100% Measured Moves May Signal A Top

One type of Fibonacci price structure we use to attempt to measure price trends and identify potential tops/bottoms is the “100% Measured Move” structure.  This is a price structure where a previous price move is almost perfectly replicated in a subsequent price trend after a brief period of retracement or price correction.  These types of patterns happen all the time in various forms across multitudes of symbols to create very solid trading signals for those that are capable of identifying trends and opportunities using this technique. If you want my daily analysis and trade ideas, be sure to get my updates by joining my free trend signals email list.

The first thing we look for is a strong price trend or the initially confirmed reversal of a price trend.  We find that these trending price ranges and initial “impulse trends” tend to prompt 100% measured moves fairly accurately.  The explosive middle-trend is where one can’t assume any type of Fibonacci 100% measured move will happen.  Those explosive moves in a trend that tend to happen in the middle of a price trend are what we call the “expansion wave” of a trend and will typically be 160% or more the size of the initial impulse trend.

These trade setups we call the “100% measured moves” are naturally occurring price rotations that skilled traders can use to identify strong trade potential setups.  They are more common in rotating markets where a moderate trend bias is in place (for example in the current YM or ES chart).

First, let’s take a look at this YM Weekly Chart to highlight the most recent 100% Measured Move.  The original upside price move between June 2019 and July 2019 resulted in a 2787 point price rally that replicated between August 2019 and November 2019 – after a brief price retracement.  Currently, price is rotating near the peak of this 100% measured price move near 27,875 while attempting to set up a new price trend.

In this ES Weekly example chart, we see a 100% Measured Move that originated in June 2019 and ended in July 2019 – just like on the YM chart.  Although the completion of the 100% measured move didn’t originate until the low that formed before price rallied to take out the previous high near 3029.50.  Remember, the other facets of Fibonacci price theory are also still at play in the markets while these 100% Measured Moves are taking place.  Thus, rotation between a previous price peak and valley (without establishing any new price highs or new price low) are considered “price rotation” – not trending.  The 100% Measured Move that did take place recently did complete a full 100% advancement and is now stalling near the 3040 level peak.

If you are not familiar with some of my forecasting and trading strategies for trading the S&P 500, or my gold trading signals be sure to click those links to see some pretty interesting charts like these.

SP500 INDEX TREND IDENTIFICATION AND TRADE SIGNAL SYSTEM

CYCLE AND PRICE PREDICTION SYSTEM

CONCLUDING THOUGHTS:

Once these 100% measured moves complete, price usually attempts to stall or wash out a bit before attempting to establish a new price trend.  At this point, given the examples we’ve illustrated, we believe the US market will enter a period of rotation and moderate volatility as these 100% measured moves have completed the upside price advance for now.  Some level of price rotation after these 100% measured moves have completed will potentially allow for another attempt at a future 100% price advance after setting up a new price leg.

These techniques don’t always work, we recently got stopped out on a TVIX (vix/volatility trade for a loss) but we just close out our thirst natural gas trade for a quick 7% profit. The previous UGAZ trade netted 20%, and the one before that was 7.95%.

I can tell you that huge moves are about to start unfolding not only in metals, but stocks, and currencies. Some of these supercycles are going to last years. Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. PDF guide: 2020 Cycles – The Greatest Opportunity Of Your Lifetime

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

I urge you to visit my Wealth Building Newsletter and if you like what I offer, join me with the 1 or 2-year subscription to lock in the lowest rate possible with our BLACK FRIDAY offer, PLUS get a FREE BAR OF GOLD and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next set of crisis’.

Chris Vermeulen
www.TheTechnicalTraders.com

Market Fears and Flash Crashes

I want to wish everyone a Happy Thanksgiving and if you find this type of analysis interesting be sure to visit my website and sign up to get both my swing trade and investing analysis.

ETF trade signals at 41% discount, plus a free bar of silver or gold
Black Friday Offer Today! 

Visit: www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

The Bond Market Is Telling Us Some Weakness Could Be Entering The US Markets

Chris Vermeulen joins me to look at the charts for US markets, bonds, gold, and natural gas. He points out that bonds have rebounded and are showing that some of the smart big money is taking a more defensive position. However gold is lagging the moves in bonds. Also considering where the VIX had dropped to we could finally see a US market correction that could bring some fear back into investors’ minds.

I want to wish everyone a Happy Thanksgiving and if you find this type of analysis interesting be sure to visit my website and sign up to get both my swing trade and investing ETF trade signals at 41% discount, plus a free bar of silver or gold with my Black Friday Offer Today!  Visit: www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

Range-Bound Into The End Of 2019?

Two of our favorite charts for following the US markets are suggesting the markets are range bound headed into the end of 2019.  The news may continue to push the price higher as the overall bias has continued to be to the upside.  Yet, our Fibonacci predictive modeling system is suggesting the current price trend has begun a “scouting party” type of move which may end in a moderate price correction fairly quickly.

IWM RUSSELL 2K STOCK INDEX CHART

Our Adaptive Fibonacci price modeling system is capable of learning from past price activity and attempts to present key price data and trigger levels that are important for future trending.  The GREEN and RED horizontal lines on the right edge of this chart shows where the TRIGGER LEVELS are for the Fibonacci system.  The bullish trigger level (GREEN) is 2.5% above the current price levels.  The bearish trigger level (RED) is nearly 16% below the current price level.  This suggests that price would have to target either of these levels to establish a new price trend, or continue rotating within these levels to setup new minor peaks and valleys in the price – thus creating revised TRIGGER LEVELS. Get my updates by joining my free trend signals email list.

What we find interesting is the current “scouting party” type of rally that is taking place on the right edge of this chart.  This upside price move is above historical resistance (the CYAN LINE) and appears to be an attempt to test the support levels above the $160.50 level.

If the price is successful in establishing support above this level, a new bullish trend may begin.  If not, the price will rotate lower and potentially begin a new bearish price trend.  Remember, the downside Bearish Trigger level is 16% below the current price – so that the downside move could be quite dramatic.

TRANSPORTATION INDEX WEEKLY CHART

This TRAN Weekly chart highlights a similar range-bound price setup where the bullish and bearish Fibonacci TRIGGER LEVELS are well above/below the current price.  The upside Bullish Trigger Level is 4.15% above the current TRAN price level – thus price would have to rally at least 4.5% higher to qualify as a breach of this Bullish Trigger Level and qualify as a potential new bullish trend.  The Bearish Trigger Level is near 18.4% below the current price level – thus the price would have to fall 18.5% from current levels to breach this Bearish Trigger Level and to qualify as a new Bearish Trend.

Where does this leave us headed into the end of 2019?  Our researchers believe the Santa Rally that most traders expect maybe more like a lump of coal in 2019.  We don’t expect any big breakout rally to happen over the next 35+ days and we don’t expect a massive 40% price correction either.  Our Fibonacci price modeling system is suggesting that any rotation within this 20% price range would be considered “absolutely normal” given the ranges that have been set up over the past 2+ years.

Last week we share these charts on the VIX that paint a clear picture of what is likely to unfold in the next week. This current week is one of the strongest months of the year so

Therefore, the downside price move of 6 to 12% would be completely normal.  And the upside move of 2~3% from current levels would be completely normal.  Any price rotation within the GREEN/RED Fibonacci triggers levels would be considered “normal price rotation” given the established price ranges, peaks and valleys.

We’ve been saying for months, 2019 and 2020 are certainly going to be interesting years for traders.  We believe any price rotation or breakout could lead to a wide range of price rotation that may shock skilled technical traders.  At this point, a 22%+ “normal” price range has setup in the markets.  Prices could rotate within this range and “not really go anywhere” in technical terms.

I want to wish everyone a Happy Thanksgiving and if you find this type of analysis interesting be sure to visit my website and sign up to get both my swing trade and investing ETF trade signals at 41% discount, plus a free bar of silver or gold with my Black Friday Offer Today! Visit: www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

Consumer Discretionary Sector and Corporate Bonds On Verge of Sell-off

I have been warning of a peak in the markets and a continued capital shift in the global economy that continued to push the NASDAQ and DOW towards new all-time highs while the foundations of the global markets continued to weaken.

I authored dozens of research posts regarding this phenomenon over the past 90+ days.  Yet the clearest signs of this event may already be present in these Consumer Discretionary Sector and Corporate Bonds charts.

Consumers drive economic activity and corporate debt is often a measure of sustainable debt function within a functioning economy.  When consumers tighten their belts and exit the economy in some form and Corporate debt is viewed as “more toxic” than “opportunistic” – something has changed in the global economy where a portion of the active consumer engagement of that economy is waning or has already left the building.

One of the biggest reasons economic contractions happen is because consumers exit the marketplace as a form of protectionism.  Much like in 2008-09, when the credit crisis started hitting, many consumers were in shock and simply exited the marketplace completely.  They didn’t buy big-ticket items.  They didn’t go on trips.  They didn’t do much of anything other than try to pay their bills and to protect what they had.  I call this the “toilet paper and toothpaste mode”.  Consumers typically buy only what is needed at times like this and try to save as much as they can. You can get all of my trade ideas if you opt-in to my free trend signals alert list.

CONSUMER DISCRETIONARY SECTOR – DAILY CHART

If the Consumer Discretionary sector breaks below the $118 level and continues lower, it would be a very clear sign that the lower price channel has been broken and that new downward pricing pressures are taking place in the global markets.  The bigger picture is that a breakdown in consumer confidence could take place – much like a self-fulfilling event.  When the consumer market begins to tighten, more fragile consumers (those without extra money to spend) begin to tighten their spending and begin to default on loans/credit cards.

As the event extends, more middle-ground consumers begin to change their tactics and risks become more evident to them.  Each time a consumer sector moves into a protectionist mode, it pushes other areas of the economy into a crisis mode/contraction.  Thus, the self-fulfilling process continues until a bottom is reached.

HIGH YIELD CORPORATE BONDS – DAILY CHART

Corporate Bonds are another measure of economic engagement and debt function.  A breakdown in Corporate Bonds would become a major debt risk factor for the consumer market and for the global stock market.  As Corporate debt falls below the lower trend line level, consumers and lenders may begin to view Corporate Debt as more and riskier.  This creates a type of panic is the consumer sector has already begun to move towards a protectionist mode.

Corporate Debt failures would represent a massive risk factor for the global economy because it would break the overall confidence within the markets and push consumers over the edge in terms of economic activity and engagement.

Remember near the end of 2018 when the market collapsed after the US fed raised rates in early October 2018.  This type of breakdown was the same type of event.  What changed was the US Fed had to alter its longer-term stance in the markets and decrease rates in order for the markets to feel more comfortable.  Now, 12 months later, after the FED has lowered rates three times and softened forward expectations, what would a breakdown in consumer and corporate sectors really do to the markets?  What would the Fed use to counter a price contraction and consumer panic?

Pay very close attention to both of these sectors going forward.  We believe we are very close to the edge of a massive price breakdown event given our research.  If these charts break lower and breakthrough price support, the global markets could contract by at much as 15 to 22% over time – possibly further.

I urge you visit my Wealth Building Newsletter and if you like what I offer, join me with the 1 or 2-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Round or Gold Bar!

I can tell you that huge moves are about to start unfolding not only in metals, or stocks but globally and some of these supercycles are going to last years. This quick and simple to understand guide on trading with technical analysis will allow you to follow the markets closely and trade with it. Never be caught on the wrong side of the market again and suffer big losses. PDF guide: Technical Trading Mastery

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Chris Vermeulen
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.  Visit our web site (www.TheTechnicalTraders.com) to learn how to take advantage of our members-only research and trading signals.

Adaptive Predictive Modeling Suggests Weakness Into 2020

Our Adaptive Dynamic Learning (ADL) predictive modeling system is suggesting the Transportation Index will fall to levels near $10,000 over the next 2 to 3 weeks which would indicate moderate price weakness in the US stock market and the global stock market.

Our ADL predictive modeling system attempts to model future price activity by finding and mapping critical price and technical elements within the historical price action.  In a way, this is like mapping the future by attempting to learn from the past. You can get all of my trade ideas by opting into my free market trend signals newsletter.

WEEKLY TRANSPORTATION INDEX CHART #1

This first Weekly Transportation Index chart highlights the ADL predictive modeling results since the end of July 2019.  Notice the CYAN and YELLOW lines drawn on this chart showing what the ADL predictive modeling system suggested would happen over time.  This Technical ADL pattern consisted of SIX historical reference points and suggests the last three weeks’ price levels have a 63 to 84% probability rate.  This would indicate a fairly strong probability that prices will fall as the ADL predicts.

WEEKLY TRANSPORTATION INDEX CHART #2

This second Weekly Transportation Index chart highlights the ADL predictive modeling results from early September 2019.  The results are quite similar across these two charts.  Although the September results highlight a bit more potential price rotation than the earlier July ADL results.

This September ADL predictive modeling chart suggests the TRAN price will fall dramatically to levels below $10,000, then recover a bit.  After that, the price will continue to settle near the $9,700 to $10,000 level throughout the end of 2019.  This downside price move in the Transportation Index suggests the US and Global markets will experience some extended price weakness over the next 3 to 6+ weeks.

The decline in the Transportation Index suggests an overall weakness in the global economy.  If that translates into true price action in the global markets, we could see a series of lower lows set up in the US Stock Market over the next 4 to 6+ weeks.

General price weakness may become a waning anthem for the global stock market headed into the start of 2020.  Take a look at this NQ (Nasdaq) Weekly ADL chart to see what our predictive modeling system is suggesting will happen over the next 60 to 10+ weeks.

If our ADL predictive modeling system is correct, the NQ will fall to price levels near or below $7,700 over the next 2 to 4+ weeks before attempting to settle near $8000 near the end of 2019.  A couple of days ago I shared an interesting article talking about the VIX ready to rocket higher which is linked to this pending decline. As a word of warning, the price can, and often does, move beyond the ADL predictive levels on extended/volatile price swings.  So be prepared for what may happen as price rotates.

As we are nearing the US Thanksgiving holiday weekend, we wanted to alert you to the fact that we’ve created incredible Black Friday membership subscription options for all of our followers to take advantage of.  These special savings rates will run through the end of November – so don’t miss out by joining the Wealth Building Newsletter right now!

Chris Vermeulen
Technical Traders Ltd.

Oil Begins To Move Lower – Will Our Predictions Come True?

Recently, we posted a multi-part research post suggesting a collapse in Crude Oil could be setting up and how we believe this decline in energy prices may lead to a broader market collapse in the near future.  Crude oil fell more than 3% on November 19 in what appears to be a major price reversal.  On November 20, inventory levels and other key economic data will be presented – could the price of oil collapse even further over the next 60+ days?

Here is a link to our most recent multi-part article about Crude Oil from November 13 (just a week ago): https://www.thetechnicaltraders.com/what-happens-to-the-global-economy-if-oil-collapses-below-40-part-i/

OUR ORIGINAL RESEARCH CHART FROM JULY 2019

Our original research post, from July 2019, included this chart showing our Adaptive Dynamic Learning (ADL) price modeling system and where it believed the price of oil would go in the future.  This chart highlights expected price ranges and directions all the way into April 2020 with a low price level near $25 somewhere between February and April 2020.  Is Oil really going to reach a low price near $25 ppb in the near future?

On July 10, 2019, we authored a research article using our ADL predictive modeling for Oil.  At that time, we predicted Oil would fall in August, recover in September and October, then collapse to near $42 (or lower) in November and December.  You can read our followup to this article here.

In order for these predictions to continue to hold true, Crude Oil will have to fall below $47 ppb over the next 30+ days and then consolidate through December and January into a fairly tight price range between $42 and $49.  If this happens as we predicted back in July, then there would be a much higher probability that the February, March and April price targets are valid going forward.

On November 19, Crude oil reversed quite extensively to the downside after weeks of upward price pressure.  We believe this downside price rotation may be setting up a bigger, deeper price move that is aligned with our ADL predictive modeling systems results from July 2019 – eventually targeting the sub $50 price level near the end of November or early December. You can get all of my trade ideas by opting into my free market trend signals newsletter.

CONCLUDING THOUGHTS:

This potential move in Crude Oil is setting up a potentially great trade for active traders if you know how to profit from falling prices and I even talked about how to trade this move in my member’s only trading newsletter service. Remember, if our ADL research is correct, December and January will see very mild price action in Oil.  The bigger breakdown move happens in late January or early February.

On Monday another commodity gave us another trade and it popped 3.4% in our favor within the first trading session. Big moves in stocks, metals, and energy are ready for big price swings here, get ready!

As a trader, you need to be aware of the greater implications for the global markets if Crude Oil falls below $45 ppb (eventually, possibly falling below $30 ppb).  A large portion of the global market depends on oil prices being relatively stable above $50 ppb.  A decrease in oil prices will place extreme pressures on certain nations to maintain oil production and to generate essential revenues.  Depending on how this plays out in the future, falling oil prices could translate into far greater risks for the global stock markets and global economics.

Chris Vermeulen
Technical Trader Ltd.

Vix Warns Of Imminent Market Correction

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX.  These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance.  This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. You can get all of my trade ideas by opting into my free market trend signals newsletter.

VIX VALUE DROPS BEFORE MONTHLY EXPIRATION

When the VIX falls to levels below 12~13, this typically very low level is usually associated with an extreme peak in price.  Throughout history, after the VIX has collapsed to these types of low price levels, the markets have a tendency to revert/correct in ranges that are typically in excess of 3.5% to 5.5%. In some cases, these corrections have been as large as 11% to 18% or more.

CURRENT CONTINOUS VIX PRICE CHART

The current VIX level, near 12, is near the lowest historical levels of the past 12 months.  Every time the VIX has fallen to near these levels, a peak in price has set up within just a few days potentially.  Each time this setup has occurred, the price has rotated/corrected downward by at least 5.5%.  Is that about to happen again in the US markets?

CUSTOM MARKET CAP INDEX

Our custom Market Cap Index is also suggesting a market peak has setup and that price may likely revert to lower levels. Historically, when the price reaches these extreme price ranges, a rotation/reversion price event takes place.  We believe a price reversion may be setting up in the US/Global markets that traders may not be prepared for.  The current rally in the US stock market suggests a broader market rotation may take place.  This suggests a deeper reversion event may be setting up.

Last week I talked about the 3-year record high outflows in the GLD gold bullion ETF and how it’s warning us that investors are not fearful of falling stock prices. This along with the vix, and our custom index paint a clear contrarian signal that a top is near!

CONCLUDING THOUGHTS:

As we near the end of 2019, the current bullish price trend may come to a dramatic end as the VIX charts and our custom Index charts suggest the US/Global markets may have reached levels that support a price rotation/reversion event may be setting up.  Traders need to be prepared for the risks associated with such an event and plan for extended risks.

If you find this type of analysis interesting be sure to video my website to learn more about how you take full advantage of this analysis every week at www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

What happens To The Global Economy If Oil Collapses – Part 3

This, the final section of this multi-part research article, will continue our exploration of the consequences that may result from our ADL predictive modeling system’s suggestion that Oil may continue to fall to levels below $40 over the next few months.

In Part I and Part II, we’ve highlighted what we believe to be very compelling evidence that any continue oil price decline from current levels may be setting up the global markets for a massively volatile price reversion – similar to what happened in 1929.

Prior to the stock market collapse in 1929 and the start of the Great Depression, commodity prices collapsed in 1921 and again in 1930.  This commodity price collapse was the result of over-supply and a dramatic change in investor mentality.  The shift away from tangible items and real successful investing/manufacturing and towards speculation in the housing markets and stock market.

Today, we want to focus on some of the core elements of our current global economic structure to attempt to present any more compelling evidence of a commodity collapse event that may happen after the past 7+ years of a massive credit market expansion event.  Allow us to briefly cover the events of the past 20 years.

You can get my daily market analysis articles and trade ideas by opting into my free market trend signals newsletter.

1999: the DOT COM bubble burst after a mild recession in 1993-94 and a stock market rally from 1996 to 1999

September 11, 2001: Terrorist Attack on US soil.  Shocked the world and global stock markets.  Sent the world’s economy into severe contraction. US Fed lowered interest rates from 6.25% to 1.0% from 2001 to 2003.

2004-06: US Fed begins raising rates from 1.0% and gradually increased rates to 5.25% in August 2006: +525%.  Pushing the US credit market, and housing market, over the edge and starting the 2008 Credit Crisis.

2007-2008: US Fed lowered interest rates to near ZERO over a very short 16-month span of time as the US Credit Crisis event unfolded.

2009-15: US Fed continued to keep interest rates near zero throughout this time-frame and continued to pump capital in the global capital markets with multiple QE and debt buying events.  Other global central banks followed the US lead providing additional capital throughout the global markets.  This massive expansion of credit/debt over a 7+ year span of time allowed foreign nations to “binge” on cheap US and Euro credit/debt while an Emerging Market and Foreign Market recovery were taking place.

2016-2019: US Fed raised interest rates from 0.08% to 2.42% over this span of time. Pushing US Fed rates up by the highest percentage levels EVER: +3025%

This continued global cycle of “boom and bust” has wreaked havoc on global consumers and business enterprises.  Over the past 20+ years, various cycles of economic appreciation and depreciation have left some people considerably better suited to deal with these cycles while others have been completely destroyed by these events.  Now, it appears we are entering another period of “early warning” as global manufacturing activity, growth and economic output appears to be waning. Are we entering another period like the 1929 to 1940 period of the US where a global economic contraction resulted in a deeper economic recession/depression and took 15+ years to recover from?

The US Fed has recently started acquiring assets again – at a far greater rate than at any time since 2012.  It is very likely that the US Fed is “front-running” a crisis event that is already starting to unravel again – possibly aligned with institutional banking entities and global credit/debt risks.

(Source: https://wolfstreet.com)

Chinese factory orders have continued to fall recently and the news is starting to trickle out of China that the US trade tariffs have done far greater damage than currently expected.  This suggests that manufacturing, exports, and GDP for China have entered a massive decline.  What happens next is that commodity prices collapse because of the lack of demand from manufacturers and consumers. (Source: https://www.yahoo.com/finance/)

Chinese new loan origination rates have fallen to a 22 month “new low” – which suggests corporate and consumer borrowers are simply not willing to take on any new debt/credit at the moment.  This happens when a population decides they want to “disconnect” from any economic risks and shift towards a “protectionist” process. (Source: https://finance.yahoo.com)

Recent news suggests that Chinese demand for European consumer and luxury goods has also contracted dramatically.  Germany will release GDP estimates on November 14th.  It is our opinion that the Chinese have already shifted into a more protectionist consumer stance and that would mean that demand for non-essential items (call them high-risk purchases) are very low at this time.  If this is the case, the lack of true demand origination out of China/Asia could push much of Europe into a recession. (Source: https://www.yahoo.com/)

The last thing China would want right now is to blow the potential for any type of US/China trade deal – even if it means giving up more than they may have considered many months ago.  More tariffs or any type of tit-for-tat retaliatory trade war would not be in the best interest of either party at this stage of the game. Who flinches first? The US, or China, or the rest of the world?

So, the question, again, becomes..  “will a commodity collapse lead the global stock market into a prolonged period of price decline and/or a global recession over the next 10+ years?”

If so, can we expect commodities to collapse as they did after the 1929 stock market peak?

You may remember this chart from the earlier sections of this multi-part article.  It highlights what happened leading up to the 1929 stock market crash and how early warning signs of manufacturing and agriculture weakness continued to plague the markets while speculation in housing and the stock market pushed certain asset values much higher near the end of the “Roaring 20s”.

Are we setting up for the same type of event right now where global trade, manufacturing, and agriculture are weakening after the 2008 Credit Crisis and we are meandering towards a repetition of the events that led to the “Great Depression”?  Will commodities prices collapse to 2002 or 2003 levels for most items?  Will Oil collapse to levels below $30 ppb over the next 6 to 12+ months?  And what will happen to Gold and Silver throughout this time?

Can we navigate through these troubling events without risking some type of new collapse event or reversion event?  Are the central banks prepared for this?  Are traders/investors prepared for this?  Just how close are we to the start of this type of event?

The answers lie in what we do now and how the commodities react over the next 12+ months.  The one major difference between now and 1929 is that the world is far more inter-connected economically and there are more people throughout the world that have moved into the “economic class”. Thus, it is our opinion that any event that is likely to happen will be followed by a moderately strong recovery event – no matter how severe the outcome. The world is in a different place right now compared to 1929.  Overall, only time will tell if our research and ADL predictive modeling system is accurate with respect to future oil prices.

We believe it is critical for all traders to understand what lies ahead and the risks involved in “playing dumb” about the current market environment.  We recently authored an article titled “Welcome to the Zombie-land for investors” and highly suggest you read it. Our researchers will share this one component that should help to ease some of the stress you may be feeling right now – the most capable, secure, mature and best-funded (reserves) economies on the planet will likely lead any recovery process should an event as this happen.  Therefore, look for strengths in the most mature and capable economies on the planet if some new crisis event begins.

Even if a trade deal between the US and China were to happen today and eliminate all trade tariffs, would this change anything or would this simply pour fuel onto the “capital shift” fire that is already taking place with speculation reaching frothy levels?

If you want to earn 34%-50% a year return on your trading account with very few ETF trades then join me at the Wealth Building Newsletter today!

Chris Vermeulen
www.TheTechnicalTraders.com

What happens To The Global Economy If Oil Collapses – Part 2

In the first part of this research article, we shared our ADL predictive modeling research from July 10th, 2019 where we suggested that Oil prices would begin to collapse to levels near, or below, $40 throughout November and December of 2019.  Our ADL modeling system suggests that oil prices may continue lower well into early 2020 where the price is expected to target $25 to $30 in February~April 2020.

We believe this type of global commodity price collapse, essentially collapse in oil revenues for many global nations could present a very real crisis in our future.  Most of the oil-producing nations rely on stable oil prices to supply much-needed revenues/income to support current and future operations and essential services. If oil prices collapse to levels below $40, this decrease would represent a -40%, or more, collapse in oil revenues for these nations.  If oil prices fall to levels below $30, this would represent a -55%, or more, decrease in expected revenues.

You can get my daily market analysis articles and trade ideas by opting into my free market trend signals newsletter.

We believe the ADL predictive modeling systems results, if accurate, represents a very real potential that the global capital markets and stock market may experience a major crisis event before the end of 2020.  This type of commodity collapse happened once before in history – nearly 10 years before the 1929 US stock market collapse and the slide in commodity prices continued in 1930 and beyond as an extended economic contraction pushed the US into an economic depression.

PRODUCER PRICE INDEX FOR ALL COMMODITIES FROM 1914 TO 1933

Take a look at these charts for comparison.  The first is a chart of the Producer Price Index for All Commodities from 1914 to 1933. Pay close attention to how commodity prices collapsed in 1921, approximately 9 to 10 years before the US stock market peak (1929) and commodities continue to slide lower.  This collapse in commodity prices relates to the consumer, agriculture, and industrial demand after WWI and setup a shift within the capital markets more focused on stock market speculation. The period between 1923 and 1929 resulted in a complete shift in the capital markets where farms, agriculture, and manufacturing levels decreased while urban areas, cities, and the stock market flourished – until it ended in 1929. (Source: https://eh.net/encyclopedia)

MONTHLY CRUDE OIL CHART

Now, take a look at this Monthly Crude Oil chart which highlights very similar types of price patterns over the span of about 10 years.  This strangely similar chart, in combination with the strangely similar set of circumstances related to farm, agriculture, and manufacturing as well as the shift of capital towards speculation in the US/Global stock market may be setting up another type of 1929 stock market peak event.

ASSETS IN MONEY MARKET ACCOUNTS

The shift in the capital markets is very clearly seen in the following chart – the Assets in Money Market Accounts chart.  One can clearly see that after the credit crisis in 2008-09, investors were not willing to participate in the Money Markets at levels prior to 2008.  In fact, for the entire period of 2009 through 2017, global investors stayed away from Money Markets and only recently began pouring capital back into the markets near late 2017 – when confidence increased.

Yet, this chart also shows a very clear “shift” in capital engagement which is very similar to what happened in the late 1920s.  At a time when manufacturing, agriculture and farm foreclosures were haunting the markets, investors poured capital in the stock market and speculative investments because these instruments were ripe with opportunity. The rally in the US stock market in the late 1920s became an opportunity that no one could resist.  Is the same thing happening right now in the US stock market?  Has a capital shift taken place that has global investors bumbling their way into the US stock market while trying to avoid/ignore obvious risks in local markets, manufacturing, and the global economy?

Source: https://www.wsj.com

We believe the evidence is very clear for any investor willing to pull off the “bubble goggles” and take a good hard look at where we really are in the economic cycle.  Unless something dramatic changes in relation to global economic growth, credit market expectations and consumer economic participation, it seems obvious that we are inching our way towards a global stock market peak just like we did in 1929.

Even if a trade deal between the US and China were to happen today and eliminate all trade tariffs, would this change anything or would this simply pour fuel onto the “capital shift” fire that is already taking place with speculation reaching frothy levels?

Skilled technical traders should pay very close attention to Oil Prices and global economic factors while this “zombie-land melt-up” continues.  We believe this is not a healthy rally in the US stock market currently and is more similar to what happened in the last 1920s than anything we’ve seen over the past 80+ years.

In Part III of this research article, we’ll highlight some of the recent economic news that helps to further identify the complexity that makes up the current global stock market  “zombie-land”.

If you want to earn 34%-50% a year return on your trading account with very few ETF trades then join me at the Wealth Building Newsletter today!

Chris Vermeulen
www.TheTechnicalTraders.com