FXEMPIRE
All
Ad
Corona Virus
Stay Safe, FollowGuidance
World
93,854,763Confirmed
2,009,343Deaths
67,029,564Recovered
Fetching Location Data…
Advertisement
Advertisement
Chris Vermeulen
S&P 500

One thing is very certain right now – we live in very interesting times.  As the world rushes head-first into the 21st Century, it appears one of the most pressing issues before all of us is to navigate the risks and opportunities that continue to stack up ahead of us.  Within the first 20 years of this century, the global markets have experienced many shifts and big price rotations.  Emerging markets, Oil, Technology, Bio-Tech, Miners, Metals, Currencies, Cryptos – we can look at all of these on a longer-term basis and see a boom cycle and a moderate bust cycle event.

The current trends suggest global investors are pouring capital into the US technology stocks which is what is driving the NASDAQ to new all-time highs.  We published this article in late June suggesting a parabolic top pattern may be setting up in the global markets – which may be very similar to the DOT COM peak in 1999~2000 explained here.

Advertisement
Know where the Market is headed? Take advantage now with 

75% of retail CFD investors lose money

Our researchers believe the global shift away from risk and into hot sectors are driving capital investments into a frenzy right now.  It reminds us of the frenzy in the US in the late 1990s when housing, technology stocks, and credit expansion rolled into a frothing expansion phase – then burst suddenly in 1999.  There were plenty of signs in 1997 and 1998 that the frenzy buying was a huge risk – but traders and consumers simply ignored the risks and kept buying.

Similarly, this same type of bubble mentality happened in 2017 with Bitcoin.  In less than 24 months, Bitcoin rallied from $370 in early 2016 to $19,666 near the end of 2017 – a massive 8000%+ rally.

The similarities of the Bitcoin rally and the rally of the US stock market in the late 1990s is the mentality of the investors throughout these bubbles – the “no fear” mentality that it will keep going higher and higher.  The same type of mentality appears to be happening in the US stock markets right now and the data suggests something vastly different is really taking place.

Unlike what happened throughout recent history, the globe has recently experienced a massive disruption event – the COVID-19 virus.  This disruption has displaced economic output and consumer earnings on a massive scale – and we are just starting to learn how disruptive these economic factors may be.

One item we believe is severely under-estimated is “consumer earning capabilities”.  The number of jobless in America has risen to well over 35 million (over 10% of the population). If the COVID-19 virus continues to disrupt consumer’s ability to earn income and engage in the economy over the next 6+ months or longer, there is a very real possibility that the V-shaped recovery everyone believes is happening will simply not happen at all.

One of the most ominous signs of a broader consumer and commercial contraction happening in the US markets is the skyrocketing delinquency rates for commercial real estate. Trepp recently published new data suggesting the commercial real estate market is experiencing a massive increase in delinquencies of 30+ days which may lead to a wave of high-value defaults.  Other research suggests US Banks may face $48+ Billion in commercial real estate loan losses.

The Q2:2020 earning estimates have decreased by such a large amount that all investors should prepare for a shocking series of data over the next 30+ days.  Nike surprised everyone with a nearly $800 million loss for their Q4 ending May 31, 2020.  We just read that PizzaHut parent, NPC, filed for bankruptcy recently.  This recent Bloomberg article suggests a massive wave of US corporate bankruptcies could continue throughout 2020 and well into 2021 and extended economic pressures erode the foundations and operations of hundreds or thousands of US businesses ().

What is happening in the US markets right now is that foreign and US investors are piling into this deep price rotation expecting the US Fed to do whatever is necessary to support the markets throughout the COVID-19 virus event.  We believe the risks for investors have never been higher as the global markets teeter on the edge of a partial recovery while the COVID-19 virus surges again throughout the US.

We’ve kept our clients actively protected from the risks within the markets and continue to advise them on how to identify profitable trades within the current market trends.

In the next part of this article, we’ll explore more data facets related to the Q2:2020 and the future expectations of the US and global markets. Our biggest concern is the destructive capabilities of the general consumer.  At some point, we have to understand the consumer drives 85% of the US GDP and future expectations.  If this event destroys the consumer, then it will destroy future expectations.

Keep in mind, we do not trade or invest on fundamentals or economic cycles because we know they can lead or lag stock prices by several months at times. Our focus as technical traders is to follow the price trend and trade accordingly. Stay tuned for part II.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.

 

Advertisement
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US