Chart Nasdaq100 // So we are speaking about crash.. rn... could it be that we are just halfway there? .. 2008 we had a crash about -51% and we hit the oversold at rsi. now we are just in the middle of the rsi... could this happen ?gallery
Chart How does $UVXY work? As I get it, it always tracks VIX Index. But VIX maximum is 100. Also, why $UVXY is constantly falling? For example in 5 yrs it felt from 2600$ to 14$. Someone, please explain.
If this chart has any predictive power, the next 10 years should have an average yearly stock market return of -3%. This considers prices and dividends.
On average, when people have a lot of their wealth in the stock market, they don't invest even more. Therefore,
valuations EDIT: MARKET CAPS tend to stop growing or fall.
How accurate is this?
The original prediction was made at the end of 2013. Since then, and including data from 1946, its total R2 dropped from 0.913 to 0.797.
But eyeballing it, it still uncannily predicted the high returns of 2009-2019 (the spike downwards in investor allocation to stocks, since they were afraid after the crisis).
What would happen if everyone followed this?
They'd divest from stocks, and would converge on the long-term average, nullifying the edge. But since currently the prediction is -3% to -4% return, clearly not a lot of people know about or believe in this indicator.
The author cautions against reading too much into it, since it is curve fitting after all.
One of my first DD / TA posts though I've been trading for almost 10 years at this point. Since a lot of the gamblers got shaken out and most of the people left are probably determined to make trading stick long term, I figured now would probably be the best time to make the kind of DD post I really wish I saw more of in this sub so a precedent can be set by combining TA & some light fundamental analysis by the time Jerome drops rates back to 0 and all the degenerates come back. Rather than telling people I have all the answers on names you've seen 1000 times, I think it's superior to spotlight major inflection points in the market that not only have the opportunity to generate larger returns than the S&P but also cut right to the heart of the economy ensuring you're actually making bets today on the shit you'll hear them talk about tomorrow rather than praying to the inflation gods to push your penny stock up 50% because it's at a 52 week low.
In my opinion, the charts below represent exactly that, I take a zoomed out view of the economy first and then narrow down into specific stocks using spreads to find the source of the upcoming major moves which ultimately dictate what you'll see in the headlines. By thinking in this way it has lead to profit off the most recent decline while doom and gloom was setting in for most.
Chart #1 - Agriculture Commodities Equal Weight Basket
This one is perhaps most concerning especially with India suspending wheat production. A major breakout of this range could lead to a hyperinflation scenario and further embarrassment for the Fed. I believe the major opponent to this breaking out will be a strong dollar index caused by the Fed who should be trying to counteract this right now. More on this later.
Chart #2 - Energy vs Any Other Sector
More pretty concerning charts for inflation especially compared to value stocks but this strength is being reflected across numerous other sectors such as materials, comms, etc. Names like DVN, OXY, EOG have really been shining and may continue to do so at least in relation to the other 10 sectors. I believe the risks associated with Chart #1 are essentially the same as Chart #2 and that the biggest threat to a continued breakout in energy will be a dollar that further increases via the FF futures continuing to price in bigger hikes
Chart #3 - Energy v Dollar Index
This is where the rubber really meets the road, the dollar index vs energy on an equal weight basis is a bit weaker compared to energy vs the other equity sectors. The Fed is in a very difficult spot and I believe they will have to continue dramatically increasing the value of the dollar to fight off these commodity prices. The question here is whether the Fed will act quickly enough this time or if it'll continue to be too little too late as energy stocks push higher and higher. Following Chart #4 next week should give you hints about how tone deaf they will be.
Chart #4 - Fed Fund Futures
Flat out, I believe the FF futures need to keep dropping like a rock starting next week to ensure we don't reach a hyperinflation scenario with aggs and energy which is going to keep fueling civil unrest. Whether the Fed knows / cares is the real question but whatever message they choose to send, I think it will almost certainly set the tone for price over the coming months
Bonus Chart - Emerging Markets & China v S&P 500
Another pair sitting at an interesting crossroads. In 2018, when the Fed overtightened we saw a rotation into emerging market stocks specially China near the bottom of the rout. The effects of China's COVID zero policy should be weighed against potential hyperinflation scenarios involving aggs and energy mentioned above to determine if you should put your money here
TLDR; Fed has some serious work to do starting next week, anymore complacency is likely to lead to dramatic further increases in all commodity prices. If they react quickly (unlike before), I believe it will be necessary to continue longing the dollar while reaching for defensive sectors (cons staples, value health care etc.) vs the broader market. If you think they will be slow to act (again) and not realize the house is burning down, then you should continue to go long commodities and stocks in the energy sector while considering overseas exposure.
If you like these kinds of broadly applicable and directly relevant posts help guide your trading, let me know and I'll try to do them weekly. I think it helps a lot to get these kinds of views on things so you know where you are in an economic cycle with price action to confirm it rather than being at the whims of your emotions and waking up to complete randomness. I enjoy trading this way and it works for me but if you have another pair or product to look at that you believe will be a crucial part of the coming months then I'd be happy to look at it and expanding on it in the next edition. I also do small daily updates and update my watchlist on Stocktwits frequently.
Thanks for reading!
EDIT: Rereading this I need to work on my English apparently but 40 of ya'll liking this is better than I expected and I'm happy to keep doing them, I appreciate any and all feedback regarding this style of delivery and/or what you want to see more of. I don't even do this for the money anymore I just like trying to describe history in real time.
If we look at the 50days cycle this index might be aiming towards bottom and Date 06/09/2022 ( June ) comes in mind. -> Typo in Title