chart are to know when the price goes parabolic in any direction and with huge price gaps, know its time to start scaling out of a trade, or close it.

The second point is that you must have a trading plan and actively manage your trade by moving up protective stop orders, so when price corrects, you are taken out of the trade automatically.

This daily chart of bonds shows the large bullish chart pattern (bull flag). I waited for price to breakout, the trend to turn green, and then entered the trade using Fibonacci extensions for price targets, which I have found are the absolute best way to spot our price targets. If bonds were to rally to the 100% measured move, we would close the trade, and that is what happened exactly.

A few things took place at that price level, which has the charts screaming at me to sell. First, the 100% target was reached. The second was that price was going parabolic with a 10% gap higher above my target, and volume was extremely high, meaning everyone, including their grandmother, were buying bonds. If everyone is buying the same thing, its time to move on to a new chart.

Gold and Gold Miners as a Safe Haven

While subscribers of my ETF trading signals and I profited on GDXJ as an early safe-haven trade exiting our position at the high tick of the day before it reversed and fell 58%, most traders I know still hold their gold miner’s positions.

For most of us, it is tough to sell a winning trade, and it is even harder to sell a losing trade. And knowing most trades will turn into a losing trade if you hold them long enough, the odds are clearly stacked against you as a trader.

This pullback in metals and miners, which turned into something much larger than I ever expected, is a huge shock to most people. The reality is history shows during extreme volatility/fear both gold and bonds collapse, and it is nothing new or unexpected.

In fact, I posted a warning that both will fall two days before they topped and collapsed.

Concluding Thoughts:

In short, we are experiencing some unprecedented price swings in the financial system, but other than extra-large market selloffs, and rallies the charts are still moving and telling us the same things for trading and investing.

There are times when the markets are untradable as a swing trader, which is has been the last 15 days because of how them market has been moving. It is a fantastic time for day traders, but with some sectors moving 10-25% a day back to back like the gold miners or crude oil, it is high-risk trading (gambling) right now.

With all that said, my inter-market analysis is pointing to some tradable price action potentially starting next week. The potential is larger than normal because price volatility remains elevated, meaning 10-20% moves over a week or two are expected.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

 

Four Key Questions To This Crisis Everyone is Asking

Recently, I was asked to participate in a live radio talk with Arnold Gay and Yasmin Wonkers at Money 89.3 Asia First and was sent the following questions to prepare for the show.  I thought this would be a great way to share my thoughts and expectations related to the Covid-19 virus, global economics and what the Central Banks are doing to combat this virus economic event.

The reality is that the bottom in the markets won’t set up until fear subsides and the unknowns related to this virus event are behind us.  Until then, the global markets will attempt to seek out the true valuation levels based on this fear and the unknowns.  This means true valuation could be much further away from current price levels as the virus event is still very fluid in nature.

I’ve included a few of our custom index charts to highlight exactly where the markets are currently situated and have attempted to explain my thinking related to these charts.  Please continue reading.

Custom Smart Cash Index Weekly Chart

This first chart is our Custom Smart Cash Index Weekly Chart.  We had been expecting a breakdown in the US stock market last August/September 2019 (near the origination point of the line on the RSI pane) as our Super-Cycle system indicated a major breakdown was likely near the end of 2019 and into early 2020.

As the US Fed started pumping credit into the Repo market and the US/China trade deal settled over many months, a zombie-like price rally pushed prices higher through December 2019 and into early 2020.  We alerted our members that this was likely a blow-off rally and to prepare for greater risks.

You can see how dramatic the change in trend actually is on this chart.  We have broken the upward sloping price channel and moved all the way to the lower range of the GREEN downward sloping price channel.  This is HUGE.  Near these levels, we believe the US stock market will attempt to find support while continuing to rotate and setup additional “waterfall downside price events”.  These custom indexes help us to understand the “hidden side” of the market price action.

Weekly Custom US Stock Market Index

This next Weekly chart is the Custom US Stock Market Index and we want you to pay very close attention to the fact that the recent lows have come all the way down to reach the upper range of the 2016 trading range.  Once the 2018 lows were breached, we knew the markets were setting up for a deeper downside price move.

We do believe this current level is likely to prompt some type of “Dead Cat Bounce” or moderate support though.  The entire range of 2016 (low, midpoint and high) are very much in play right now as these represent the current support levels for the US stock market.  We do believe some moderate support will be found near these levels – yet we have to wait for the price to confirm this bottom setup.

Weekly Custom Volatility Index

This is our Weekly Custom Volatility Index and the extremely low price level on this chart suggests the US stock market may attempt to try to find moderate support soon.  We have not seen levels this low since 2009.  If the markets continue to push lower, this Custom Index will continue to stay below 6.0 as the price continues to decline.  Yet, we believe this extremely low price level may set up a bit of support near recent lows (within the 2016 range) and may set up a sideways FLAG formation before the next downside price leg.

Please continue reading the questions (below) and answers/thoughts to those questions (below the questions).  We certainly hope this information helps you to understand and prepare for the next 6 to 12+ months as we believe the volatility and unknowns will persist for at least another 4 to 6+ months.

Questions:

1. Rates at zero, massive injections and coordinated central bank action… why isn’t the market convinced the situation is under control?

2. What are investors looking for now – A peak in coronavirus infection rates? A sense that a proper healthcare response is in place and won’t be overwhelmed?

3. The main issue seems to be that this is not a slowdown, but the sudden closure of economic activity, do you see massive fiscal support coming, including bailouts for sectors like airlines?

4. Do you get a sense that the White House finally gets it, and is now moving to reassure markets and ordinary Americans?

Answers/Thoughts:

The markets are not reacting to what the global central banks are doing right now and probably won’t react positively until two things happen: fear of the unknown subsides across the globe and the total scope of the global economic destruction is assessed (think of this as TRUE PRICE VALUATION).  Right now, we are in the midst of a self-actuating supply and demand-side economic contraction that will result in a renewed valuation level as markets digest the ongoing efforts to contain/stop this virus.  Where is the bottom, I have an idea of where the bottom might setup – but the price will be what dictates if that becomes true.

If 2018 lows fail to hold as a support level, then we are very likely going to attempt to reach the 2016 trading range and I believe the midpoint and low price range of 2016 are excellent support levels for the market. I show the SP500, Nasdaq and Dow Jones index analysis and prediction in this video below.

What we are looking for in terms of closure of this event (or at least a pathway out of it) is some type of established containment of the event, the spread of the infections and the ability for governments and economies to begin to advance forward again.  As long as we are stuck in reverse and do not have any real control of the forward objective (meaning consumers, corporations and governments are reacting to this event), then we will have no opportunity to properly estimate forward expectations and advancement in local and global economies – and that is the real problem.

The White House and most governments get it and are not missing any data with regards to this virus event.  I truly believe that once this virus event ends and the general population gets back to “business as normal”, the world’s economy will, fairly quickly, return to some form of normal – with advancing expectations, new technology and continued global economic and banking functions.  Until that happens, which is the effective containment and control of this virus event, then no amount of money or speech writing is going to change anything.

Far too many people are acting emotionally and afraid right now.  The facts are simple; until we get a proper handle on this virus event, there will continue to be extended threats to our economy, people, families and almost every aspect of our infrastructure, banking, society and more.  Once the virus event is mostly contained and settled, then we can get back to business cleaning up this mess and finding our way forward.

I’m not worried too much, my research team and I advised our clients to move into bonds and cash before the drop in equities and have been warning our members of a “zombie-rally) for the past 5+ months which took place as expected.  We called for a “volatile 2020 with a very strong potential for a breakdown in global markets” near August 2019.  This is playing out almost exactly like we expected (except we had no idea a virus event would be the cause).

I firmly believe the global leaders and dozens of technology firms will have a vaccine and new medical advancements to address the Covid-19 virus.  I believe this event will be mostly behind us in about 90+ days.  What happens at that point is still unknown, but I believe we will be able to see a pathway forward and I believe all nations will work together to strengthen our future.

In closing, I urge everyone to try to relax a bit and understand this is a broad (global) market event with a bunch of unknowns.  It is not like the Fed can just throw money at this problem and make it go away.  This is going to be a process where multiple nations and various industries and groups of people will have to work together to reduce and eliminate this threat.  Because of that, there are no real clear answers right now – other than to be prepared for a few months of quarantine to be safe.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Chris Vermeulen
www.TheTechnicalTraders.com

How To Trade Gold & Bonds During High Volatility: March 18 2020

Chris Vermeulen of http://www.TheTechnicalTraders.com shares his take on the Gold and Bond market corrections. You should not have been surprised at all and should have profited from this recent price action. FX Empire posted my special report warning of this and my analysis here: https://www.fxempire.com/forecasts/article/fear-reaches-a-level-seen-only-4-times-since-2008-signature-pattern-637481

Find out what is next and watch this video.

How To Trade Gold & Bonds During High Volatility: March 18, 2020

S&P500, Nasdaq, Dow & Oil Analysis for March 18, 2020

Chris Vermeulen of http://www.TheTechnicalTraders.com shares his take on the weakest and strongest indexes, along with his current price forecast on crude oil. All major US indexes have more downside potential this week but should find a bottom at these critical support levels and provide a new trade setup in equities soon. Chris’ Fibonacci price extension target for crude oil is $17 per barrel, which may sound extreme but that is what the charts are pointing to.

S&P500, Nasdaq, Dow & Oil  Video Analysis for March 18, 2020