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What happens To The Global Economy If Oil Collapses Below $40 – Part I

Currently, commodity prices are the cheapest they’ve been in over 40 years compared to equity prices.  US Equities have continued to rise over the past 7+ years due to a number of external processes.  QE1, 2, 3, and Fed Debt Purchases Share Buy-Backs and creative credit facilities.  Only recently have investors really started to pile into the US stock market (see charts below). Global investors were very cautious throughout the rally from 2011 to 2016.  In fact, the amount of capital invested within the US money market accounts was relatively flat throughout that entire time.

It was only after the 2016 US presidential election that investors really began to have confidence in the global economy and started piling into the US stock market and money market accounts.  This was also after the time that Oil began to collapse (2014~16) as well as the deflation of Emerging Markets rallies.  With all this new money having entered the global markets and equities being extremely overbought currently, what would happen is Oil collapsed below $40 and the global economic outlook soured headed into the 2020 US presidential election?

On July 10, 2019, we authored a research article using our ADL predictive modeling for Oil.  At that time, we predicted Oil would fall in August, recover in September and October, then collapse to near $42 (or lower) in November and December.  You can read our followup to this article here.

Currently, Oil has followed our ADL predictive modeling relatively closely over the past few months.  Although the attack in Saudi Arabia sent prices skyrocketing in mid-September, Crude price has generally stayed within our expected ranges and has recently settled near $55.  If you notice the two GREEN BARS on the chart, above, September and October price expectations suggested price settling near $54 and 59 throughout those two months.  Now, with November upon us, the ADL predictive modeling system is suggesting Oil prices will collapse from levels near $58 to levels near $40 – a massive 31% price collapse.  In reality, the price could fall below on a deeper price decline event.

This Crude Oil chart highlights what we believe may happen in Oil over the next few weeks and months – where price may collapse below $40.  Yet, we started asking another question..  What happens to the global economy if Oil prices collapse below $40 before the end of 2019?  What happens to the nations that depend on exported Oil income and to central bank functions within the economy?

When we start to understand the correlation between the price of Oil and the expectations throughout the global market, we must immediately focus on the income expectations of nations that rely on oil as the main source of income.  If our ADL predictions are correct, Oil will begin to plunge to levels near $40 (possibly below $40) over the next 3~4 months.  How will foreign nations react to this loss of income and who are the most dependent nations on Oil revenues.

Oil-producing nations vary in scale across the world, yet the United States, Saudi Arabia and Russia are the largest producers.  Nations that are the most dependent on Oil revenues are some of the smaller, less mature economies of the world.  Should the supply of oil stay relatively consistent across the globe while an extended economic contraction continues, we must begin to question the sustainability of various nations in terms of oil revenues.

For many of these nations, the income from Oil exports make up more than 15% of their annual GDP – in some cases, with Brunei, Kuwait, Libya, the Republic of Congo, Saudi Arabia and Singapore, oil revenues make up more than 30% of GDP.  How would a dramatic decrease in oil prices act as an economic destabilization event for these nations? Could they survive the event?

If the price of oil were to fall to $40 from current levels (near $67), this would represent a 40%+ price decline.  Oil revenues for all nations would likely collapse by similar amounts.  Nations that are most dependent on oil revenues would be hardest hit and this decrease in national revenue would likely increase strains on future operations, debt/credit as well as potentially create massive social unrest and strife.

If our ADL predictive modeling system is accurate and oil prices collapse to near $40, the economic, social and future strains this creates for many nations become even more severe – at a time when an economic contraction is taking place.  This type of commodity price collapse could lead the world into a chaotic economic mess if it is prolonged.

In Part II of this article, we’ll explore the ramifications of this potential oil price collapse across the global stock market and other factors that may be setting up to drive a period of uncertainty and volatility within the global markets.

Opportunities are all around us.  Using the right tools to identify the true technical cycles, price cycles, and trading setup can help to eliminate risks and hone into more profitable trades.  It is almost impossible to time market tops and bottoms accurately, yet, as you can see from our work above, we have tools that can help us see into the future and help to predict when major price peaks and valleys should form.  Using a tool like this to help you determine when the real opportunity exists and when to time your trades will only improve your market insights and trading results….

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 both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Chris Vermeulen
www.TheTechnicalTraders.com

US Fed Set To Rattle Global Markets – Part II

Today is the day for the US Fed to announce their rate decision and we believe the 25 basis point rate cut is the only option they have at the moment that will attempt to settle foreign market fears and allow for a suitable “unwinding” of the credit/debt “setup” we highlighted in Part I of this research post.

We believe out August 19 expectation of a global market PEAK and the beginning of a price reversion move is related to multiple aspects of the timing of this Fed move and the current global economic outlook.  The unwinding of this debt/credit bubble will likely take many more years to unravel.  Yet, right now the US Fed is trapped in a scenario they never expected to find themselves in.  Either continue to run policy that supports the US economy (where rates would likely stay between 1.75 to 2.75) over the next 5+ years or yield to the global market and attempt to address a proper exit capability for this debt/credit “setup”.

We believe global investors are expecting a massive collapse in the US stock market as a reaction to this move by the Fed and because of the expectation that another bubble has set up in the US.  But we believe the actual bubble is set up in the foreign markets and not so much in the US.  Yes, the US markets have extended to near all-time highs and the US consumer is running somewhat lean.  It would be natural for the US economy to revert to lower price levels and for the US economy to rotate as “price exploration” attempts to find true market support.  Yet, our fear is that the foreign markets are much more fragile than anyone understands at the moment and that a reversion in the US markets will prompt a potential collapse in certain foreign markets.

Weekly SPY chart

This Weekly SPY chart highlights what we expect to transpire over the next 6 to 8+ months.  We believe the August 19 peak date that we predicted months ago will likely start a process that will be tied to the US election cycle event (2020) and the US Fed in combination with global market events.  We believe a reversion price process is about to unfold that could be prompted into action over the next 2+ weeks by the US Fed, trade issues and global central banks.

If the US Fed drops the FFR by 25pb, the fragility of the foreign market debt/credit issues is not really abated or resolved.  It just allows for a bit of breathing room that may allow these foreign debtors enough room to wiggle out of some of their problems.  The US Fed would have to decrease rates by at least 75 basis point before any real relief will materialize for these foreign debtors.

Asian Currency Custom Index

This Asian Currency Custom Index used by our research team highlights the weakness in the foreign markets.  The recovery in 2018 is related to the Chinese/Asian currency market recovery that initiated in Feb/Mar 2018.  The recent weakness in this custom index is related to strengthening major market currencies (USD, CAD, JPY, CHF) in relation to weakening Asian currencies.  Notice how the price channels have set up to warn us that any further downside move will initiate a new “price exploration” phase that could see a -20% to -25% decrease in currency valuations – possibly much deeper.

We believe this is the real reason the US Fed is opting to decrease the FFR rate now and is not taking a more stern position related to US economic performance.  We believe the US Fed is, again, donning the “Superman cape” and attempting to Save The World from their own debt/credit mess.

We are holding to our original predictions and expectations.  We believe the US stock market indexes will enter a reversion price phase over the next few weeks that will prompt a downside price reversion toward recent lows (2018 levels or deeper).  We believe this process will end in early 2020 and that the lows established by this move will represent incredible opportunities for skilled technical traders.

Weekly Dow Jones chart

This Weekly Dow Jones chart highlights our expectations.  We believe a mild price rotation will start this move over the next 2~4 weeks before the August 19, 2019 date prompts a breakdown move.  After that date, we believe an extended downside price leg will continue to reach a price bottom near the end of 2019 or in early 2020.

This Weekly Dow Jones chart highlights our expectations.  We believe a mild price rotation will start this move over the next 2~4 weeks before the August 19, 2019 date prompts a breakdown move.  After that date, we believe an extended downside price leg will continue to reach a price bottom near the end of 2019 or in early 2020.

Skilled traders understand how the global markets are setting up for incredible opportunities and how to identify where and when these opportunities are ripe for profits and this is where we can help you!

CRUCIAL WARNING SIGNS ABOUT GOLD, SILVER, MINERS, AND S&P 500

In early June I posted a detailed video explaining in showing the bottoming formation and gold and where to spot the breakout level, I also talked about crude oil reaching it upside target after a double bottom, and I called short term top in the SP 500 index. This was one of my premarket videos for members it gives you a good taste of what you can expect each and every morning before the Opening Bell. Watch Video Here.

I then posted a detailed report talking about where the next bull and bear markets are and how to identify them. This report focused mainly on the SP 500 index and the gold miners index. My charts compared the 2008 market top and bear market along with the 2019 market prices today. See Comparison Charts Here.

On June 26th I posted that silver was likely to pause for a week or two before it took another run up on June 26. This played out perfectly as well and silver is now head up to our first key price target of $17. See Silver Price Cycle and Analysis.

More recently on July 16th, I warned that the next financial crisis (bear market) was scary close, possibly just a couple weeks away. The charts I posted will make you really start to worry. See Scary Bear Market Setup Charts.

CONCLUDING THOUGHTS:

In short, you should be starting to get a feel of where each commodity and asset class is headed for the next 8+ months. The next step is knowing when and what to buy and sell as these turning points take place, and this is the hard part. If you want someone to guide you through the next 12-24 months complete with detailed market analysis and trade alerts (entry, targets and exit price levels) join my ETF Trading Newsletter.

Be prepared for these incredible price swings before they happen and learn how you can identify and trade these fantastic trading opportunities in 2019, 2020, and beyond with our  Wealth Building & Global Financial Reset Newsletter.  You won’t want to miss this big move, folks.  As you can see from our research, everything has been setting up for this move for many months.

Join me with a 1 or 2-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis.

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 both short-term swing trading and long-term investment capital. The opportunities starting to present themselves will be life-changing if handled properly.

FREE GOLD OR SILVER WITH MEMBERSHIP!

Kill two birds with one stone and subscribe for two years to get your FREE PRECIOUS METAL and get enough trades to profit through the next metals bull market and financial crisis!

Chris Vermeulen – www.TheTechnicalTraders.com

Trade Issues Will Drive Market Trends – PART II

In PART I of this report we talked about and showed you the charts of the Hang Seng and DAX index charts and what is likely to unfold. In today’s report here we touch on the US markets. As we’ve suggested within our earlier research posts this year, US election cycles tend to prompt massive price rotations when the election cycles are intense.  For example, the 2000 election of George W. Bush prompted a very mild price rotation in 1999~2000.  This was likely because the transition from Clinton to Bush II was not overly contentious.  The 2008 election of Barrack Obama was a moderately contested election cycle and happened at the time of the biggest credit market collapse in modern history – thus, the markets were well on their way lower 12+ months before the elections.  The 2012 election cycle showed moderate price rotation as it was a highly contested election event in the US.  The 2015-16 election event was highly contested as well and the price rotation near this time appears longer and deeper than the 2012 event.

Now, in 2020, we have one of the biggest, most highly contested US election cycles in recent history unfolding and we have already begun to see a price range /rotation over the past 12+ months that suggests we could see even bigger price rotation.  If we add into this mix the US/China trade issues, global market concerns, US political rhetoric, and other issues, we have a recipe for A BIG MOVE setting up.

 

Our analysis still suggests that we are poised for an attempt at fresh new all-time highs before any massive price rotation takes place (near the upper trend line).  Yet, we believe the downside price rotation is an eventual component of the next 16+ months of the US election cycle and the future price advance that should take place in the near future.  In other words, we believe the markets are setting up for a bigger shake-out throughout this election cycle/trade issue event that will prompt lower prices before the end of 2019.  We do believe the markets will settle and resume an upward trend bias after this downside price rotation – yet we don’t know exactly when that will happen.

 

To the best of our ability to predict the future, we can state this at the moment.  It appears the end of 2019 will be filled with large price rotation – likely to the downside as trade issues and election/political issues cause a “shock-wave” in the markets.  We believe early 2020 will see a relief rally that may setup a bigger price move throughout the remainder of 2020.  Right now, traders need to be prepared for an incredible increase in volatility and price rotation.  It is very likely that we will see a VIX level above 40 at some point before the end of 2019.  This is a time for skilled traders to get in, get profits and get out.  Position trading over the next 12+ months will be very difficult.

For active swing traders, you are going to love our daily trading analysis. On May 1st we talked about the old saying goes, “Sell in May and Go Away!” and that is exactly what is happening now right on queue. In fact, we closed out our SDS position on Thursday for a quick 3.9% profit and our other new trade started Thursday is up 18% already.

Second, my birthday is only three days away and I think its time I open the doors for a once a year opportunity for everyone to get a gift that could have some considerable value in the future.

Right now I am going to give away and shipping out silver rounds to anyone who buys a 1-year, or 2-year subscription to my Wealth Trading Newsletter. I only have 5 left as they are going fast so be sure to upgrade your membership to a longer-term subscription or if you are new, join one of these two plans, and you will receive:

1-Year Subscription Gets One 1oz Silver Round FREE
(Could be worth hundreds of dollars)

2-Year Subscription Gets TWO 1oz Silver Rounds FREE
(Could be worth a lot in the future)

I only have 5 more silver rounds I’m giving away
so upgrade or join now before its too late!

SUBSCRIBE TO MY TRADE ALERTS AND GET YOUR FREE SILVER ROUNDS!

Happy May Everyone!

Chris Vermeulen