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Weakness Appears To Be Setting For This Week’s 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.

Before you continue, be sure to opt-in to our free market trend signals 
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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. We issued an Important Trade and Investment Alert Yesterday.

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.

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!

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.

Concerned About The Real Estate Market? Us Too!

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.

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

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

Part III – Crunching Some Numbers – Virus, Market Crash, Rate Cuts

In this section of this multi-part research article related to the potential economic destruction of the Covid-19 virus event across the global markets (Part IPart II).

We’re going to peer into data related to the GDP and other factors of the US economy.  Remember, the US economy is the largest single economy and consumption component in the world.  As we suggested in our earlier research, the US and China (combined) account for about 30% of the total global GDP each year.  The top 12+ GDP nations on the planet account for just under 80% of the total annual GDP for the globe.  What happens if economic activity and global GDP collapse for the next 24+ months because of the Covid-19 virus?

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

The second thing we want to discuss is the real potential for economic interruption within the global markets.  As of today, the US has declared an emergency status and many states and cities have already started to shut down schools, sporting events, entertainment venues and many other aspects of the US economy.  Additionally, a travel ban has been set up in an attempt to prevent the spread of the Covid-19 virus and the potential of an uncontrolled global contagion.  We believe these travel restrictions will stay in place for at least 60+ days and we believe the spread of this virus will continue for at least another 45+ days before potentially “leveling off”.

The third thing we want to discuss is the economic fallout that is resulting from this Covid-19 event.  It has clearly become evident that exporting a large portion of our manufacturing capabilities to China and other nations puts the USA in a very dangerous situation.  China has threatened to withhold vital medical supplies and other items from the USA over the past few weeks as China attempts to blame the USA for initiating this virus event.  Simply put, America will not be held hostage by China under any circumstances.

Additionally, we believe other mature economies and nations are also starting to reconsider many policies and manufacturing processes related to this event.  Although we don’t have any real proof that this Covid-19 virus event originated in a Chinese lab in China, the very first instance of this virus was documented in China in November 2019 and didn’t really spread to any other country until well into 2020.  It makes perfect sense this Virus originated in China and spread throughout the Chinese New Year to other nations.

Debt and Banking capabilities become a real issue at times when consumers shift spending and economic habits.  Large sectors of the economy become “at-risk” very quickly.  The way our researchers put it is “isolated economic events may cause certain economic events to unfold, but extended economic events put greater pressure on even mostly healthy corporations and enterprises as lack of revenues and a shift in consumer activity can result in a broad market collapse”.

So, here we have the setup of the economic event and now we can speculate about the consequences.  Our researchers believe the immediate needs of all nations is to attempt to contain this virus event and to reconsider policies and manufacturing processes/locations to eliminate risks related to hostile countries.  Is it worth it to save a few pennies to manufacture something while putting your entire nation at risk when an event like this happens?

The funny thing about all major events, like this, is that usually cause people and nations to “shift gears”.  Remember after 9/11 how America shifted away from certain policies and came together to support our military against terrorists around the world?  Remember after the 2008-09 credit crisis how the US took immediate steps to attempt to prevent this type of financial event from happening again and how consumers were “shell-shocked” to re-enter the marketplace after the fallout?  This same type of social constriction happens all over the world as consumers/people act in a flock-mentality.

WHAT DO OUR RESEARCHERS BELIEVE IS THE MOST LIKELY OUTCOME FOR Q1 AND Q2 OF 2020?

We took the past 73 years of quarterly US GDP data and attempted to run two rolling Standard Deviations on them.  The first, a 12 quarter (roughly three years) rolling Standard Deviation.  The second, a full 10-year rolling Standard Deviation.  The purpose of this was to determine how volatile past economic events have been related to these standard deviation ranges.

There have only been a few economic events that meet any of the criteria similar to the Covid-19 virus event.  The closest was the 2008-09 Credit Crisis.  All other events were isolated US types of events related to bubble events and Federal Reserve functions.

1957-1958: a collapse in GDP growth (below the 12 QTR StdDev) took place where GDP contracted by nearly 10 billion (-2%), then almost immediately rebounded back to 2x StdDev growth by 1959.

Mid 1960 to mid-1961: GDP growth collapsed to below 1x StdDev range, at one point almost stalling in Q1 1961, then immediately rebounded back to 2x StdDev growth by the end of 1961.

Q1 1982 to Q1 1983: GDP growth stalled to levels near 0.5 StdDev range for a period of 12 months before slowly rebounding back to 1x+ levels by late 1983 into 1984.

Q3 1990 to Q4 1991: GDP growth stalled to nearly 0.6 of the StdDev range, then rebounded back to 1.5x StdDev range by Q2 1992

Q4 2000 to Q3 2002: The Dot Com bubble and the 9/11 terrorist attacks resulted in an extended contraction in GDP expansion throughout this time.  By Q4 2001, GDP growth was only 0.53x the StdDev range.  Growth finally rebounded in late 2002.

Q1 2008 to Q1 2010: The Credit Crisis really took a toll on GDP.  Throughout most of 2008, GDP levels were still positive and above 0.5x the StdDev range.  Yet in Q3 2008, everything turned negative and GDP reached an extreme (-2.088x) StdDev range in Q3 2009.  Gdp rebounded back to 2x StdDev range in Q1 2010.

Q3 2015 to Q3 2016: This was an election year GDP contraction.  GDP continued to grow, but fell below the 1x StdDev range that seems to be very consistent.  Q4 2016 returned to levels above 1x StdDev.

What this shows us is that a -2x StdDev range is not uncommon and that a bigger move could take place with the right global economic setup.  A 3x or 4x GDP reversion (downside collapse) is also not out of the question if certain circumstances setup to present such an event.

IN CONCLUSION

This lengthy article and extensive research, our researchers do believe a 2x to 3x GDP reversion event is on the immediate horizon.  Given current data points and the fact that we’ve had little “transition” from previous growth phases to this potential new contraction phase, we believe the GDP contraction for Q1 2020 is likely going to be -10% or more from previous levels.  We believe Q2 GDP contraction may actually be higher (-12% or more).  This will be the result of China’s contracting and quarantining economy as well as the fallout from the continued spread of the Covid-19 virus throughout the rest of the world.

We believe Q4 2020 may result in a positive GDP quarter before further GDP contraction takes place in early 2021. We believe this will likely be the result of extended global economic malaise, global banking issues, global credit, and corporate earnings issues and the possibility that a global asset revaluation event may be taking place (similar to the 2008-09 Credit Crisis event).  This time, though, we believe it will be foreign markets engaging in a Credit Crisis and asset revaluation process that will drag the US economy into a 2021~2023 slump.

A 2x StdDev GDP event right now would be a collapse of $1.65T.  A 3x StdDev GDP event right now would be a collapse of $2.486T.  A 4x StdDev GDP event (God forbid), right now would be a collapse of $3.316T.  Remember, it is not really the size that matters – it is the length of time this contraction takes place.

Be prepared for some really ugly earnings data in Q1 an Q2 of this year, then we’ll figure out if our expectations were accurate or not and what we should be doing to plan going forward.

The type of market condition I think we have entered could be here for a long time, and it’s going to be a traders’ market, which means you must have a trading strategy, plan your trades, and trade your plan. It’s amazing how simple a few trading rules that are written down on paper can save you thousands of dollars a week or month from locking in gains or cutting losses.

I have this mini trading strategy mastery course if you want to take control of your trades and override your emotional issues. And also if you want to start making money from home which is the only option going forward the next 3-6 months from the looks of it my trading as a business program is something to think about doing.

– If you hold winners until they turn into losers

– Taking too large of a position and get stuck with a drawdown so large that if you close the position you will lose 10-50% of your trading account

– have mastered the art of buying high and selling low repeatedly?

All these things happen to most traders, and they can easily be overcome with a logical game plan I cover in the crash courses, pun intended 🙂

In short, if you have lost money with your trading account this year giving back years of gains, I think it’s worth joining my trading newsletter so you can stay on top of the markets and if you really want to excel take my mini-courses. I take the loud, emotional, and complex markets and deliver simple common sense commentary and a couple of winning trades each month for you to follow.

My trading is nothing extreme or crazy exciting because I’m not an adrenaline trading junky. I only want to grow my entire portfolio 2-4% a month with a couple of conservative ETF trades. Earning a 22%-48% return on my capital every year without the stress of being caught up in this type of market, and knowing I have a proven bear market trading strategy incase this market continues to fall is a comforting thought.

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

Crunching Some Numbers – Our Researchers Share Their Data – Part II

Continuing our earlier multi-part research post related to our extensive number crunching and predictive modeling systems expectations going forward many years, (Part I) this second part will highlight some existing data points and start to discuss the concepts of what the Covid-19 virus event may do to the immediate global economy.  Remember, in the first part of this article, we shared research related to the US Fed Funds Rate (FFR) and how the Covid-19 virus event may create an environment of economic malaise over the next 12 to 24+ months as well as potentially disrupt the population and deficits over a 5+ year span.

This type of event is very similar to war (think WWII) in the sense that consumer spending changes, population growth, and levels change, GDP changes and deficits change for all involved.  Our researchers modeled the GDP levels from 2017 will now with the intent of attempting to identify probable outcomes of GDP output throughout the world over the next 5+ years.  Throughout these types of events, a massive capital shift takes place where consumers within areas impacted by war shift their spending and purchasing habits to address the immediate real needs of their attempted survival.  Speculation vanishes.  People only spend on things they are confident they can afford to risk their money on.  Anyone who is able to take advantage of the displaced or disparaged has a real opportunity to create some real gains if they don’t become the next displaced or disparaged individual.

Here is some data we used to model what we believe will happen over the next 2 to 5+ years as a result of the Covid-19 virus event.  We are using this global data as a basis for our modeling going forward and attempting to align 2018 and 2019 data with that reported by the St. Louis Federal Reserve data.  Our objective is to attempt to identify the scope and extend of any potential change in economic cycles going forward and to prepare our friends and followers of what to expect.

This data illustrates the scale and scope of the total global GDP output of all the nations on the planet for 2017.  It is important to understand that China and the United States are the two biggest GDP producers of all nations.  Between the US and China, both nations produce roughly 40% of the world’s total GDP annually.  When you consider all nations producing more than $1.5T in annual GDP on this graphic, these 12+ nations (including OTHERS) produce nearly 78% of the world’s total GDP annually.

The nations that make up this list of top GDP producing nations are:

These nations (and the group of nations listed as OTHERS) total almost 80% of total annual GDP across the entire planet.  Keeping in mind that we are attempting to model the Covid-19 virus event, which nations are likely to be the hardest hit on this list?  Obviously China, Japan, Germany, Italy, South Korea, and the United States are all prime targets of the Covid-19 virus event.  Brazil, Canada, France, India, and Others are secondary targets for GDP disruption.  Yet, their proximity to the price candidates makes them fairly easy targets for future GDP disruption related to the Covid-19 virus.

The point we are trying to make by illustrating this is that 80% of the world’s total GDP is at risk over the next 24+ months related to shifting consumer spending, central bank activities, asset valuation levels and much more.  We’re not talking about 4% or 5% of the world – we’re clearly showing you that 80% of the world’s total economic output is within the cross-hairs of this virus event.

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

Our modeling suggests the 2017 GDP levels presented by the image (above) and the subsequent yearly REAL GDP levels presented by the St. Louis Federal Reserve deliver this data as a basis for our modeling system.

Our attempted modeling of the Covid-19 virus event across global economies is based, in part, on what happened in the 2008-09 Credit Crisis event.  Throughout that span of time (2008 to 2009), US GDP fell -3.36% over 12 to 16 months.  The difference between this Credit Crisis event and the Covid-19 event is that the Covid-19 event appears to be disrupting a broader segment of economic sectors across dozens of nations/cities all at once.  Whereas the Credit Crisis event resulted in somewhat isolated asset and economic contractions related to banking, insurance, credit, and assets – the Covid-19 virus event appears to be much broader in scope and consequences.  Our researchers believe the Covid-19 virus event will reach nearly every segment of the global economy in some way or form – causing some type of economic disruption either in supply, demand or overall consumer activity related to the sector/economic component.  Therefore, we believe the scope of the contagion event related to Covid-19 will be, at a minimum, 2x to 3x the scale and scope of the Credit Crisis.

We’ve come to the conclusion that the disruption to earnings, revenues, expenses and other economic factors across a broad spectrum of global economic outputs may look something like this.

This image has an empty alt attribute; its file name is image.png

We believe Q1 and Q2 of this year will be a disaster for almost all nations.  We believe there is a chance Q3 and Q4 2020 may see a moderately strong recovery (or the start of a recovery).  We believe winter 2020 and into 2021 may bring further influenza type illness and may begin the process anew.  Or, we believe the recovery process may be somewhat stalled in 2021 as we believe the fallout from the previous year may still be taking place across multiple asset classes and corporate level and banking/insurance level industries.  We believe that by mid-2022 and early 2023, the global economy will begin to find a solid foundation for future economic growth and that global GDP may begin to move higher overall.

We are basing our modeling process on the information we have gained from our experience in the markets and from living through the 2008-09 Credit Crisis event.  Far too many people fail to understand the contagion event process that takes place when consumers abandon traditional spending patterns as income levels become more “at-risk”.  As we’ve suggested many times in previous articles, consumer spending and the “flock mentality” is not something to underestimate.  Current GDP levels are calculated mostly by consumer spending activity.  Think about what that means going forward.

Here are some St. Louis Federal Reserve data charts that we used in attempting to model these results.

A potential further decrease in M2 (velocity of money) throughout this Covid-19 virus event is very likely.  This is one of the primary reasons we believe this event may last more than 24 months in total span.  We believe the continued decline of the M2 velocity level is a very strong indication that historical levels of economic activity (1965 through 1995) simply are not present in today’s global economic world.  This complicates how money is used within the global market – it is being engaged as active money transactions by a -30% ration than 1995 levels. If M2 continues to decline, we believe the consequence of this move will relate to an even slower recovery from the Covid-19 virus event.

In the next part of this article, we’ll explore the real data points and outlier expectations of the 2020 Covid-19 virus event.

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

US Fed Panics – Predictive Modeling Shows You What’s Next

March 3, 2020: the US Fed issued an emergency rate cut of 0.50% to move rates to levels near 1.0% as a result of global economic concerns related to the spread of the Coronavirus and the potential damage it may do to the global major economies.  President Trump had been suggesting the US Fed needed to be ahead of the risks associated with future market expectations to allow for increased liquidity and global economic function.  Yet, we believe this move by the US Fed came at the wrong time for most investors and traders.

The global markets had already begun a process of revaluing risk in the markets near the end of February 2020.  After the Q1 earnings data was digested and the newest Chinese data became available, investors suddenly understood the risks that we had been warning about for most of January and February.  Suddenly, the US markets collapsed and traders were revaluing forward expectations.

Now that the US Fed has engaged in a 0.50% rate cut, the real risk solidifies in investor minds as “hey, the Fed is acting in a manner to ease money supply in preparation for a broad global slowdown”.  What does this mean for skilled traders?  We’ll explore the future price action using our Adaptive Dynamic Learning modeling system.

DOW JONES WEEKLY CHART

This INDU Weekly chart showing the ADL predictive modeling system results suggests the INDU will likely rotate near current lows (near 27,000) with very high volatility.  Current volatility ranges on the INDU suggest the US markets could rotate 1000 points a day very easily over the next few weeks.  Near early April, our ADL modeling system is suggesting the INDU will attempt to rally back to near 29,500 setting up a potential Double-Top formation.  Our earlier research suggests the INDU/YM will likely form a bottom well before the S&P and NASDAQ – so this aligns with our earlier research.

Once the Double-Top sets up – all bets are off as risk will be extremely high for another breakdown event.  We believe a true bottom will form/setup sometime between May and June 2020.  Therefore, any recovery in the INDU to levels near 29,500 before the end of April would strongly suggest the markets are setting up for a Q1 earnings collapse – and a potential for a much deeper price low to set up as a real bottom.

NASDAQ WEEKLY CHART

This NQ Weekly Chart highlights a shorter-term ADL projected price outcome.  The reason we went further back in time to produce these results is because these ADL results aligned with price quite efficiently and also illustrated the perceived weakness in price throughout the end of 2019.  Notice the CYAN DASH lines below the price in December 2019 – these are the ADL predictive price levels for that span of time.  Near the early January 2020 price bars, the ADL predictive modeling system identified price levels that almost mirrored the NQ price activity.  Currently, the ADL system is predicting the NQ will find temporary support near 9000 for a few weeks before breaking lower to levels near 8000~8200.

This price move, which is opposite that of the INDU, suggests the tech-heavy NASDAQ may continue to experience price pressure with a potential for a downside “waterfall” price event setting up.

TRANSPORTATION WEEKLY CHART

Lastly, this TRAN (Transportation Index) Weekly chart highlights was we believe to be a more true valuation event setting up over the next 60 to 90+ days.  This ADL chart suggests the TRAN price will almost immediately move back to levels near 11,000 (with a potential for a new high print above 11,300), then consolidate near 10,800 before breaking lower in late April or early May.  This type of price action aligns with the Q1 results reflecting an economic contraction while optimistic investors attempt to push price levels back towards recent highs before the reality sets into the markets.  The real forward expectations of Q2-2020 and Q3-2020 may be a fraction of levels reported for Q4-2019.

The US Fed is attempting to front-load the global markets with easier monetary policy to allow for unknown risks that may span 6 months out or longer.  Our researchers believe the US stock market will set up a major bottom sometime between May and June 2020 (possibly a bit later) and from that point we expect the US markets to begin to move gradually higher.  We believe this move will be similar to the downside price collapse that happened in January 2018 when the markets formed a clear Double-Bottom and began to move higher after May 2018 – eventually peaking above all-time highs.

Although the Fed fired an emergency rate cut of -0.50%, the reality is that investors may see this as a “miss” in terms of hitting a target.  Yes, it eases capital flows and sets investor expectations to believe the US Fed is prepared for this risk – but it also diminishes the potential for the US Fed to take decisive action in Q2 or Q3 of 2020 if the markets collapse as we expect.

As we’ve been saying for many months, 2020 is sure to be an incredible year for skilled traders.  Pay attention to our research to prepare for the biggest moves in the markets.

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.

I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-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. Join Now and Get a Free 1oz Silver Bar!

Chris Vermeulen
www.TheTechnicalTraders.com

Is This A Repeat of February 2018 Market Crash?

Back in early 2018, after a dramatic rally in early January 2018, the US stock market collapsed suddenly and violently – falling nearly 12% in a matter of just 9 trading days.  Our researchers asked the question, is the current collapse similar to this type of move and could we expect a sudden market bottom to setup?

Although there are similarities between the setups of these two events, our researchers believe there are two unique differences between the selloff in 2018 and the current selloff.  We’ll attempt to cover these components and setups in detail.

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

FIRST, THE SIMILARITIES:

_  The contraction in market price just before the end of the year in 2017 was indicative of a market that had rallied to extended valuation levels, then stalled in December as the year-end selling took over.

_  The renewed rally in early January was a process of capital re-engaging in the market as future expectations continued to drive and exuberant investor confidence in the markets.

These two similarities between 2018 and 2020 seem fundamental.

Yet, there are differences that may drive a further price contraction event – beyond what we saw in 2018.

_  The US/China trade deal disrupted market fundamentals over the past 6+ months and established a more diminished function of global economics as the trade tensions continued

_  The foreign market capital shift process, where foreign capital poured into the US stock market over the past 12+ months and supported the US Dollar was a process of avoiding foreign market risks.  This process trapped a large portion of foreign capital in the US markets prior to the 2020 collapse.

_  Global geopolitical functions are far more fragile than they were in 2018.  After BREXIT was completed and prior to the signing of the US/China trade deal, a number of concerns existed throughout the world and are still valid.

_  The Wuhan Corona Virus has changed what global investors expect and how both supply and demand economic functions are being addressed world-wide.

The potential of an early price bottom setting up after this 2020 price collapse is very real.  Yet, the ultimate bottom in the markets may be much lower than the 11% or 12% price decline that happened in 2018.  The scale and scope of the Corona Virus event, should it continue beyond April 2020 (and possibility well into June or July 2020), could extend the price decline even further.  Ultimately, this extended risk function may push the US and global markets to deeper lows before a bottom sets up – yet the outcome may be very similar.

After the double bottom in 2018 setup, a slow and stead price advance continued until the SPY price rallied to new highs in September 2018.  A very similar type of price activity may take place in 2020 after the ultimate bottom in price sets up.

Our researchers believe the ultimate bottom in the SPY will likely happen near $251 – near the middle of the 2018 price range.  Ideally, the event that takes place to create this price decline will likely happen in a “waterfall” event structure.  This means we may see a series of 3 to 9+ day selloffs culminating in a major market bottom near $251.

If our research team is correct in this analysis, a bottom will likely form in the SPY and near $251 to $265 where and extended bottom pattern may setup.  We may see a double-bottom type of pattern as we saw in 2018.  Ultimately, we believe the bottom will setup sometime in mid-2020 and the remainder of the year will continue to support an extended price rally into the end of 2020.

Are we looking at a similar type of price event like we saw in early 2018?  Ideally, yes.  Although, we believe this downside price move will be deeper in terms of the total price decline (likely 18% to 25%) and will end when price valuation levels reach a point where global investors feel opportunity exists beyond risk.

Right now, we believe an incredible opportunity for skilled investors is present and that incredible market sector price rotations are taking place.  We believe the devaluation process will move the markets lower by at least 15% to 20% or more.  That suggests the bottom in the SPY is likely near $251 before we see any real opportunity for price to form a support base and begin to rally higher.

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.

I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-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. Join Now and Get a Free 1oz Silver Bar!

Chris Vermeulen
www.TheTechnicalTraders.com

Has the Equities Waterfall Event Started Or A Buying Opportunity?

Over the past 5+ days, a very clear change in market direction has taken place in the US and global markets.  Prior to this, the US markets were reacting to Q4 earnings data and minimizing the potential global pandemic of the Coronavirus.  The continued “rally to the peak” process was taking place and was very impressive from a purely euphoric trader standpoint.  Our researchers found it amazing that the markets continued to rally many weeks after the news of economic contraction and quarantines setup in China/Asia.

Make sure to opt-in to our free market trend signals newsletter before you continue reading this or you may miss our next special report!

We believe a number of critical factors may have pushed global investors away from their comfortable, happy, bullish attitude over the past 5+ days – most importantly the reality that the virus pandemic was very real and would continue to result in a more severe global economic contraction process and the outcome of the Caucus voting where Bernie Sanders appears to be leading almost every early voting event.  There are now two major concerns hanging over the global markets and the future of the US 2020 Presidential elections.  These two major issues may be enough to change investor sentiment and present a very real volatility event.

Uncertainty breeds fear and can cause traders to move away from risk.  We discussed these topics in research posts many months ago.

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

November 11, 2019: WELCOME TO THE ZOMBIE-LAND OF INVESTING – PART II

September 24, 2019: IS SILVER ABOUT TO BECOME THE SUPER-HERO OF PRECIOUS METALS?

September 7, 2019: US STOCK MARKET HASN’T CLEARED THE STORM YET

Our researchers believe the underlying concerns that are becoming more evident to global traders are the very real facts that the global economy may continue to contract because of the spreading Corona Virus and risks of a global pandemic event and the fact that the US 2020 Presidential election process appears to be setting up to become a real battle between Donald Trump and Bernie Sanders.  Our researchers believe the combination of these two unknowns is creating an environment where global traders are fearful of the future growth opportunities within the US and global markets.

Bernie Sanders has been dominating the Caucus events in the US as a Socialist/Progressive candidate.  For many Americans, this is a frightening concept.  Even early into the Caucus voting cycle, it appears Mr. Sanders has taken a very clear leadership role headed into the 2020 Presidential election event.  Business and global investors are not going to like the concept of a Socialist/Progressive US Presidential candidate.  This is going to cause investors and business owners to avoid engaging in projects and opportunities until after the November 2020 elections.

Add into this fear contagion the fact that the Coronavirus event may continue to add to the global fear component of the US and global economy.  How much more risk is involved because of the spread of this virus over the next 12+ months and how will this concern complicate the concerns related to the US Presidential electing event?

DAILY DOW JONES INDUSTRIAL CHART

This Daily Dow Jones Industrial chart highlights the huge Gap lower that took place early on Monday, February 24, 2020.  This huge move resulted from an extended fear of a growing potential for a global pandemic event and a renewed fear that global economic activity may be greatly reduced over the next 12+ months.  We believe the extended fear of a potential Socialist/Progressive Democrat candidate may be adding to this massive decline in the global markets.

TRANSPORTATION INDEX DAILY CHART

The Transportation Index is an excellent measure of future economic activity expectations and investors belief that the global economy will recover from this potential contagion event.  On Monday, February 24, 2020, the Transportation Index collapsed below 10,600 on a Gap Down move as the markets collapsed.  This is a real sign that global investors suddenly believe the global markets will contract over the next 3 to 6+ months and are moving away from risky instruments in the US and global markets.

WEEKLY TRANSPORTATION INDEX

This Weekly Transportation index chart illustrates just how far the TRAN could move while still saying within the range of price activity from 2018 to 2019.  The TRAN could fall all the way to levels near 8,800 before reaching the lows of December 2018.  Thus, from current levels near 10,500, we could see a continued price decline in the global markets of at least 15% to 20% before we near the 2018 lows.

As our research team has been predicting, it appears a Waterfall event is beginning to take place.  This Gapping downside move may become the catalyst top in the global markets that presents a broader market rotation/decline.  As we’ve been warning, be prepared for broad sector market rotation and for precious metals to skyrocket as greater fear sets up in the global markets.  We hope you were paying attention to our research over the past 5+ months.  We’ve been all over this setup and have issued multiple warnings for all our friends and followers.

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.

I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-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. Join Now and Get a Free 1oz Silver Bar!

Chris Vermeulen
www.TheTechnicalTraders.com

Yield Curve Patterns – What To Expect In 2020

Quite a bit of information can be gleaned from the US Treasury Yield Curve charts.  There are two very interesting components that we identified from the Yield Curve charts below.  First, the bottom in late 2018 was a very important price bottom in the US markets.  That low presented a very deep bottom in the Yield Curve 30Y-10Y chart.  We believe this bottom set up a very dynamic shift in the capital markets that present the current risk factor throughout must of the rest of the world.  Second, this same December 2018 price bottom set up a very unique consolidation pattern on the 10Y-3Y Yield Curve chart.  This pattern has been seen before, in late 1997-1998 and late 2005-2008.

The reality of these two patterns setting up in the Yield Curve charts suggests that the US and global markets are going to experience a surge in volatility and a very real potential that the US and global markets will contract over the next 6 to 24 months.  Within about 3 to 6+ months of these patterns setting up, one of two separate outcomes typically takes place.

A.  A continued US stock market price advance takes place pushing the Yield Curves lower and ultimately setting up a massive stock market top formation.

B.  A moderate price peak sets up where the Yield Curve levels begin to rise from these current levels while the US and global stock markets begin a moderate correction phase – eventually leading into the possibility of a massive price collapse.

Our research team believes the deep price rotation near the end of 2018 set up a very unique capital shift event that took place within the global markets.  Currently, there is well over $75 Trillion in the US and global markets.  This capital has become enough of a force in the global markets to act as the “moon and the tide”.  In a way, this capital, and the search for profits and safety, has propelled the global markets into a very fragile position.

This total amount of capital, in combination with the derivative markets and global credit markets, presents a significant risk for global central banks and nations.  Many foreign nations have pushed their debt levels to well over 100% of GDP.  Still, even more, have engaged in reckless lending and shadow banking practices that engage a further level of risk to the global markets.  Global central banks have taken on excessive debt levels and acquired assets after 2009 in order to help stabilize the global markets.  The combination of all of these facets of new capital, risk, and assets add a new dynamic to historical patterns in the Yield Curves.

Even though the patterns are similar in structure, the risks are far greater than in 2000 or 2008.  Before, the Central Banks were like a ship navigating the Tides of the seas.  Now, the Central Banks have become the Tides and the Moon – they are essentially an omnipresent force in all levels of assets, capital, risks, and contagion.

We believe the 30Y – 10Y yield curve may move slightly lower if any type of reprieve or complacency continues throughout the global markets that risk is not a factor going forward. This would suggest that the US stock market may continue to move a bit higher – possibly seeing the DOW breach the $30,000 level.  Otherwise, we believe the Yield Curve may continue to climb suggesting that a global market peak is setting up and a price reversion event is beginning to take place.

This 10Y – 3Y Yield Curve chart highlights the potential for a brief collapse in this level to below ZERO, yet it is not necessary at this point in time to confirm a potential major market peak.  Ideally, the future of the US and global stock markets depend on how these yield curves react at this juncture in time.  A deeper move to levels below ZERO will suggest a broader market peak is setting up.  A rally from these levels would suggest the peak has already set up and that real risk and fear are entering the global markets.

The NQ setup an Engulfing Bearish pattern after a very impressive rally from moderate rotation in December 2019.  We highlighted the potential that the US markets are rallying to a peak in a number of research articles recently.  The one we’ve included, below, is an excellent example of this type of research.

January 31, 2020: A COMBINATION TOPPING PATTERN IS SETTING UP

As we’ve been suggesting for many months, this is the time for skilled traders to become “cautious long traders”.  This upside move could end in a very violent manner as the Moon and Tide shift suddenly as fear and central bank paralysis setup in the markets.  We urge all our friends and followers to prepare for this eventual setup and to understand the total scope of this omnipresent capital/debt event.  This time will certainly be different because Central Banks have become banker, holders, guarantor and leveraged participants in the future outcome.

Our suggestion is to plan to setup your portfolio so you have sufficient cash in reserve in the event of an unexpected market decline.  We also suggest proper protection/hedge investments, such as precious metals and metals miner ETFs.  Currently, this single Engulfing Bearish pattern is not enough of a trigger to warn of any immediate action for traders – but the Yield Curve charts are clearly showing us the markets will either continue to rally to an ultimate peak or begin to setup that peak very quickly from current levels.

Think of it this way, we know the music will likely stop at some point in the near future, we just don’t know exactly when it will stop.  So, we have to prepare for the scramble for the chairs when it ends.

Join my Swing Trading ETF Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

Is The Technology Sector Setting Up For A Crash? Part IV

As we continue to get more and more information related to the Coronavirus spreading across Asia and Europe, the one thing we really must consider is the longer-term possibility that major global economies may contract in some manner as the Chinese economy is currently doing.  The news suggests over 700+ million people in China are quarantined.  This is a staggering number of people – nearly double the total population of the entire United States.

If the numbers presented by the Chinese are accurate, the Coronavirus has a very high infection rate, yet a moderately small mortality rate (2~3%).  Still, if this virus continues to spread throughout the world and infects more and more people, there is a very real potential that 20 to 50 million people may be killed because of this event.  It may become one of the biggest Black Swan events in recent history.

We really won’t know the total scope of the damage to the Chinese and Asian economies for another 35+ days – possibly longer.  The information we have been able to pull from available news sources and from the Chinese press is that hundreds of millions are quarantined, the Chinese Central Bank is pouring capital into their markets in order to support their frail economy and, just recently, President Xi suggested stimulus will not be enough – austerity measure will have to be put into place to protect China from creating a massive debt-trap because of this virus.

Austerity is a process of central bank planners cutting expenses, cutting expansion plans, cutting everything that is not necessary and planning for longer-term economic contraction.  It means the Chinese are preparing for a long battle and are attempting to protect their wealth and future from an extreme collapse event.

From an investor standpoint, FANG stocks have outperformed the S&P, NASDAQ and DOW JONES indexes by many multiples over the past 5~6 years.  The chart below highlights the rally in the markets that originated in late 2016 (think 2016 US Presidential Election) and the fact that foreign capital poured into the US stock market chasing expected returns promised by future President Trump.

It becomes very clear that the FANG stocks rallied very quickly after the elections were completed and continued to pull away from valuation levels of the S&P, NASDAQ and DOW JONES US indexes.  How far has the FANG index rallied above the other US major indexes? At some points, the FANG index was 30~40% higher than the biggest, most mature industries within the US.  In late 2018, everything contracted a bit – including the FANG index.

As or right now, the FANG index has risen nearly 274% from October 2014.  The S&P has risen nearly 60% over that same time.  The NASDAQ has risen 140% and the S&P 500 Info Tech Index rose 180%.  The reality is that capital has poured into the technology sector, FANG stocks and various other US stock market indexes chasing this incredible rally event.

(source: https://www.theice.com/fangplus)

This Netflix Weekly chart highlights what we believe are some of the early signs of weakness in the FANG sector.  The sideways FLAG formation suggests NFLX has reached a peak in early 2018 and investors have shied away from pouring more capital into this symbol while the Technology index and FANG index have continued to rally over the past 8+ months.

This Weekly Custom FANG Index chart highlights the rally that took place after October 2018 and continues to drive new highs today.  This move on our Custom FANG index shows a very clear breakout rally taking place which is why we believe more foreign capital poured into the US markets as the US/China trade deal continued to plague the global markets and as BREXIT and other economic issues started to weigh on economic outputs.  What did investors do to avoid these risks?  Pour their capital into the hot US technology sector.

Another chart we like to review is our Custom Technology Index Weekly chart.  This chart shows a similar pattern to the FANG chart above, yet it presents a very clear picture of the excessive price rally and rotation that has taken place over the past 5+ months.  The real risk with this trend is that investors may start to believe “it will go on forever” and “there is no risk in these trades”.  There is a very high degree of risk in these trades.  Once the bubble bursts, the downside move may become very violent and shocking.

A reversion event, bubble burst event, in the technology sector as a result of the economic collapse in China and throughout other areas of the world may break this rally in the technology sector at some point and may push investors to re-evaluate their trading plans.  Until investors understand the risks setting up because of the Coronavirus and the potential for a 20%, 30%, even 40% decrease in economic activity and consumer spending may finally push global investors to really think about the true valuations within the FANG/Technology sector.

We writing this article to alert you to the very real fact that “what goes up – must come down” at some point.  Pay attention to how this plays out and what may cause global investors to suddenly change their opinion of the Technology sector.   A pullback in this sector may result in a -40% to -50% price reversion.

We believe the economic collapse and humanitarian crisis that is unfolding in China may be enough to put a massive dent in future expectations for 2020 and 2021.  You simply can’t have a major global economic collapse in this manner without having some type of cross-over event.  As we learned in 2008-09 with the US credit crisis – when a major economy collapses its assets and financial markets, the ripples spread across the globe.  China may become the next financial crisis event for the new decade.

Join my Swing Trading ETF Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com