MARKETS: THIS IS NOT THE BIG ONE

By Gregory Mannarino TradersChoice.net
Markets rise and markets fall—understanding what is normal, and what isn’t.
Markets in aggregate derive their value off of action in the debt market, and despite the recent NORMAL volatility which we have seen in the equity markets as of late—the debt market remains stable.
For the stock market to “crash,” we would need to see instability in the debt market—which is just not there right now.
I believe that the issue today is people are just not used to seeing normal market pullbacks and corrections, which do occur from time to time.
Therefore, when people experience normal price fluctuations, they get fearful.
However, this coming week can be thought of in some ways as a MAKE-OR-BREAK moment for the market as the Fed is expected to raise rates. In my opinion a Fed rate hike will prove to be bullish for stocks. For weeks now the market has been pricing in a Fed rate hike, and that has caused increased volatility. Generally, when the market “prices in” an event like a rate hike and then gets one, stocks respond in a positive way.
RUSSIA-UKRIANE.
What appears as rising tension between Russia and Ukraine is another uncertainty for the market, and the market HATES uncertainty. If in fact an invasion scenario by Russia into Ukraine does occur, I would expect that global stock markets will fall however, energy and crude oil prices will skyrocket.
THE BIG ONE.
If we realize that the big market event/stock market collapse everyone is anticipating will be the result of a debt market implosion, meaning a situation where debt sells off and things like the US 10-year yield spikes in an uncontrolled fashion, then by just following say the US 10-year yield, will give us a BIG heads up on whether THE BIG ONE is happening or not at any given time.
DO NOT GET RATTLED!
THE key to being a steady/long term stock market investor/trader is to not get rattled, and you do this by simply understanding market dynamics—and the key to that, is by realizing that the stock market IS A DERIVATIVE of action in the debt market. Other keys to how stocks will perform is the relative strength of the dollar, or by following the DXY/dollar index. Also, by following crude oil- which is the lifeblood of the market.

Comments (5)

Fact :— Russia will not be the aggressor here in the Ukraine. It is totally the opposite the USA will start it if its mad enough to.

January 26, 2022 ZEBB

A POSSIBLE MARKET SCENARIO OF OUR TIMES
Gerald, You are uncanny. Your prediction of a coming global (Greatest) Depression is right on- schedule for 2022. In-addition, War is just around the corner, as well. So, get a bottle of bubbly and hold for confirmation, then, “Pop the Cork” afterwards. Wall Street Bells might also be ringing loudly as sell orders trigger market closures. There probably won’t be a Christmas rally either for 2022. Imagine the horror of investors seeing their retirement nest eggs evaporate (-80 %) in a relatively short period of time (months not years).
There could also be mayhem, but before it happens, wild exuberance like we have never seen before will take hold as more and more jurisdictions withdraw all Covid era restrictions and mandates (by this Spring). When the markets finally turn down (hard) and keep going, investors would be trapped as the market rapidly gaps down (no bids, only sell, sell, sell ). Perhaps we might eventually see people jumping out of their office or condo windows or crashing their cars on the highway like Kamikaze pilots. Better stay home and be safe.
Just take a look at the following graph to illustrate or summarize where we currently are in the long term market cycle (A Generational Top):
(Inline image courtesy of Elliot Wave International)
To “top it off “, we can expect a possible stock market melt-up soon where several years of gains are condensed into only a few months time (+ 40%). Public sentiment on the street will be explosive and extreme towards the end of this cycle, as well. Time is the critical element in this financial drama.
To give a further assist, the FED may stop “raising” interest rates even before they actually raise them by much. Think of the market as a financial black hole sucking-in all the money at-large ( + leverage). Then comes the crash (crisis) and onset of the Greatest Depression of all time ( last 320 years anyway ).
In the process, the U.S. Dollar Index, now DAX 96 could start a decline, while interest rates begin heading-up again. Inflation, fueled by a new found wealth effect, may rocket-up and further squeeze the less endowed factions of the population. Envy and greed will cause corresponding celebrations (parties) and at the same time, major crime waves in the commons. Its really going to be “1929 all over again” ( Fred Hilton, 1999).
“Interesting times” we all live in, indeed. Our financial elites will be saying or at least thinking a haunting phrase from France, circa 1789: ” Let them Eat Cake”. We can watch the show from afar and see who indeed “eats” whom.

January 29, 2022 Craig Bradley

EAT THE RICH ??
The backside of a stock market mania of such magnitude ( + 40% in only a matter of months, not years) would be a corresponding bid for U.S. Treasuries, sending the 10-year way down to about 0%. Stocks would first crash perhaps as much as -80%; even faster than they peaked.
You can bet that in the process non-investment grade rated debt (BBB- rated or less) won’t be worth a whole lot, if anything. In a collateralized, highly leveraged financial system, the unwinding process would be violent and unrelenting once it starts. Nobody will be able to react fast enough once the “Big One” begins.
Zombie Corporations and businesses can also expect be vaporized. In-addition, some big banks may go insolvent and fail ( most likely in Europe). Congress and the FED would be expected to provide unlimited dollars for our FDIC. Meanwhile, new wars erupt in Asia, Middle East, and Europe. Safe haven assets and global safe places will be few and far between: Cash, U.S. Dollar, and U.S. Treasuries. Our large cities (Blue States) may become uninhabitable and outright dangerous once real estate prices crash. Gold would be expected to sell-off right along with the broad stock market Indexes, at least initially. Interesting Times, indeed.

January 29, 2022 Craig Bradley

HISTORY & CONSIDERATIONS OF “BIG ONES” ( Historical Bear Markets).
If you look at the stock market from its peak in 1966 and include inflation over a 30-year period, the result may surprise you. Nobody really made much real money in the stock market during the 1966-1982 Bear Market period. Sure, some made “nominal” gains but remember, liars know figures but figures don’t lie. Someone must win the lottery but carefully consider your odds first. Don’t plan on being “lucky”.
Similarly, investors in 1930 did not make money from investments until 1955, 25 years later. Nobody wanted to invest in the 1930’s or 1940’s. In fact, the stigma in stock market investing carried-over through the seventies, as well. Odds are the next generational bear market will be no different. “Alternatives” won’t change the financial trends, risks, or typical results much if at all. FACT: Investors buy in bull markets and they sell in bear markets. That would be the trend one way or the other for most all investments. No silver bullets.
In-addition, Bear Markets can easily last 16 or 20 years. Today, we have a whole generation of investors and their financial advisors who have NEVER witnessed a true generational, multi-year (decade) bear market. So, they have no such experience. If you retire today, just before the next “big one” sets-in, then your portfolio is going nowhere, at least in your home country’s currency. Your retirement plans must remain dynamic and adaptive. Luck and good timing are important wild cards in life and in investing, as well.

January 30, 2022 Craig Bradley

REMEMBER THE FIRST RULE OF INVESTING:
THERE ARE NO GUARANTEES !

January 30, 2022 Craig Bradley

MARKETS: THIS IS NOT THE BIG ONE

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