The predicted market crash... Can it get any worse? well, yes!
•Short since $4731 (closed some of my shorts today)↘️🔻
written on: 19:16 Thursday, February 24th, 2022
Central European Time ( CET )
S&P 500 Index (and the entire market with it)
The TA:
We broke out of the rising wedge on the 18th of January. We retested the wedge as resistance on January 18th. The target price of the wedge breakout towards the downside was roughly $4111.96, which hit today. The chart has now formed a head and shoulders pattern, which we broke the neckline off today. We will probably retest the neckline. If we can't break that resistance, the Head and Shoulders is confirmed following a 3735 target. We also broke our long term trendline that we had as support since the beginning of the recovery of the 2020 covid crash (I will make a seperate idea on that one). The squeeze momentum indicator, by Lazybear just turned red and we have a bearish monthly MACD cross.
•Almost every
indicator suggests that we are overvalued in the long term.
94% correlation between the Nasdaq 100 in the 15 years to today, and the 15 years to 2000. The S&P500 shows a 95% correlation. We all know what happened during 2000s, the markets collapsed.
shiller PE ratio is currently sitting at 34.27 on the day of writing this (the last time I updated this, it was sitting at 40.14 so it has come down a bit, but we still have a long way to go). The mean is at 16.92 and the median is at 15.87.
34.27/16.88*100≈ 203%
203-100= 103%
This means that we are possibly 103% overvalued.
•The warren buffet indicator is telling us that we are strongly overvalued. The indicator sits at a 195% Market value to GDP ratio. The exponential trendline
suggests that a Market Value to
GDP ratio of 120% to be
fairly valued. We are 51% higher than the long-term trendline. (this was 71% the last time)
What is going on in the world?
•Russia vs Ukraine war. This is very bad news and I hope that everyone stays safe. Money is way less important then the lives of innocent people. No one wants war. The Russian index crashed 45%, before rebounding during the trading session. The indexes in Europe also got crushed, just like the s&p500. We recovered the losses in the late trading hours which is very impressive.
•The number of Nasdaq stocks that have hit a 52-week low now dwarfs even that of the 2000 dot-com bubble and global financial crisis. It looks like the high multiple, tech stock bubble might have already burst. The s&p500 is just lagging behind and can go much lower then the current valuations. A ton of stocks; large or mid cap, value or growth have been absolutely devastated since I started writing about a crash:
•The FED is going to increase its interest rates, because the inflation is getting out of hand. 7.5% is the highest we have seen since the 1980s. We don’t know the ammount and the number of times that they are going to increase the interest rates, but 50 pivot points in march looks realistic to me. When the interest are getting an increase, it works like an anker on the stock market. And because we have so much debt right now, this could lead to even more pain then what we have seen. You don't want a hawkish FED as your opponent. Historically, the inflation has grown slowly, but during this and last year the inflation went through the roof.
•Members of congress and people in the government (clearly insiders: looking at you nancy pelosi) are not allowed to own stocks anymore very soon? Correct me if I am wrong on this one.
•The Canadian real estate bubble is so big, that even the mother of all crashes can’t fix it. The composite benchmark, (a.k.a. a typical home) was $798,200 in December, up 27.8% from a year before. It is at an all-time high for both price and annual growth. betterdwelling.com/c...crashes-cant-fix-it/
Mortgage lenders are about to get destroyd. Just looking at the current market and where rates are going is a recipe for disaster. In the last few years, they had between 2-3x regular refinance volume. Leaving a large pool of borrowers who will not to refinance for at leat 3-5 years.
•Mortgage rates have risen almost a full 1% in just the last 2 months, will likely raise another 1% by End Of Year. This will further slow demand. Housing market starting to show signs of cooling. Worst case scenarios is housing values drop even more which will cause cash out refinances to dry up as well. Lenders are starting to lay people off. I have heard some shops are reporting declines.
•canadian tv reminding people that bank
deposits are ensured. (The Royale Bank of Canada made this advertisement as well).
•billionaire investors have a lot of cash ontheir hands.
•Michael Burry and a ton of other famous investors predict that the markets will collapse. Warren Buffett has stopped buying new shares. Michael burry has sold his positions
•Palantir warns people of a black swan event.
•energy crisis in China and Europe. A lot of factory's in China are shutting down or slowing down because they have no power. This only got worse today since Russia attacked Ukraine, the oil prices peaked at $105.74. Every time that the oil prices reached prices above $100, we entered a recession after that. With the current sanctions against Russia, we can expect commodities like gas and oil to rise even further. Which could lead to even more inflation.
•reverse repo has never been this high. 1,738.322 billion usd (that is more then a trillion!!!). The Fed's reverse repo facility allows big institutions - mostly big banks and money-market mutual funds - to buy securities from the Fed with an agreement to sell them back to the central bank for a specified price at a specific time.
•Jpegs are getting sold for millions of dollars, which looks like the Dutch tulips bubble to me.
•Prices have been sky-high in the last months for almost everything, could we be in an everything bubble?
•With the old measurements, CPI / Inflation is above 15%, that is just as bad as the top in 1982 (instead of 7.5%).
•fibonacci extension tells us that $4875.56 could be the end. (the top is $4818.62, for now. So I my prediction was 1.16% off)
•stablecoin Tether has been in trouble for a long time. When tether crashes, everything crashes with it. 80% of BTC’s volume goes through Tether. So when Tether falls, Bitcoin falls and when Bitcoin falls, everything falls with it.
•supply chain issues and shortages for almost everything.
•Indexes like XRT with 1200% short interests (GME is in this index)
•historic records amount of margin:
When everyone is using a lot of margin in the markets, things can change very quickly for the worse, because their positions can get liquidated. If people with leveraged long-positions starts to get liquidated, more people start to get liquidated since the price has gone down even more. etc. etc. etc. (until the market has fully crashed). Not only that, retail investors are going to panic sell in such an event. the only thing that needs to happen for a trend reversal is a bad event. Like seriously, since when can retail investors use more then 100x leverage?
•We printed a ton of money during the
COVID-19 period. When we had the 2020
march crash, the stock market recovered
insanely fast, even when the economy was
falling. The recovery happened because we
printed so much money to support the
company's (not because the businesses were
performing great). -->
•The markets are not based on fundamentals anymore: 1 million+ people dead due to covid? No problem, the market goes up by 30%.
Millions of people getting unemployed in the US and the rest of the world? Not a problem,
the market goes up by another 30%. Businesses declaring bankruptcy? It didn't matter. we just kept on going up. Almost
every business was experiencing massive
losses while their stock price was
skyrocketing. The money printing led to massive inflation. The supply chain issues made this even worse. We have to pay for our mistakes now. The FED has to force a recession.
•Eliott waves suggest that a big crash is
going to happen. We are in wave 5 in the long term chart from 2008 until now (and possibly the 100 year chart as well). So the next wave will be a market correction.
"The bubble": massive credit to u/BigTechEqualsValud: www.reddit.com/r/wal...ut_its_actually_the/
"It is clear stocks are in a massive bubble based on their Price to Sale (P/S valuation).
Warren Buffett stated that his favorite means of valuing stock was the stock market capitalization to GDP ratio.
Below is a chart for this metric. As you can see, the stock market today is as overvalued relative to the economy as it was at the peak of the 1999 Tech Mania.
r/wallstreetbets - We are in Tech Bubble 2.0, but it's actually the everything bubble
So stocks are overvalued based on the most reliable corporate data point (revenues) and they are also overvalued relative to the economy. Scratch that, they're not overvalued... they're trading at 1999-Tech Bubble insanity levels.
This time the FED has created a bubble in everything. A "risk-free rate" of return against which ALL risk assets are valued.
Comparing to 1999 tech bubble, 2008 housing market bubble, this will be considered the 2022 Digitial Currency/EV bubble. Look at the 10-20 year charts for any automotive company. It is not pretty. So what makes Rivian and LCID worth more than GM or Toyota? Nothing, since its a bubble. I will rule out Tesla on this one since we know damn well they make money, have an incredible CEO, and produce something tangible unlike these others. Tesla is still overvalued and it will go down with the digital currency/ev crash, but most likely not as hard as other competitors".
•Evergrande defaulted on its debt and is now restructuring, we will have to see how that goes. But its still massively in debt and the bonds were never payed according to dr Metzler. DMSA and dr Metzler has a class action lawsuit against Evergrande to file them for bankruptcy. This
•Evergrande is still one of the biggest real estate developers, but people seem to forget about this very dangerous problem. Evergrande still has to pay 305 billion USD.
They haven't even paid of 1% of their debt.
So who are the biggest bagholders of the
$305B in bad bonds? -->
There are several American and Canadian
banks that Evergrande ows money to:
First we've got the Royale Bank of Canada
which has $46B in evergrande bonds with a
Evergrande is not the only Chinese property business with huge amounts of debt. A ton of other Chinese property company’s have defaulted so far. Some of them are now bankrupt.
If you were wondering why there was that
weird after hours - the stock dropped 64%
during AH in one day, but then they fixed the
"glitch" and the price went back up.
RBC looked worthless and this was just the
real view of the bank's financial state when
the bonds hit zero.
The media told us that the bonds from November 10th were payed, however DMSA says otherwise. Dr . Metzler, the owner of DMSA bought Evergrande bonds because he had a suspicion that the bond payments were not made. So he knew he wouldn’t get his money back. He just wanted to proof his theory. So we could be being lied to (however I’m not a fan of conspiracy theory’s)
THE BONDS WERE NOT PAYED!!!
Conclusion: the TA looks bad and so does
everything going on in the world right now. If this
ends up happening it will be a fantastic
buying opportunity. The S&p500 could go
higher to the 5500s (which won’t happen in my opinion), but a crash is
inevitable. It has already correcIf it doesn't happen this year, then it
will probably happen in the next 2 years. Its a ticking time bomb. Its just a matter of time when all of this comes together and It *could* happen very, very soon.
Do you really want to risk a 10-20% return when
the market could fall 50% or more? You can
cash out now and buy back 2x the amount of
the shares after the crash. And get 2.5x the
amount of shares that you could buy now. (this probably doesn’t make a lot of sense anymore. If you bought normal stocks, you are already down like 50% so it doesn’t make a lot of sense to sell with such a big loss).
Buy great deals like PayPal or similair stocks that are already down more then 50%
•Short since $4731 (closed some of my shorts today)↘️🔻
written on: 19:16 Thursday, February 24th, 2022
Central European Time ( CET )
S&P 500 Index (and the entire market with it)
The TA:
We broke out of the rising wedge on the 18th of January. We retested the wedge as resistance on January 18th. The target price of the wedge breakout towards the downside was roughly $4111.96, which hit today. The chart has now formed a head and shoulders pattern, which we broke the neckline off today. We will probably retest the neckline. If we can't break that resistance, the Head and Shoulders is confirmed following a 3735 target. We also broke our long term trendline that we had as support since the beginning of the recovery of the 2020 covid crash (I will make a seperate idea on that one). The squeeze momentum indicator, by Lazybear just turned red and we have a bearish monthly MACD cross.
•Almost every
indicator suggests that we are overvalued in the long term.
94% correlation between the Nasdaq 100 in the 15 years to today, and the 15 years to 2000. The S&P500 shows a 95% correlation. We all know what happened during 2000s, the markets collapsed.
shiller PE ratio is currently sitting at 34.27 on the day of writing this (the last time I updated this, it was sitting at 40.14 so it has come down a bit, but we still have a long way to go). The mean is at 16.92 and the median is at 15.87.
34.27/16.88*100≈ 203%
203-100= 103%
This means that we are possibly 103% overvalued.
•The warren buffet indicator is telling us that we are strongly overvalued. The indicator sits at a 195% Market value to GDP ratio. The exponential trendline
suggests that a Market Value to
GDP ratio of 120% to be
fairly valued. We are 51% higher than the long-term trendline. (this was 71% the last time)
What is going on in the world?
•Russia vs Ukraine war. This is very bad news and I hope that everyone stays safe. Money is way less important then the lives of innocent people. No one wants war. The Russian index crashed 45%, before rebounding during the trading session. The indexes in Europe also got crushed, just like the s&p500. We recovered the losses in the late trading hours which is very impressive.
•The number of Nasdaq stocks that have hit a 52-week low now dwarfs even that of the 2000 dot-com bubble and global financial crisis. It looks like the high multiple, tech stock bubble might have already burst. The s&p500 is just lagging behind and can go much lower then the current valuations. A ton of stocks; large or mid cap, value or growth have been absolutely devastated since I started writing about a crash:
•The FED is going to increase its interest rates, because the inflation is getting out of hand. 7.5% is the highest we have seen since the 1980s. We don’t know the ammount and the number of times that they are going to increase the interest rates, but 50 pivot points in march looks realistic to me. When the interest are getting an increase, it works like an anker on the stock market. And because we have so much debt right now, this could lead to even more pain then what we have seen. You don't want a hawkish FED as your opponent. Historically, the inflation has grown slowly, but during this and last year the inflation went through the roof.
•Members of congress and people in the government (clearly insiders: looking at you nancy pelosi) are not allowed to own stocks anymore very soon? Correct me if I am wrong on this one.
•The Canadian real estate bubble is so big, that even the mother of all crashes can’t fix it. The composite benchmark, (a.k.a. a typical home) was $798,200 in December, up 27.8% from a year before. It is at an all-time high for both price and annual growth. betterdwelling.com/c...crashes-cant-fix-it/
Mortgage lenders are about to get destroyd. Just looking at the current market and where rates are going is a recipe for disaster. In the last few years, they had between 2-3x regular refinance volume. Leaving a large pool of borrowers who will not to refinance for at leat 3-5 years.
•Mortgage rates have risen almost a full 1% in just the last 2 months, will likely raise another 1% by End Of Year. This will further slow demand. Housing market starting to show signs of cooling. Worst case scenarios is housing values drop even more which will cause cash out refinances to dry up as well. Lenders are starting to lay people off. I have heard some shops are reporting declines.
•canadian tv reminding people that bank
deposits are ensured. (The Royale Bank of Canada made this advertisement as well).
•billionaire investors have a lot of cash ontheir hands.
•Michael Burry and a ton of other famous investors predict that the markets will collapse. Warren Buffett has stopped buying new shares. Michael burry has sold his positions
•Palantir warns people of a black swan event.
•energy crisis in China and Europe. A lot of factory's in China are shutting down or slowing down because they have no power. This only got worse today since Russia attacked Ukraine, the oil prices peaked at $105.74. Every time that the oil prices reached prices above $100, we entered a recession after that. With the current sanctions against Russia, we can expect commodities like gas and oil to rise even further. Which could lead to even more inflation.
•reverse repo has never been this high. 1,738.322 billion usd (that is more then a trillion!!!). The Fed's reverse repo facility allows big institutions - mostly big banks and money-market mutual funds - to buy securities from the Fed with an agreement to sell them back to the central bank for a specified price at a specific time.
•Jpegs are getting sold for millions of dollars, which looks like the Dutch tulips bubble to me.
•Prices have been sky-high in the last months for almost everything, could we be in an everything bubble?
•With the old measurements, CPI / Inflation is above 15%, that is just as bad as the top in 1982 (instead of 7.5%).
•fibonacci extension tells us that $4875.56 could be the end. (the top is $4818.62, for now. So I my prediction was 1.16% off)
•stablecoin Tether has been in trouble for a long time. When tether crashes, everything crashes with it. 80% of BTC’s volume goes through Tether. So when Tether falls, Bitcoin falls and when Bitcoin falls, everything falls with it.
•supply chain issues and shortages for almost everything.
•Indexes like XRT with 1200% short interests (GME is in this index)
•historic records amount of margin:
When everyone is using a lot of margin in the markets, things can change very quickly for the worse, because their positions can get liquidated. If people with leveraged long-positions starts to get liquidated, more people start to get liquidated since the price has gone down even more. etc. etc. etc. (until the market has fully crashed). Not only that, retail investors are going to panic sell in such an event. the only thing that needs to happen for a trend reversal is a bad event. Like seriously, since when can retail investors use more then 100x leverage?
•We printed a ton of money during the
COVID-19 period. When we had the 2020
march crash, the stock market recovered
insanely fast, even when the economy was
falling. The recovery happened because we
printed so much money to support the
company's (not because the businesses were
performing great). -->
•The markets are not based on fundamentals anymore: 1 million+ people dead due to covid? No problem, the market goes up by 30%.
Millions of people getting unemployed in the US and the rest of the world? Not a problem,
the market goes up by another 30%. Businesses declaring bankruptcy? It didn't matter. we just kept on going up. Almost
every business was experiencing massive
losses while their stock price was
skyrocketing. The money printing led to massive inflation. The supply chain issues made this even worse. We have to pay for our mistakes now. The FED has to force a recession.
•Eliott waves suggest that a big crash is
going to happen. We are in wave 5 in the long term chart from 2008 until now (and possibly the 100 year chart as well). So the next wave will be a market correction.
"The bubble": massive credit to u/BigTechEqualsValud: www.reddit.com/r/wal...ut_its_actually_the/
"It is clear stocks are in a massive bubble based on their Price to Sale (P/S valuation).
Warren Buffett stated that his favorite means of valuing stock was the stock market capitalization to GDP ratio.
Below is a chart for this metric. As you can see, the stock market today is as overvalued relative to the economy as it was at the peak of the 1999 Tech Mania.
r/wallstreetbets - We are in Tech Bubble 2.0, but it's actually the everything bubble
So stocks are overvalued based on the most reliable corporate data point (revenues) and they are also overvalued relative to the economy. Scratch that, they're not overvalued... they're trading at 1999-Tech Bubble insanity levels.
This time the FED has created a bubble in everything. A "risk-free rate" of return against which ALL risk assets are valued.
Comparing to 1999 tech bubble, 2008 housing market bubble, this will be considered the 2022 Digitial Currency/EV bubble. Look at the 10-20 year charts for any automotive company. It is not pretty. So what makes Rivian and LCID worth more than GM or Toyota? Nothing, since its a bubble. I will rule out Tesla on this one since we know damn well they make money, have an incredible CEO, and produce something tangible unlike these others. Tesla is still overvalued and it will go down with the digital currency/ev crash, but most likely not as hard as other competitors".
•Evergrande defaulted on its debt and is now restructuring, we will have to see how that goes. But its still massively in debt and the bonds were never payed according to dr Metzler. DMSA and dr Metzler has a class action lawsuit against Evergrande to file them for bankruptcy. This
•Evergrande is still one of the biggest real estate developers, but people seem to forget about this very dangerous problem. Evergrande still has to pay 305 billion USD.
They haven't even paid of 1% of their debt.
So who are the biggest bagholders of the
$305B in bad bonds? -->
There are several American and Canadian
banks that Evergrande ows money to:
First we've got the Royale Bank of Canada
which has $46B in evergrande bonds with a
Evergrande is not the only Chinese property business with huge amounts of debt. A ton of other Chinese property company’s have defaulted so far. Some of them are now bankrupt.
If you were wondering why there was that
weird after hours - the stock dropped 64%
during AH in one day, but then they fixed the
"glitch" and the price went back up.
RBC looked worthless and this was just the
real view of the bank's financial state when
the bonds hit zero.
The media told us that the bonds from November 10th were payed, however DMSA says otherwise. Dr . Metzler, the owner of DMSA bought Evergrande bonds because he had a suspicion that the bond payments were not made. So he knew he wouldn’t get his money back. He just wanted to proof his theory. So we could be being lied to (however I’m not a fan of conspiracy theory’s)
THE BONDS WERE NOT PAYED!!!
Conclusion: the TA looks bad and so does
everything going on in the world right now. If this
ends up happening it will be a fantastic
buying opportunity. The S&p500 could go
higher to the 5500s (which won’t happen in my opinion), but a crash is
inevitable. It has already correcIf it doesn't happen this year, then it
will probably happen in the next 2 years. Its a ticking time bomb. Its just a matter of time when all of this comes together and It *could* happen very, very soon.
Do you really want to risk a 10-20% return when
the market could fall 50% or more? You can
cash out now and buy back 2x the amount of
the shares after the crash. And get 2.5x the
amount of shares that you could buy now. (this probably doesn’t make a lot of sense anymore. If you bought normal stocks, you are already down like 50% so it doesn’t make a lot of sense to sell with such a big loss).
Buy great deals like PayPal or similair stocks that are already down more then 50%
Comment:
Also Bitcoin is looking like its in a consolidation fase, just like it was in late may / early june. There is a high possibility that we will get another crypto pump if we manage to break out of this consolidation fase, which I think will happen. I bought a lot of coins that are down about 70-80% right now (for example solana, dot, enjin, atom, immutable x, verasity, xrp, matic, loopring ftx-token and Avax. Avax doesn't really belong into that territory, but I'm pretty sure it will pump very hard if btc pumps. If crypto pumps, the s&p500 will most certainly pump as well which could invalidate my analysis for now. (Because these two markets are pretty correlated with each other.). I think that we are still screwed in the long term, but we will have to see and wait what happens. Its a rollercoaster right now and its difficult to predict what will happen in the next 6 months. I just like to buy great stocks and crypto that have been absolutely devestated and I will continue to DCA into them. That way I won't really care if the markets crash or not. I know that even these stocks can go a lot lower, but if you see great opportunities you have to take them. That is how this market works and probably how it will always work. Great stocks that are discounted this much will most likely always go back up in the long term. NOT FINANCIAL ADVICE!!!
Good luck and cheers to everyone!
Good luck and cheers to everyone!
Comment:
With 7 rate hikes I mean at least 7 rate hikes (25 basis points each / 0.25% each).
Tomorrow is the FED meeting. Earlier I wrote about about a potential 50 pivot points rate hike. But with everything going on right now I don't think that the FED is going to rug pull us like that. A 7x rate hike of 25 pivot points would make more sense to me. Stay safe everyone and good trading / investing:)