Hmm, new thread title?

They always seem to manage that. lol

 

Even Forbes says we fuk

https://www.forbes.com/sites/johnto...nvestors-may-panic-next-week/?sh=17d4f2fc73bf

Conditions are right and last week’s dismal market removed the last vestiges of hope for a rebound or recovery. It’s now a decision of whether to get out partially or wholly. Whatever, expect emotions to drive the action, and that means fear and panic are back.



Here is how I arrived at this forecast...


After posting my Friday write-up ("Stock Market Fear Is Overdue, So Be Ready For Its Reappearance"), I began going through my weekly chart analysis. That solid red S&P 500 return map in my Friday article prepared me to expect plenty of negativity. However, what I found was downright ugly - and ominous. And that's looking at weekly graphs going back to the beginning of 2021.


I believe that those 16 months are the crucial period for influencing investor emotions. Since 2021 was a banner year that contained lots of bullishness, a 2022 reversal of most or all of those gains could cause investors to suffer and react emotionally.


What I didn't expect is that the disheartening scenario is now here
Note: The graphs at this article's end show the discouraging pictures

The Nasdaq Composite index has wiped out 2021 and more. The Nasdaq 100, where the popular leaders reside is back to where it started. The DJIA is better off (still up almost 8%), but it never did ride the speculative bull. Then there is the index for all: the S&P 500. It still retains a 10% return for those 16 months, although that's only about one-third of what it was four months ago.

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But that isn't all...
The widely used trend lines have lost their upward moves. Moreover, there is the clear, negative signal of the shorter-term trend line crossing down through the longer-term trend line. Such moves bode ill.


Perhaps worst are the broken foundations that were established only recently. All but the DJIA’s were penetrated last week with gusto. What support levels remain? Nothing of substance. Moreover, fundamental sales/earnings valuations are out the window because building inflation-recession concerns make forecasts questionable. Nor do dividend yields provide a cushion as bond yields continue to rise. Therefore, investors are now left looking at only air below.

So, what's next?
Well, there's panic selling. As I wrote in my Friday article, the missing element in this bear market has been investor fear. It will come, but I added that its long delay could mean that we see fear quickly give way to panic selling.

How soon?
Before I did my chart work, I thought it could be anytime during the next month or two. Now, I believe it’s very close - perhaps even this coming Monday morning.

I know! That's a heck of a thing to suggest. However, my experience tells me that all the bull props are gone, so there is nothing holding back the panic selling except a bout of buying from who-knows-where-or-why.

Now imagine this weekend for investors. Can't you just see them thinking about last week's losses. Some (many?) could decide it’s time to get out with smaller, but, at least, positive gains - or minimal losses. There are plenty of Wall Street axioms to support doing just that. Those sales wouldn't be classified as "panic," but if the volume is high enough, buyers will step aside creating the perfect environment for panic selling to drive a falling market. It’s certainly happened before, and there is nothing today to prevent it.

The bottom line: Don't count on anything because emotions are about to take over
Fear is coming, and panic selling is likely to follow close behind. The timing of emotional events is normally very difficult. However, with fear overdue and stock returns continuing to melt away, there is a real possibility that the gruesome twosome will take the stage as early as next week - perhaps even starting as early as Monday’s opening bell.

Below: The weekly index graphs covering the past 16 months
First is the cumulative performance comparison for the four indexes. Following are the separate price and performance graphs for each index: S&P 500, DJIA, Nasdaq 100 and Nasdaq Composite.


16-month comparison performance graph for four indexes

John S Tobey (StockCharts.com)

S&P 500 - 16-month price and performance graphs

John S Tobey (StockCharts.com)

DJIA 16-month price and performance graph

John S Tobey (StockCharts.com)

Nasdaq 100 16-month price and performance graph

John S Tobey (StockCharts.com)

Nasdaq Composite 16-month price and performance graph

John S Tobey (StockCharts.com)

 

I love fear markets. It's where I can finally make money in the next decade from people impulse liquidating, getting bent over on taxes, then working for the rest of there lives trying to get back the money they already lost, and took a hit on for withdrawing on taxes.

Unless you're retiring in the next 5 years then you already had your chance to move around accordingly.

 

I would love further selloff. Im always willing to get shares on sale.

 

Sale? You mean 10:1 P/E as compared to 50:1? lol

Even the US markets get a reality check now and again.

NVDA was trading 90:1. Now it's at 50:1. Think it will hit 30:1?

 

Rising P/Es and P/E averages are to be expected over time with inflation. Sometimes (often) I think even investors don't get this. The P means "price", and when dollars devalue...nominal prices rise.

Stack historically low interest rates on top of that (reminder: We are still currently at .25 FFR with treasuries all yielding below 3%) and stocks absolutely should be more expensive than the historical average.

NVDA maybe, but some are arguing that the S+P 500 is already oversold and that's a justifiable position.

Personally I think we're gonna see the high 3000s on the S+P and that will just be too tempting a sale for big money and start the rally.

 

Jpow: "lmao, you guys tyna do some TA? fuck you, brrrrrrrrrrrr"

 

I'm gonna be real interested in seeing how the Fed proceeds with QT and rate increases once politically connected unions start complaining to their pet politicians about pension fund models getting fucked up.

They folded like a house of cards in 2018, but of course inflation was sub-2% way back then...

 

I'd argue it's largely irrelevant at this point. There's no stopping what's about to happen. If you drop the rates and keep printing, you might be able to stave off the inevitable until mid 2023.

The QT plan and rate hikes designed for a "soft landing" are doomed to fail anyways. The next few years are gonna suck for everybody except, well....you know.




You're certainly not gonna try and tell me with a straight face that S&P is behaving "as expected"



At any rate, I've already perfected my, "I told you so" dance

 

Ya'll always drag out that non-log chart and leave out the past periods where the S+P has made permanent upward marches of this magnitude:

https://www.macrotrends.net/2324/sp-500-historical-chart-data

I have no idea if the sp500 is behaving "as expected" (what was expected? By whom?), but it's not wildly out of line with its historical behavior. Especially not after this ~12% pullback.

 

I'm curious what you would suggest in lieu.

The two standard proxies for US market behavior as a whole that are considered most accurate are the S+P 500 or the Russell 3000.

 

It is wildly out of line though, by arguably every measurement. The money pumped into the system since 2020 is all you have to look at lol. Never mind the total return swaps, the SLB swaps, canada about to get fucking rekt with their Evergrande bonds whenever china decides to do whatever it is they're gonna do to leverage that over the US and Canada

Jpow and the fed done fucked all of us at the expense of giving his buddies time to settle their affairs (to the best of their ability) and get ready to buy the crash.

 

That's a lot of multi-syllabic words to tell us you don't know what you're talking about lol

 

This was my favorite part. Bagholder spotted lol.

Department of redundancy department. And I agree. Facebook, google, Amazon, and microsoft are all at the brink of bankruptcy due to their lack of innovation lol

 

Nah. Leverage and lack of oversight is the issue. If you find out in 2008 you can make a ton of shitty bets and get bailed out when they fail, you'll do that to an even larger degree in the future if you expect the same slap on the wrist results for your shenanigans

 

Yikes.

 

Ra disapproves

 

"Mildly", not "wildly".

Following historical averages it's a touch high. Again, historical averages really shouldn't be relied on here because, as you pointed out, we don't have a historical money supply situation. We also don't have a historical interest rate situation, and the world population (and thus, aggregate demand) is the biggest it has ever been.

But even assuming historicals apply, we're not far out of trend.

SP500 was around 3300 pre-covid in Jan 2020, which was universally agreed to be a healthy economy marching along. Assume a 10% nominal increase from there (the historical average) and you get 3630 Jan 2021 and 3993 Jan 2022. We closed at 4131 on Friday. That's about dead smack on historical trendline.

Current S+P P/E is 20.8 - The average since 1980 is 21.9. The average all time is 15.something.

Everything as it sits now is easily within 10% of historical trends. I'm curious what you consider wildly out of line right now?

 

One more note:

Take the above and assume the dollar has devalued, oh, say, 8.9% in the past year due to inflation (just to pick a random number very much not in line with historical averages).

There's another 8.9% that the price of the SP500 should theoretically rise on top of historical averages to account for the less valuable currency purchasing it.

 

Glad I got my money under my mattress where it’s safe from inflation