Anyone Who Understands Risk Management Is Watching This Like a Hawk

By Graham Summers, MBA

Was it a dead cat bounce… or something else?

On Monday, the markets were melting down due to fears of contagion from Evergrande, China’s second largest real estate company, going bankrupt.

Since that time, the market has bounced hard… despite the fact nothing has changed about Evergrande, or its $300 billion in debt, or the contagion issues that it presents to the financial system (commodities, EU banks, Australian miners, etc.).

So, the big question for stocks is: was this a dead cat bounce or the start of a new major rally?

Let’s find out.

The S&P 500 is attempting to reclaim its 50-day moving average (DMA). As the below chart shows, this line has acted as major support throughout much of 2021. So, the fact we broke below it is significant. If the S&P 500 cannot reclaim this level and stay there… then stocks are in MAJOR trouble.

For anyone who understands risk management, the below chart has been a MAJOR concern for the last few months. On a monthly basis, the S&P 500 is EXTREMELY overstretched to the upside. At a minimum, you would expect a drop to the 12-month moving average (MMA) to occur sometime this year.

This would mean a 10% drop in stock prices. 

Note in the above chart that every drop to the 12-MMA started with a significant black candle. We’ve got one week left in September, but it looks like we could be getting our first black candle of the year.

However, given that stocks are in their largest bubble of all time by some measures… that leverage levels are obscene, and that we are seeing the kind of mania associated with major tops… smart investors are asking…

“Is a Crisis about to hit?”

To figure this out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards

Posted in stock collapse? | Comments Off on Anyone Who Understands Risk Management Is Watching This Like a Hawk

An Urgent Update on China’s Black Swan

By Graham Summers, MBA

The markets have rallied hard on news of a potential Evergrande debt payment.

In case you’ve missed this story, Evergrande is a massive property developer in China. The company is effectively insolvent, and with $300 billion worth of debt many analysts were predicting this would lead to China’s “Lehman moment.”

We had some fireworks on Monday, but the markets have since rallied hard on news that Evergrande would make a payment on one of its Yuan-denominated bonds. 

That payment is expected to be made today.

Regardless of what happens with this specific payment, the fact remains that Evergrande is effectively insolvent. The chart says it all.

Moreover, this company is not an isolated situation. China’s government has made it clear it wants the real estate sector to deleverage, which means many of the over-indebted property developers are at risk of similar issues. Real estate and construction account for 16% of China’s ~$15 trillion economy… so this is not a small problem.

Keep an eye on BHP Group limited (BHP). As one of the largest Australian mining companies responsible for supplying China’s construction/real estate sectors, it’s a decent litmus test for whether or not this issue is really resolved or not.

As I write this, BHP is staging a VERY small bounce. The chart is profoundly ugly.

At the end of the day, whether Evergrande pays its bond or not today is just one paragraph in the book of bad debts that are floating around the financial system. The fact the Fed has spent over $4 trillion propping things up since 2020 doesn’t mean this whole mess won’t come crashing down.

In chart terms, it’s only a matter of time before this happens.

The multi-trillion dollar question is…

WHEN?!?!

To figure this out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards,

Posted in stock collapse? | Comments Off on An Urgent Update on China’s Black Swan

At Some Point, We Are Revisiting That Blue Line

All eyes are on the Fed today.

The Fed is expected to announce its tapering schedule for its current $120 billion per month Quantitative Easing (QE) program. The Fed has been hinting at its plan for months, via both Fed officials and media proxies.

The current proposal appears to be a $10-$15 billion per month tapering program, starting in November 2021. This is a very rapid scheme that would bring its QE program to a complete end by mid-2022.

By way of comparison, during the Fed’s last QE taper (that pertaining to QE 3 in 2017), the Fed reduced the pace of its then-QE program by $10 billion every THREE months, with the pace stopping at $30 billion per month.

Again, the current proposed tightening is much faster and aggressive than the last.

The big question is how the markets digest this. The last time the Fed attempted to taper a major QE program, it ultimately blew up the corporate debt markets resulting in stocks collapsing 20% in a matter of weeks.

Chart

Description automatically generated

Will the Fed blow things up again?

It’s quite possible, particularly when you consider that stocks are currently in their largest bubble in history by some measures… financial leverage is extraordinarily high… and we are seeing the types of mania associated with major market tops.

At the end of the day, the stock market is EXTREMELY overstretched above its 50 -month moving average. The only time it’s been more stretched was before the 1987 Crash and during the Tech Bubble.

Chart

Description automatically generated

At some point we are revisiting that blue line. The market always does.

By the way, the 50-MMA is currently at 3,141 while the S&P 500 is at 4354.

The big question is WHEN will this happen?

To figure this out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards

Posted in stock collapse? | Comments Off on At Some Point, We Are Revisiting That Blue Line

This is the Kind of Environment In Which Crashes Can Happen

Stocks got creamed yesterday, but thanks to late day manipulation, they ended up well off the bottom.

From a purely technical perspective, the S&P 500 has broken below its 50-day moving average (DMA) for the first time since March 2021. Stocks then bounced hard off the 126-DMA (six month moving average).

Chart, line chart, histogram

Description automatically generated

It will be crucial to see how the markets act the next few days. We’ve had three significant breaks below the 50-DMA since the March 2020 bottom: one in September ’20, October ’20 and March ’21 (purple circles in the chart below). All of those were resolved in a little over a week.

Chart

Description automatically generated

On the surface things don’t look that bad. But “underneath the hood” things are terrible. None of the S&P 500’s sectors are in uptrends.

Table

Description automatically generated

Moreover, four out of the five most heavily weighted stocks (AAPL, FB, AMZN, and GOOGL) have lost their 50-DMAs and are losing their uptrends.

This is the kind of environment in which actual crashes can happen. 

To figure this out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards

Posted in stock collapse? | Comments Off on This is the Kind of Environment In Which Crashes Can Happen

China’s Black Swan Has Arrived… Are You Ready?

The market is a sea of red this morning.

The issue at hand is China’s massive Evergrande property developer. The company is effectively insolvent, with over $300 billion in bad loans. Many are calling this “China’s Lehman Moment.”

The company’s stock is down 80% Year to Date.

Chart

Description automatically generated

How serious is this?

Serious.

Real estate comprises nearly 8% of China’s economy. Construction is another ~8%. So, all in all, you’re looking at 16% of the second largest economy in the world experiencing the bankruptcy of one of its largest players. This has significant implications for everything from commodities (use in construction) to finance (the loans used to build the buildings and finance the mortgages for consumers).

And in these types of situations, there is never just one player at risk.

Contagion has already begun. Hong Kong property developers and Chinese industrial producers are getting hit. And if you think this will be confined to China you are mistaken.

Australia supplies much of the commodities China uses for its construction. It is not coincidence that BHP Group (BHP) and other major Australian miners are nosediving, crashing 26% in the last few weeks.

A picture containing chart

Description automatically generated

And then there’s European banks, which have massive exposure to China. By the look of the bloodbath this morning, things are spreading to there as well.

Table

Description automatically generated

This is the problem with an Everything Bubble: you never know where the black swan is going to come from.

With the financial system in the single largest bubble of all time, and leveraged to the hilt by easy debt courtesy of Central Bank policies, even a single spark can set the whole thing to blow.

As I warned a few weeks ago, this whole mess will come crashing down one day. In market terms, this is going to happen, it’s just a matter of time.

The question of course is “when”?

To figure that out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards

Posted in Debt Bomb | Comments Off on China’s Black Swan Has Arrived… Are You Ready?

Ok, This is TRULY Horrifying!

 Yesterday, I outlined a terrible secret.

That secret?

That the Fed knows the official inflation measure, the Consumer Price Index (CPI) is practically useless for forecasting future inflation.

In a little-known paper published in 2001, the Fed found that food inflation, NOT CPI or PCE, is the best predictor of future inflation. Fed researchers wrote the following:

We see that past inflation in food prices has been a better forecaster of future inflation than has the popular core measure [CPI and PCE]…Comparing the past year’s inflation in food prices to the prices of other components that comprise the PCEPI (as in Table 1), we find that the food component still ranks the best among them all

Source: St Louis Fed (emphasis added).

I want you to focus on these two admissions:

  1. The Fed has admitted that its official inflation measures do not accurately predict future inflation.
  • The Fed admitted that FOOD prices are a much better predictor of future inflation. In fact, food prices were a better predictor of inflation than the Fed’s PCE, non-durables goods, transportation services, housing, clothing, energy and more.

I mention all of this because today food inflation is erupting higher.

We already noted that agricultural commodities are ripping higher.

But the situation is even worse than I imagined. The below quote is truly horrifying…

Adjusted for inflation and annualized, [food] costs are already higher now than for almost anytime in the past six decades, according FAO data. Indeed, it’s now harder to afford food than it was during the 2011 protests in the Middle East that led to the overthrow of leaders in Tunisia, Libya and Egypt, said Alastair Smith, senior teaching fellow in global sustainable development at Warwick University in the U.K.

Source: Yahoo! Finance

Put simply, food inflation today than at almost any time in the last 60 years. That would include the 1970s, when inflation went into the double digits and the stock market crashed over 50% in a matter of months.

If you think we’re immune to something like this now, take a look at the below chart. This is a massive bubble, looking for a pin. And by the look of things, inflation is it!

On that note, we published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We made 100 copies available to the public.

Today is the last day this report is available to the general public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Posted in Inflation | Comments Off on Ok, This is TRULY Horrifying!

Trust Me, the Fed Doesn’t Want You to Know This

Yesterday I explained how the official inflation statistic used by policymakers, the Consumer Price Index or CPI, is practically useless.

I realize this is quite controversial. After all, everyone on the planet from hedge fund managers to social security administrators uses this data point as THE inflation measure.

Unfortunately for them, CPI is pretty much useless. It doesn’t accurately measure inflation in any way shape or form.

Today, I’m going to let you in on a little secret.

The Fed knows this.

In fact, the Fed has known this for years… since 2001 to be exact.

Back in 2001, the Fed had several researchers dive into the subject of inflation. Their goal was the analyze whether the Fed’s preferred measures of inflation (the CPI and the Personal Consumption Expenditures or PCE) are decent predictors of future inflation.

The Fed also investigated a whole slew of other inflation measures for comparison purposes.

The results?

The Fed found that food inflation, NOT CPI or PCE, is the best predictor of future inflation. Fed researchers wrote the following:

We see that past inflation in food prices has been a better forecaster of future inflation than has the popular core measure [CPI and PCE]…Comparing the past year’s inflation in food prices to the prices of other components that comprise the PCEPI (as in Table 1), we find that the food component still ranks the best among them all

Source: St Louis Fed (emphasis added).

I want you to focus on these two admissions:

  1. The Fed has admitted that its official inflation measures do not accurately predict future inflation.
  • The Fed admitted that FOOD prices are a much better predictor of future inflation. In fact, food prices were a better predictor of inflation than the Fed’s PCE, non-durables goods, transportation services, housing, clothing, energy and more.

With that in mind, take a look at what is happening with agricultural commodities, which are the primary supplies for food.

Chart, histogram

Description automatically generated

You are looking at the end of a 12-year bear market… and the beginning of a new bull market.

If you think this is going to go well for stocks, you are mistaken. During the last major bout of inflation in the 1970s, stocks initially ripped higher for a few years before crashing ~50% erasing all their gains and then some. Even worse, the stock market finished the decade having gained ZERO in 10 years.

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We made 100 copies available to the public.

There are just 9 left.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Posted in Inflation | Comments Off on Trust Me, the Fed Doesn’t Want You to Know This

These Inflation Numbers Are No Joke… a Crisis is Brewing.

The government bean counters are working overtime to hide inflation.

Yesterday’s Consumer Price Index (CPI) number would be hilarious if it wasn’t so damaging to Americans. According to the Bureau of Labor Statistics (BLS), inflation rose only 0.3% month over month for the month of August and 5.3% year over year.

Anyone who lives in America knows this is total bunk

The BLS claims inflation in rents is up a mere 2.9% year over year. The very same day this came out, the Wall Street Journal reported that in the real-world rents are up 10.3%. Also, home prices are up 18% over the same period.

Put simply, unless you live in a cave, your cost of living for shelter (which the BLS uses to calculate total inflation) is up a whole lot more than 2.9%.

Let’s keep going, shall we?

Over the last 12 months, the cost of every commodity is up 51%. Agricultural commodities are up 30%. So is copper. Gasoline prices have nearly doubled at 90%.

Chart, histogram

Description automatically generated

And yet, somehow the BLS claims inflation is just 5.3% year over year. I guess if you don’t drive a car, eat food, build anything, or use any commodities in any way, you’re probably fine.

The whole thing is ridiculous. And it begs the question… why is the BLS doing this?

I can’t claim to be psychic, so I have no idea what’s going on in these peoples’ minds. But I do know that a big reason to understate inflation is to mask the fact that real quality of life is in steep decline in the U.S.

This fact stares all of us in the face on a daily basis.

In the 1950s typically only one parent worked, and most Americans were able to afford their homes and live reasonably comfortable lives. In contrast, today typically both parents work, and most families have massive mortgages, student debt, credit card debt, auto loans, etc.

The whole system requires credit/ debt to function. Without it, most people cannot afford to live anything resembling a “middle class’ existence.

This whole mess will come crashing down one day. In market terms, this is going to happen, it’s just a matter of time.

The question of course is “when”?

To figure that out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards

Posted in It's a Bull Market | Comments Off on These Inflation Numbers Are No Joke… a Crisis is Brewing.

These Inflation Numbers Are No Joke… a Crisis is Brewing.

The government bean counters are working overtime to hide inflation.

Yesterday’s Consumer Price Index (CPI) number would be hilarious if it wasn’t so damaging to Americans. According to the Bureau of Labor Statistics (BLS), inflation rose only 0.3% month over month for the month of August and 5.3% year over year.

Anyone who lives in America knows this is total bunk

The BLS claims inflation in rents is up a mere 2.9% year over year. The very same day this came out, the Wall Street Journal reported that in the real-world rents are up 10.3%. Also, home prices are up 18% over the same period.

Put simply, unless you live in a cave, your cost of living for shelter (which the BLS uses to calculate total inflation) is up a whole lot more than 2.9%.

Let’s keep going, shall we?

Over the last 12 months, the cost of every commodity is up 51%. Agricultural commodities are up 30%. So is copper. Gasoline prices have nearly doubled at 90%.

Chart, histogram

Description automatically generated

And yet, somehow the BLS claims inflation is just 5.3% year over year. I guess if you don’t drive a car, eat food, build anything, or use any commodities in any way, you’re probably fine.

The whole thing is ridiculous. And it begs the question… why is the BLS doing this?

I can’t claim to be psychic, so I have no idea what’s going on in these peoples’ minds. But I do know that a big reason to understate inflation is to mask the fact that real quality of life is in steep decline in the U.S.

This fact stares all of us in the face on a daily basis.

In the 1950s typically only one parent worked, and most Americans were able to afford their homes and live reasonably comfortable lives. In contrast, today typically both parents work, and most families have massive mortgages, student debt, credit card debt, auto loans, etc.

The whole system requires credit/ debt to function. Without it, most people cannot afford to live anything resembling a “middle class’ existence.

This whole mess will come crashing down one day. In market terms, this is going to happen, it’s just a matter of time.

The question of course is “when”?

To figure that out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards

Posted in It's a Bull Market | Comments Off on These Inflation Numbers Are No Joke… a Crisis is Brewing.

How to Profit From a Market Crash

Yesterday, I explained why I believe we are due for a period of below average stock market returns.

By quick way of review:

  1. Inflation is roaring higher. Official inflation measures put it at over 5%. Unofficial, more accurate measures have it clocking in at over 8%. And we are seeing corporations raise prices to deal with this.
  1. Inflation is NOT good for stocks. During the last major bout of inflation in the 1970s, stocks initially ripped higher for a few years before crashing ~50% erasing all their gains and then some. Even worse, the stock market finished the decade having gained ZERO in 10 years.
  1. The stock market is now extremely overstretched to the upside. On a monthly chart, the market is 40% above its 50-month moving average (MMA). The only time it has been more stretched above this line was right before the 1987 crash and during the Tech bubble.

So now the big question is… how do we profit from the inevitable collapse?

One method of doing this is the UltraShort S&P 500 ETF (SDS).

SDS was a leveraged play on the U.S. stock market collapsing.

You see, the SDS returns TWO TIMES the inverse of the S&P 500 ETF (SPY).

So, if the SPY falls 5%… the SDS returns 10%. Etc.

During market meltdowns, SDS is a great means of profiting from stocks collapsing. The below chart shows how it performed during the 2020 meltdown. Note SDS (bottom box) skyrocketed over 70% while the S&P 500 dropped some 30% in the month of March 2020.

However, I want to be clear here, DO NOT go out and buy this investment right now. SDS is a TRADE, not a long-term investment. Put another way, SDS ONLY works when the market is melting down. So, if you buy it at any other time, you’ll lose money.

So how do we know when the market is going to melt down?

To do that, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Posted in It's a Bull Market | Comments Off on How to Profit From a Market Crash

Forget About the Economy, This is How You Know a Bubble is Bursting

One of the most difficult things to learn about the stock market is the fact that it has little, if anything, to do with the real economy.

This is a fact borne out by both statistical studies and real-world analysis. And yet I would argue that over 95% of investors don’t understand this.

For whatever reason, most investors believe that the stock market is effectively a derivative of economic growth.

The reality is that the people thinking this haven’t really thought their arguments through to their logical conclusions.

Indeed, if you think I’m being naive with my views of the weak correlation between stocks and the economy, consider that the mutual fund giant Vanguard performed a study analyzing the correlation between stock market returns and various items (dividend yield, stock market valuations, etc.), from 1926 to 2011.

They found that the correlation between stock market returns and the direction or trend of GDP growth was 0.05, or about 5%. Put another way, the trend of the economy only explained roughly 1/20th of the stock market’s returns.

To put this into perspective, it’s lower than the correlation between rain and stock market returns. Yes, rain, as in whether or not it’s raining outside on a given day.

If you still find this hard to believe, let’s take a real-world example.

Between 1972 and 1982, the US economy nearly tripled in size from $1.2 trillion to $3.2 trillion. And yet, throughout that entire period the stock market traded sideways for ZERO GAINS!

In contrast, from 1982 to 2000, the US economy again nearly tripled in size from $3.2 trillion to $10 trillion. But during this particular time, the stock market exploded higher rising nearly 1,500%!

Chart

Description automatically generated

So, we have two time periods in which the economy nearly tripled in size. During one of them, the stock market went nowhere. During the other, the stock market rose nearly 1,500%.

Again, stocks have little if any correlation to the economy. This is especially true during asset bubbles like the one we’re in today.

So how do you determine when a bubble has burst and a crisis is about to begin?

To do that, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by:

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards

Posted in It's a Bull Market | Comments Off on Forget About the Economy, This is How You Know a Bubble is Bursting

These Charts Are SCREAMING Inflation

On Friday I outlined a very disturbing reality.

That reality?

That the Fed is very likely now a political entity.

By quick way of review:

  • Fed Chair Jerome Powell’s term as Fed Chair ends this year. 
  • The Biden administration has leaked in the media that it is considering giving Powell a second term.
  • Powell failed to present any meaningful information concerning the tightening of monetary policy at the Fed’s annual Jackson Hole meeting.
  • Based on inflation, GDP, and unemployment numbers, there are ZERO economic reasons for the Fed to NOT be already tightening monetary policy aggressively.
  • The above items suggest strongly that Powell has cut a deal with the Biden administration to gain reappointment.

That deal?

Keep the easy money flowing. 

Again, there are no economic reasons for the Fed to continue its current monetary path. The fact that Jerome Powell won’t even commit to presenting a clear timeline for when the Fed will taper is truly negligent.

So where does this leave us?

As I’ve outlined recently, there are clear signs that inflation has entered the financial system.

Commodities, which are inflationary hedges, have just broken out of a 13-year BEAR market. 

Most important in this sector are agricultural commodities. The Fed’s own research has shown that the single best predictor of future inflation is food inflation. Well, take a look at what agricultural commodities are doing.

And then there’s gold, which recently rose to new all-time highs in every major currency.

These charts are SCREAMING inflation. And with the Fed refusing to tighten monetary policy for political reasons, this is likely just the beginning.

Smart investors are taking steps to profit from inflation today. I’ll outline some of my favorite ideas tomorrow.

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We made 100 copies available to the public.

There are just 29 left.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted in It's a Bull Market | Comments Off on These Charts Are SCREAMING Inflation

The Four Horseman of the Coming Crash, Pt 3

Over the last two days, I’ve outlined THE single most important development you need to see, in order for the market to crash.

Think of them as BIG warnings, or the FOUR Horsemen that precede a stock market apocalypse.

What are they?

When most heavily weighted companies began to break down badly.

Technically, the S&P 500 is made up of 500 companies. However, each of those 500 stocks don’t receive the same weight from the index. Rather, certain stocks receive a disproportionate weighting giving them a much larger impact on the market’s price action.

Because of this, in order to get a crash, you need the heaviest weighted stocks to break down badly. Put another way, even if most of the 500 companies in the overall market are in a downtrend, if the heaviest weighted stocks DON’T break down, it’s pretty much impossible for the overall market to crash.

Yesterday we reviewed the 1987 crash, noting that the vast majority of the 10 most heavily weighted stocks had broken down in clear warnings that the market was in serious trouble.

Let’s apply this same methodology to today’s market. Today, the top 10 most heavily weighted stocks in the S&P 500 are:

Company Symbol Weight
Apple Inc. AAPL 6.26
Microsoft Corporation MSFT 5.96
Amazon.com Inc. AMZN 3.82
Facebook Inc. Class A FB 2.38
Alphabet Inc. Class A GOOGL 2.27
Alphabet Inc. Class C GOOG 2.16
NVIDIA Corporation NVDA 1.47
Tesla Inc TSLA 1.47
Berkshire Hathaway Inc. Class B BRK.B 1.41
JPMorgan Chase & Co. JPM 1.27
  Total 28.48

Note that out of an index of 500 companies, these 10 alone account for nearly 30% of the market’s weight. So, in order for the market to crash, we need to see them breakdown badly.

So, let’s take a look at the top five today (September 2021).

Apple (AAPL): this stock is clearly in an uptrend.

Chart, histogram

Description automatically generated

Microsoft (MSFT): STRONG uptrend.

Chart, histogram

Description automatically generated

Amazon (AMZN): this is a weak chart. AMZN has been chopping back and forth for a year now. It’s not as bad as if the company had entered a definite downtrend, but it’s still pretty bad.

Facebook (FB): strong uptrend.

Alphabet (GOOGL): incredible uptrend.

Put simply, out of the top FIVE companies in the S&P 500, which account for nearly a quarter of the market’s weight (22.8% to be exact), FOUR of them are in strong uptrends.

While the market is definitely in a bubble, until these companies break down, the odds of a crash remain small. So, for now, it’s best to let this bubble run. Just keep an eye on these companies. Once they start to break down, you’ll know it’s time to start getting defensive.

In the meantime, if you’re looking for a guide on how to means to accurately predict crashes, what investments perform best during them, and how to take out “portfolio insurance” on your portfolio, we offer an Exclusive Investment Report, The Stock Market Crash Survival Guide outlining all those items and more.

To pick up a FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards,

Posted in It's a Bull Market | Comments Off on The Four Horseman of the Coming Crash, Pt 3

The Four Horsemen of the Coming Crash, Pt 2

Yesterday I outlined THE single most important development you need to see, in order for the market to crash.

Think of them as BIG warnings, or the FOUR Horsemen that precede a stock market apocalypse.

What are they?

When most heavily weighted companies began to break down badly.

Technically, the S&P 500 is made up of 500 companies. However, each of those 500 stocks don’t receive the same weight from the index. Rather, certain stocks receive a disproportionate weighting giving them a much larger impact on the market’s price action.

Because of this, in order to get a crash, you need the heaviest weighted stocks to break down badly. Put another way, even if most of the 500 companies in the overall market are in a downtrend, if the heaviest weighted stocks DON’T break down, it’s pretty much impossible for the overall market to crash.

So today, let’s review the 1987-Crash: arguably the worst single-day collapse in stock market history.

In 1987, the 10 largest companies by market weight were:

Of these, IBM, XOM, GE and T have charts that are easy to find. So, let’s review them.

In 1987, IBM had already taken out both its 50-DMA and its 200-DMA before the crash hit. Put another way, the largest company on the index (the equivalent of the tech sector today) had already broken down VERY badly.

Exxon had yet to look as terrible, but it was clearly struggling, having traded sideways for months before finally breaking down.

General Electric looked awful, breaking its uptrend and falling below its 50-DMA long before the Crash hit.

AT&T (T) was the only one that looked remotely good, as it was still in something of an uptrend when the crash hit.

Chart, histogram

Description automatically generated

For space reasons, we’re only looking at four of the top 10 companies today. But if you were to look at all 10 charts, you’d quickly see that the majority of them had entered downtrends, and were breaking down badly, weeks before the Crash hit.

So does this impact the market today? Put another way, how do we know when THIS will happen?

I’ll outline that in tomorrow’s article. Until then…

In the meantime, if you’re looking for a guide on how to means to accurately predict crashes, what investments perform best during them, and how to take out “portfolio insurance” on your portfolio, we offer an Exclusive Investment Report, The Stock Market Crash Survival Guide outlining all those items and more.

To pick up a FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards,

Posted in It's a Bull Market | Comments Off on The Four Horsemen of the Coming Crash, Pt 2

The Four Horsemen of the Coming Crash, Pt

Over the last few weeks, I’ve been outlining the clear evidence that stocks are in a bubble, arguably the largest stock market bubble of all time. 

In truth, however, it’s not just a bubble in stocks, it’s a bubble in Treasuries, which the Fed has manipulated to absurd levels via over $2 trillion in Quantitative Easing (QE) during the last 18 months.

These bonds are the senior most asset in the current financial system. Their yields represent the “risk free” rate of return against which all risk assets (including stocks) are valued. So, when the Fed created this bubble in Treasuries, it was creating a bubble in Everything, which is why I call this the Everything Bubble.

Of course, this begs the question… when will it burst?

Put another way, when does THIS happen?

Predicting the actual week, let alone the day, of a market crash is all but impossible. However, there are certain key developments that MUST happen for the market to crash. 

Think of them as BIG warnings, or the FOUR Horsemen that precede a stock market apocalypse.

What are they?

The most heavily weighted companies began to break down badly.

Technically, the S&P 500 is made up of 500 companies. However, each of those 500 companies don’t receive the same weight from the index. Rather, certain companies receive a disproportionate weight giving them a much larger impact on the market’s price action.

Because of this, in order to get a crash, you need the heaviest weighted stocks to break down badly. Even if most of the 500 companies in the overall market are in a downtrend, if the heaviest weighted stocks DON’T break down, it’s pretty much impossible for the overall market to crash.

I’ll outline precisely how this played out before the 1987 Crash (arguably the worst single-day collapse in stock market history) in tomorrow’s article. 

In the meantime, if you’re looking for a guide on how to means to accurately predict crashes, what investments perform best during them, and how to take out “portfolio insurance” on your portfolio, we offer an Exclusive Investment Report, The Stock Market Crash Survival Guide outlining all those items and more.

To pick up a FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards,

Posted in It's a Bull Market | Comments Off on The Four Horsemen of the Coming Crash, Pt

The Four Horsemen of the Coming Crash, Pt 1

Over the last few weeks, I’ve been outlining the clear evidence that stocks are in a bubble, arguably the largest stock market bubble of all time. 

In truth, however, it’s not just a bubble in stocks, it’s a bubble in Treasuries, which the Fed has manipulated to absurd levels via over $2 trillion in Quantitative Easing (QE) during the last 18 months.

These bonds are the senior most asset in the current financial system. Their yields represent the “risk free” rate of return against which all risk assets (including stocks) are valued. So, when the Fed created this bubble in Treasuries, it was creating a bubble in Everything, which is why I call this the Everything Bubble.

Of course, this begs the question… when will it burst?

Put another way, when does THIS happen?

Predicting the actual week, let alone the day, of a market crash is all but impossible. However, there are certain key developments that MUST happen for the market to crash. 

Think of them as BIG warnings, or the FOUR Horsemen that precede a stock market apocalypse.

What are they?

The most heavily weighted companies began to break down badly.

Technically, the S&P 500 is made up of 500 companies. However, each of those 500 companies don’t receive the same weight from the index. Rather, certain companies receive a disproportionate weight giving them a much larger impact on the market’s price action.

Because of this, in order to get a crash, you need the heaviest weighted stocks to break down badly. Even if most of the 500 companies in the overall market are in a downtrend, if the heaviest weighted stocks DON’T break down, it’s pretty much impossible for the overall market to crash.

I’ll outline precisely how this played out before the 1987 Crash (arguably the worst single-day collapse in stock market history) in tomorrow’s article. 

In the meantime, if you’re looking for a guide on how to means to accurately predict crashes, what investments perform best during them, and how to take out “portfolio insurance” on your portfolio, we offer an Exclusive Investment Report, The Stock Market Crash Survival Guide outlining all those items and more.

To pick up a FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards,

Posted in It's a Bull Market | Comments Off on The Four Horsemen of the Coming Crash, Pt 1

These Sophisticated Traders Are Betting on a 1987-Type Crash

While the stock market continues to rise to new all-time highs, the options markets are betting on a massive crash.

If you’re unfamiliar with options, they are securities that give you the right, (but not the requirement) to buy shares in an underlying stock or ETF at some point in the future.  The pricing and trading of options is a complicated thing, so for simplicity’s sake you can think of them as bets on where you think a given stock or ETF might trade at some point.

Goldman Sachs, noting that the options markets are pricing in a market crash similar to that of 1987 or 2008.

Displaying

Goldman specifically notes that the options on the Volatility Index (VIX) that are due to expire 12 months from now are priced at 26.

Historically, the only time this contract has been priced at this kind of level has been around the 1987 Crash, the Great Financial Crisis of 2008 and the Coronavirus Crash of 2020.

Put another way, someone is betting and betting BIG that a crash is coming sometime in the next 12 months.

Obviously, this bubble, like all bubbles, will eventually burst. Smart investors are preparing for this in advance.

With that in mind, we’ve reopened our Stock Market Crash Survival Guide to the general public.

Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).

We are making just 100 copies available to the general public.

To pick up your copy of this report, FREE, swing by:

http://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Posted in It's a Bull Market | Comments Off on These Sophisticated Traders Are Betting on a 1987-Type Crash

Yes, It’s a Bubble and Yes It Will Burst Soon

The #1 question I’m asked these days is…

“Are stocks in a bubble?”

Defining a bubble in stocks is extremely difficult because stock prices are based heavily on Treasury yields, and Treasury yields are at ridiculously low levels due to the fact that the Fed is currently spending $960 BILLION per year buying Treasuries.

Think of it this way, if the 10-Year U.S. Treasuries is yielding 1.36%, and that is the “risk free” rate which you would earn lending money to Uncle Sam, what would you be willing to pay for growth from the stock market?

18 times earnings? 20 times earnings? 22 times earnings?

You get my point.

If Treasury yields are kept low, you can argue that stocks are “cheap” even at valuations that no one would be willing to buy a private business for with their own money. Do you think Uncle Bob would buy a carwash for 22 times what it makes per year? Yeah, me neither.

This is one of the key reasons why Central Banks love Quantitative Easing (QE) so much. It doesn’t do much for the economy or job creation, but it allows them to reflate the financial system by pushing the risk-free rate of return (the rate against which all risk assets including stocks are measured) to levels that the bond market wouldn’t tolerate otherwise.

So how are we to measure a bubble?

Warren Buffett’s favorite measure for stocks is to compare the market cap of the stock market to U.S. GDP. By that metric, the stock market is more overvalued today than it was during the Tech Bubble of the late 1990s (153% vs 146%).

Suffice to say, this is a bubble. And technically it’s a bigger bubble than the Tech Bubble, which was widely considered to be the biggest stock market bubble of all time.

Chart, line chart

Description automatically generated

Obviously, this bubble, like all bubbles, will eventually burst. Smart investors are preparing for this in advance.

With that in mind, we’ve reopened our Stock Market Crash Survival Guide to the general public.

Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).

We are making just 100 copies available to the general public.

To pick up your copy of this report, FREE, swing by:

http://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Posted in It's a Bull Market | Comments Off on Yes, It’s a Bubble and Yes It Will Burst Soon

This Company Gave Us a Glimpse Into What’s Coming to the Broader Market

The deflationists had another bad day yesterday.

Deflationists argue that inflation doesn’t exist because the Treasury market isn’t acting as if inflation is a problem. They always fail to mention that the Treasury market is ALSO the most manipulated market on the planet. The Fed is currently spending over $1 trillion per year buying these bonds, effectively cornering them.

So why was yesterday a bad day for deflationists?

Because it was revealed that apartment rents are up almost 15% year over year since June. Yes, 15%. This is the highest annual increase since 1993.

By the way, the Bureau of Labor Statistics, which compiles the official inflation data for the U.S. claims “rents or shelter” is in fact only up 2.6% over the same period. As Bill King notes, if CPI accurately reflected the real jump in rent inflation, CPI would be at least 4% higher (north of 9%).

So, while the bond market continues to exist in a manipulated state of fantasy, real people are experiencing real jumps in prices, which is causing real economic damage.

This will eventually lead to catastrophe.

Stocks initially LOVE inflation but that love eventually turns to hate when costs rise so much that they eat into profits.


This was the case during the last real bout of inflation in the 1970s. At that time stocks initially rallied aggressively from mid-1970 to 1974. Then inflation spiraled out of control and the markets crashed some 50%.

Chart, histogram

Description automatically generated

This time around will prove no different. We are already beginning to see signs of this in individual stocks.

Consider Clorox (CLRX). The company lost over 11% of its market cap yesterday when it revealed that the company’s cost of products as a percentage of net sales spiked from 53% in 2Q20 to 63% in 2Q21.

The reason for this spike in costs?

Inflation.

CLRX shares erased months’ worth of gains in a single day and are now back to where they were in early 2020, erasing the ENTIRE COVID-19 ramp.

Chart, line chart, histogram

Description automatically generated

This kind of collapse will be spreading more and more throughout the stock market as inflation roars.

With that in mind, we’ve reopened our Stock Market Crash Survival Guide to the general public.

Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).

We are making just 100 copies available to the general public.

To pick up your copy of this report, FREE, swing by:

http://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted in Inflation | Comments Off on This Company Gave Us a Glimpse Into What’s Coming to the Broader Market

These Three Charts Are Issuing a Major Warning to Stock Investors

So, will it be stagflation after all?

It is already clear that inflation has entered the financial system. Those who claim that this cannot be true because Treasury bonds aren’t showing it fail to mention that Treasury bonds are the most manipulated asset class on the planet.

After all, it’s rather difficult to argue that Treasury bonds can discount or measure much of anything when the Fed is spending over $1 trillion buying them every year. Technically, all they are reflecting is what $1 trillion worth of Fed asset purchases can get you in terms of manipulation.

Meanwhile, we are getting signs of inflation everywhere.

  1. Capri, which owns Michael Kors, Versace and other fashion brands just announced it will be raising prices “considerably.”
  2. Chipotle is raising prices 4% to cover increased labor costs.
  3. Proctor & gamble which manufactures consumer goods like Gillette razors and Tide detergent announced it will be raising prices in September.
  4. General Mills, which produces cereals like Cheerios announced inflation costs are up 7% this year.
  5. Whirlpool which manufactures appliances ranging from refrigerators to dryers and washers will raise prices by 12% to offset inflation. It says inflation could cost the company $1 billion this year.

And on and on.

So, we know inflation is here. The question now is whether or not the economy will continue to strengthen or roll over creating a 1970s’-style stagflation.

It now appears it might be the latter as three stock market sectors with close ties to the real economy show us.

First and foremost are Industrials (XLI). These are companies that either produce actual things like tractors, cranes, HVAC systems, etc. or that are involved in real economic activity (mail/shipping). As such, they represent a good gauge of how strong the real economy is doing: during economic expansions these businesses receive more orders.

XLI has gone nowhere since late-April. And this is despite the prospect of a multi-trillion infrastructure bill from the federal government and $120 billion in QE from the Fed.

Chart, histogram

Description automatically generated

Next up are Materials (XLB). These are companies involved in producing things like concrete, copper, steel and the like. During economic expansions these companies receive more orders as they are the primary suppliers of commodities needed for construction, manufacturing and the like.

Here again the chart is odd given the macro backdrop. The Biden administration is hoping to sign a $1.2 trillion infrastructure bill sometime in the next few weeks, and yet, XLB is 5% off its highs. Indeed, you could easily argue that the only reason XLB didn’t collapse last week was the prospect of this infrastructure bill.

Chart, histogram

Description automatically generated

Finally, we have Amazon (AMZN).

The consumer accounts for 75% of the U.S. economy. As the largest online retailer in the U.S., AMZN presents a great window into consumer spending.

After disappointing results for 2Q21, AMZN shares collapsed. They have now gone nowhere since July of 2020. This is NOT what you would expect from a raging economy.

Chart

Description automatically generated

So, inflation is here… and the economy appears to be rolling over. That would mean a stagflationary environment… which would be the absolutely WORST environment for the massive fake bubble the Fed has created.

With that in mind, we’ve reopened our Stock Market Crash Survival Guide to the general public.

Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).

We are making just 100 copies available to the general public.

To pick up your copy of this report, FREE, swing by:

http://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted in It's a Bull Market | Comments Off on These Three Charts Are Issuing a Major Warning to Stock Investors