US Stock Market Sets Up Technical Patterns – Pay Attention

The recent “melt-up” in the US stock market after a moderate downside price move in early May 2020 has set up a number of technical patterns that traders need to pay attention to.  This melt-up trend may continue for a bit longer, but price levels and actions are beginning to set up very clear patterns that warn of potential weakness in the future.

First, no matter how we attempt to spin the data, the US economy is very likely to fall into a moderate recession after the COVID-19 virus event has created a world-wide economic event and the recent riots and protests all across the US continue to disrupt and destroy property, businesses, and other assets.

It is almost like a one-two-three series of punches leading to a TKO.  We have the virus event, the stay-at-home orders, and now the riots and protests.  Recently, the National Guard has been called out to support local law enforcement and to protect people and properties. From our perspective, the situation is very far away from stable economic activity/growth supporting current stock price activity/levels.

We have been urging our friends and followers to be very cautious of long-side trades and to execute them with very narrow parameters, minor position sizes, and easy/tight targets and stops.  The reason for this is because we are not confident that the underlying global economic fundamentals support the current price trends and activities.  Yes, the US Fed is pouring trillions into the economy attempting to support the US and global markets, but the view from the ground level is very different from the Wall Street office on the 20th floor.

The GDP-Based Recession Indicator Index has risen to the highest levels since Q1:2008 as of April 2020 data.  If it continues higher with the May 2020 data point, we’ll have more evidence that the US economy has entered the early stages of an economic recession.  Remember, in early 2008, the US stock market had already begun to collapse more than 20% from recent highs.  Currently, the SPY is trading only -9.63% below the all-time high levels.  Our researchers continue to believe the US stock market is overvalued by at least 11% to 15% at current levels.

GDP-BASED RECESSION INDICATOR INDEX

We continue to urge technical traders to be very cautious of the potential “washout-high” price pattern that is setting up and we continue to urge our followers to be very selective of active long trades.  There is money to be made in this trend and certain sectors and symbols have rallied 10 to 15% over the past 4+ weeks – but technical traders need to be very aware of the active risks still playing out in the markets.

Before we continue, be sure to opt-in to our free market trend signals 
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This Daily YM (Dow Jones E-Mini Futures Chart), highlights the major resistance levels near current price highs.  The first, the MAGENTA line originates from our Adaptive Fibonacci Price Modeling system and is a key target/price level originating from the all-time price peak level.  The reason this level is so important is that it continues to reflect the prominent downside price move/trend and this key Fibonacci level is still active until it is breached by price moving/closing above this level.

Second, the current Adaptive Fibonacci Price modeling system trigger level is highlighted in YELLOW.  This level is going to act as a “trigger point” in price.  If price rallies above this level and closes above this level, then we may see more upward price activity over the next few days/weeks.  If price fails to close above this level and stays below this level, then we interpret this as a failure to achieve the trigger level and it would suggest that price may begin to move downward – away from this critical price trigger level.

Watch for the YM to move to levels near or above 25,600 and watch how it reacts to this key resistance level.  If it rallies above this level then fails and begins to move dramatically lower – this level is being rejected and a new bearish trend may setup.  If it moves above this level and closes above this level, then we have confirmation of a potential upside price trend and bullish trending may continue for a bit longer. If you are new to trading you can use TradingSim to paper trade and practice day trading.

DOW JONES E-MINI FUTURES DAILY CHART

This next Weekly chart, the IWM (Ishares Russell 2000 ETF), highlights another key technical pattern – a Gap Fill.  We’ve been watching how capital has transitioned from the NASDAQ and S&P500 and into the Mid-Caps and other sectors over the past 4+ weeks.  Once the major indexes began to reach levels near the past all-time highs, capital began seeking out undervalued sectors and technical traders began rotating into these sectors expecting a moderate price rally to occur.

Not that the Russell 2000 has rallied up to fill this gap, it is very likely that some level of moderate price weakness will setup – possibly pushing price levels lower.  A Gap Fill is a technical pattern that suggests any Gap in price will eventually get filled by future price activity.  Once this Gap is Filled, the price has completed a technical pattern to “fill the void”.  After the Gap is filled, price usually stalls and moves in the opposite direction for a period of time – establishing a new base for a new momentum move.

We believe the filling of the GAP on this IWM chart suggests the Mid-Caps may have reached a key resistance level and may begin to move downward in the near future – likely attempting to establish a new momentum base near the $122 level.

IWM – ISHARES RUSSELL 2000 ETF WEEKLY CHART

We love this market volatility and how various sectors are rotating right now.  It presents incredible opportunities to be able to select new trades.  We are still being very cautious overall with our portfolio.  We’ve been able to achieve new highs in our accounts by selectively trading various symbols and targeting exit points using our proprietary trading technology.  Right now, we have two active trades that continue to generate solid profits.  No reason to go crazy trying to pick dozens of trades with our “Best Asset Now” modeling system.  It allows us to attempt to stay active while trading the best asset class in the markets.

Watch how the markets react this week and early next week.  We recently posted a research article about the US Presidential cycle and how June/July is often very difficult months in an election year.  You may find this research article very informative as we push forward into the Summer months of this 2020 election hear

Election Year Cycles – What To Expect?: https://www.thetechnicaltraders.com/election-year-cycles-what-to-expect/

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

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 Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

Election Year Cycles – What to Expect?

Every election year over the past five US Presidential election cycles has presented a unique set of price rotation events.  Particularly evident in strongly contested US Presidential candidate battles where the voters are consumed with pre-election rhetoric.  The 2007-08 election cycle was, in our opinion, very similar to the current market cycle in terms of consumer sentiment and economic function. The 2015-16 election cycle was less similar – yet still important for our researchers.

The economic conditions of the US economy and the global economy were vastly different prior to each US Presidential election cycle and continue to evolve throughout the current 2020 election cycle. Yet, our researchers believe the correlation of price volatility and rotation combined with the distraction for consumers as the election process occupies the hearts and minds of almost everyone across the globe takes a toll on the markets.  Prior to almost any US Presidential, price volatility and trends tend to become much more exaggerated and extended.

We’ve published research articles about this technical setup/pattern that occurs in the markets nearly 8 to 15+ months before the US Presidential election cycle before. The basic theory of the setup/pattern is as follows…

_  12+ months prior to the election date, the parties consolidate around specific candidates where the first battles of the US presidential election cycle conclude.

_  Over the next 12 months, the battle between the selected candidates becomes more heated and aggressive as voters are pushed information and disinformation related to their decisions.

_  The process of the election and the decision-making process for consumers/voters is very stressful and distracts from the normal economic activity for many.  This distraction translates into an indecisive market where future expectations (optimism and pessimism) greatly depend on the outcome of the election.  Thus, the markets are stuck in a “no man’s land” type of “stasis” waiting for the election event to conclude.

Depending on the events that lead up to the election date, the stock market could be biased towards a bullish trend or a bearish trend which can have a big impact on the pre and post-election outcomes.

Before we continue, be sure to opt-in to our free market trend signals 
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S&P 500 INDEX 2006-09 US PRESIDENTIAL ELECTION CYCLE

Lets start by taking a look at the 2006-09 (2008 US election cycle) data/chart.  First, we can see the price trend in 2006-07 was moderately bullish within the early election cycle.  The first real signs of a crisis in the markets took place in mid-2007 where a deep low price move setup a double-bottom. Near the end of 2007 and into very early 2008, the stock market collapsed below those lows and never really recovered.  The real collapse in price began in June 2008 – after a moderate price recovery from the new lows. Price continued to collapse more aggressively just prior to the election date and even after the election was completed.

Yes, we know this collapse was related to the 2008-09 Housing/Credit market crisis and was not related to the directly related to the Presidential election event.  Yet, we, as technicians, believe price translates all external factors into a form that we can use to derive future information from.  The point we want to try to make is that election cycle years tend to be much more volatile and aggressive.

The pre-election price declines appear to set up a bottom or double-bottom price level 12 to 15+ months prior to the election date.  After that completes, the markets may attempt to rally above previous highs at some point, but will likely attempt to retest recent lows 4 to 12 months prior to the election date.  As voters/consumers’ attention is consumed by the election process, news and rhetoric, consumers change their habits and become more protective of their assets and future expenses.

The one thing to consider when reviewing this chart is that the uncertainty and indecision in the markets related to the Presidential election cycle were compounded by the collapse of the housing, financial, and credit markets. This event created additional price and economic concerns fairly early in 2008.  Additionally, pay attention to the June 2008 change in price trend that sets up a deeper downside price collapse.

S&P 500 INDEX 2014-2017 US PRESIDENTIAL ELECTION CYCLE

This next chart is the 2014-2017 US Presidential Election cycle and this chart highlights a very different time in US history.  There was no massive housing/credit crisis event.  There was no massive implosion of the US or global markets taking place throughout this time.  There was only a heated battle between two candidates.  The chart shows how 2015, nearly 12 months prior to the election date, the market price collapsed twice to complete a double-bottom pattern.  This pattern seems to set up prior to election cycles with fairly high consistency.

As we progress to the 12 month period just before the election date (highlighted in CYAN), we can see the 2016 election year resulted in a moderate upside price bias after establishing a bottom very early in 2016.  Still, there was a decent amount of volatility throughout the year – particularly in June and the 60 days prior to the actual election date.

Remember, other than political drama, this election cycle didn’t include any massive economic crisis events which could have altered the direction of the markets closer to the election date.  The deeper double-bottoms set up the price range headed into the election date and the lack of surprise/crisis events prompted a moderate upside price bias leading into the election event.

S&P 500 CURRENT 2017-2020 PRESIDENTIAL ELECTION CYCLE

Now, we take a look at the current 2017-2020 setup.  This time, because of the prior extended rally in the markets from 2017, we’ve seen a series of deeper price lows setups into an expanding bottom/downward sloping price trend.  This is somewhat unusual and suggests volatility is excessive at this time in the markets. We’ve also experienced the COVID-19 virus event occur, which is acting like the 2008 housing/financial crisis event.

At this point, heading into early June 2020 and understanding that these Presidential election cycle events typically result in much greater volatility as we get closer to the election date, our research team believes the June through August period could prompt a broad market downside retracement which coincides with Q2 data/expectations.  The month of June prior to the election date (Q2) appears to be a very instrumental period for the markets.

The downward sloping lows on this chart suggest a deeper price rotation may occur as the markets move closer to the election date and continue to process the technical and economic data.  The uncertainty related to Presidential election cycles is still at play in the markets. Should some type of crisis event unfold in the midst of the final 5 to 6 months prior to the election date, the risk of a downside price event would become much more excessive.

GDP BASED RECESSION INDICATOR

Currently, the COVID-19 virus event has set up a critical price event headed into the 2020 Presidential election cycle which is somewhat similar to the 2008 election cycle.  Pay attention to the GDP Based Recession Indicator chart below.  Notice how the 2008 election cycle correlated with a massive increase in the GDP Based Recession Indicator?  Now, see how the current GDP Based Recession Indicator has already begun to spike upward?  Unlike what happened in 2016 where the GDP Based Recession Indicator stayed below 30, the current level of this indicator suggests a crisis event is beginning to unfold in 2020.

If this crisis event continues, the process where the price will attempt to properly identify risks and valuation levels will likely take place over the next 8 to 12+ months – which is very similar to what happened in 2008 and 2009.  Our researchers believe June 2020 could become a critical month for price activity where the future price trends are established.

CONCLUDING THOUGHTS:

Currently, we are urging our friends and followers to stay overly cautious of this upward price trend in the US stock markets.  Even though we have seen the NQ and other sectors rally to near all-time highs, we believe the markets are still excessively volatile and the indecision leading up to a Presidential election cycle could prompt some really big price moves in the future.  We are still trading the long side of the market and advising our clients to take very low-risk trades which have been properly sized.  This is a traders market where skilled technical traders can find incredible gains.

June through August will likely become critical in regards to the future price trends and will likely determine if the markets continue to push higher or rotate downward as concerns and potential crisis events continue to unfold.  Historically, June through August prior to a Presidential election cycle are very important measures of what happens near and after the election event.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

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 Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

Comparing Bitcoin to Other Sectors – Risk vs. Value

Quite a few traders have been discussing the recent rally of Bitcoin to recently breach the $10,000 level on May 7, 2020.  This psychological price level is a major milestone for Bitcoin – even though the price has fallen into an extended Flag/Pennant formation since reaching the recent peak.  Many traders and speculators are expecting Bitcoin to rally alongside the precious metals sector as there appears to be a strong belief that Bitcoin aligns with precious metals well.  Our researchers attempted to put this assumption into a simple test and this is what we found. Bitcoin appears to be similarly volatile in comparison to precious metals, although the overall trending of Bitcoin has been moderately lower since the peak levels in February 2020 whereas the Gold/Silver sectors have seen advancing price activity over the same span of time.  Precious metals rallied much quicker after the bottom near March 2020 whereas Bitcoin didn’t really begin to rally until late April 2020. Because of this disconnect in price association, we don’t believe Bitcoin is aligned with the precious metals segment. Bitcoin doesn’t seem to be aligned with the price action of the Dow Jones either. Initially, after the peak in February 2020, the price alignment between Bitcoin and the DJI was almost in sync.  A broader price disconnect appears to be more evident in late April where Bitcoin rallied and the Dow Jones stayed rather flat.  Because of this shift in price alignment – we believe Bitcoin is not aligned with the Dow Jones well enough to derive any cross-market correlation.

BITCOIN – DOW JONES – METALS CHART

Before we continue, be sure to opt-in to our free market trend signals  before closing this page, so you don’t miss our next special report!

Additionally, we attempted to compare Bitcoin to major consumer sectors (communications, staples, and utilities) to see if we could find any measurable correlation to these sectors in relation to Bitcoin price activity.  Again, the early price alignment of all of these seemed somewhat in-sync in the early downside price collapse in February 2020.  Yet that alignment quickly deteriorated in early March 2020 as Bitcoin prices collapsed and bottomed while the consumer sectors continued to trend a bit lower until after March 20, 2020.  The one thing we did notice is that the consumer sectors appear to be much less volatile than Bitcoin in both downside and upside price activity.

BITCOIN – COMMUNICATIONS – STAPLES – UTILITIES

Lastly, we compared Bitcoin to the NASDAQ 100 and the Russell 2000 attempting to find any price correlation between these major market sectors.  Although the price correlation is not perfect, our researcher believes Bitcoin is moderately closely correlated to the Russell 200 more than any other symbol/sector we have attempted to analyze.  Many of the bigger, more prominent, upward, and downward price cycles/trends seems to align with the Russell 2000 price action (often within 1 or 2 days of the Bitcoin trends – if not immediately). For example, the bottom/base near April 21 aligned almost perfectly between the two symbols, the rally starting near April 25 began 1 day apart on both symbols, the peak in price before a moderate selloff on March 26 happened on almost the same day for both symbols, the moderate upside peak before the big collapse on March 4 occurred only one day apart.  Even though there is a broad price volatility difference between Bitcoin and the Russell 2000, the correlations between the two symbols seem much more aligned than any symbols we’ve attempted to run other comparisons. We will add that appears a recent shift in price activity may be starting to disassociate Bitcoin to the Russell 2000 over the past 7+ days.  Our researchers have identified the Russell 2000 (and other consumer sectors) appear to be attracting new investments from skilled technical traders while the major sectors appear to be weakening.  We believe this is because capital is shifting away from already pricey assets and moving into undervalued assets that may do well as the recovery strengthens.

BITCOIN – NASDAQ 100 – RUSSELL 2000

Will Bitcoin continue to rally above the $10,000 level?  Eventually, the answer to that question is “probably – yes”.  The one thing we want to bring to our reader’s attention is the immediate downside price correlation of Bitcoin to all of the various sectors and symbols we’ve presented today.  When a broader downside price collapse happens in the US/Global markets – it appears Bitcoin is not immune or considered a decentralized asset class in any form.  Bitcoin seems much more aligned with the Dow Jones and/or the Russell 2000 than any other symbols/sectors. Because of this alignment, we suggest traders watch the Dow Jones and the Russell 2000 for price trend correlations that may relate to how Bitcoin price activity may react in the near future.  Until this correlation is broken, we believe the alignment in price is relatively predictable for skilled technical traders. I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter. 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 Long-Term Investing Signals which we issued a new signal for subscribers. Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis. Chris Vermeulen Chief Market Strategies Founder of Technical Traders Ltd.

Metals Nearing Critical Momentum For New Parabolic Rally

While the US stock market has rallied over the past 5+ weeks, Gold has stalled near $1730 to $1740.  We issued a research post suggesting the GREEN Fibonacci Price Amplitude Arc was acting as major resistance and once that level is breached, we expect a big upside move in Gold.  Currently, Gold has reached just above the Green Price Amplitude Arc and this week may be a critical moment for both Gold and Silver in terms of a momentum base. Gold has continued to move high in a series of waves – moving higher, then stalling/basing, then attempting another move higher.  This recent base near $1740, after the deeper price rotation in February/March, confirms our 2018/2019 predictive modeling research suggesting that $1750 would be a key level in the near future.  Part of that research suggested once $1750 is breached, then a bigger upside move would take place targeting levels above $2400 – eventually targeting $3750. April 25, 2020: Fibonacci Price Amplitude Arcs Predict Big Gold Breakout

GOLD FUTURES WEEKLY CHART

This consolidation after the COVID-19 event near $1750 is a very real confirmation for our researchers that the upside breakout move is about to happen.  How soon?  It could begin to break out next week of the following week?  How high could it go?  Our upside target is $2000 to $2100 initially – but Gold could rally to levels near $2400 on this next breakout move.

Before we continue, be sure to opt-in to our free market trend signals  before closing this page, so you don’t miss our next special report!

SILVER FUTURES WEEKLY CHART

While Gold has been consolidating near $1740, Silver has exhibited an incredible upside price move after a very clear Flag/Pennant formation (highlighted in YELLOW on the chart below).  The current upside price rally in Silver appears as though it may breach the MAGENTA downward sloping trend-line and this breakout move may prompt a rally to levels near or above $21 over the next few weeks. Eric Sprott is very excited about silver and miners. Also, he talks about the demand for physical delivery which is way out of whack and how something could finally give which would be metals go parabolic. We’ve been suggesting that metals will transition into a moderate parabolic upside price trend as the global markets deal with concerns related to economic activity, debt, solvency, and continued operational issues.  For skilled technical traders, this setup in Metals may be a very good opportunity for skilled technical traders to establish hedging positions in ETFs or physical metals before the breakout really solidifies.

Concluding Thoughts:

Longer-term, we believe metals could continue to rally for quite a while, yet we understand skilled technical traders want to time entries to limit risks.  We believe skilled technical traders should consider hedging their portfolio with a moderate position in Metals/Miners at this time – allowing traders to trade the remaining portion of their portfolio in other sectors/stocks. If the US/Global markets continue to struggle to move higher over the next 60 to 90+ days, metals/miners should continue to push higher – possibly entering a new parabolic upside price move.  The deep washout low in Silver was an incredible opportunity for skilled traders to jump into Silver miners and Silver ETFs at extremely low price levels.  Now, with Silver at $18.40, it’s time to start thinking about $21+ Silver and $2100+ Gold. Now is the time to really tune up your trading and get ready for some really great trading opportunities. You don’t have to spend days or weeks trying to learn my system.  You don’t have to try to learn to make these decisions on your own or follow the markets 24/7 – I do that for you.  All you have to do is follow my research and trading signals and start benefiting from my research and trades.  My new mobile app makes it simple – download the app, sign in and everything is delivered to your phone, tablet, or desktop. I offer trading signals for active traders, long-term passive investors, and wealth/asset managers.  Each of these services is driven by my own experience and my proprietary trading systems and modeling systems.  I have a small team of dedicated researchers and developers that do nothing but research and find trading signals for my members.  Our objective is to help you protect and grow your wealth. Please take a moment to visit www.TheTechnicalTraders.com/tti to learn more about our passive long term investing signals, Also, get our swing trading signals here www.TheTechnicalTraders.com/ttt.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple. Chris Vermeulen Chief Market Strategist Founder of Technical Trader Ltd.

New Sector Rotation Trade Setups

Friday morning I was live on TraderTV and share some charts and trade setups in sectors starting fresh new uptrends.

Please take a moment to visit www.TheTechnicalTraders.com/tti to learn more about our passive long term investing signals, Also, get our swing trading signals here www.TheTechnicalTraders.com/ttt.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Trader Ltd.

Shortage of Physical Gold and Silver

Please take a moment to visit www.TheTechnicalTraders.com/tti to learn more about our passive long term investing signals, Also, get our swing trading signals here www.TheTechnicalTraders.com/ttt.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple. Chris Vermeulen Chief Market Strategist Founder of Technical Trader Ltd.

Real Estate Stats Show Big Wave Of Refinancing Is Coming

Current data released for the May Real Estate and Consumer Spending activity suggests a wave of refinancing is taking place – and not much else.  Pending home sales slipped to 69.  That level is 7.4 points below the lowest level in 2010 – at the height of the 2008-09 credit crisis that collapsed the global Real Estate values.  How big is this new low level in Pending home sales?  It’s HUGE.

It suggests the rate of sales in the US for Real Estate has collapsed beyond levels that were seen at the worst possible time in recent history (July 2010).  In fact, over the past 20 years, there has never been a time when the pending home sales index has collapsed below 74 to 75 – until today.

2008-2011 PENDING HOME SALES DATA

The sudden collapse of Pending Home Sales as a result of the COVID-19 virus event should not have come as any surprise to skilled technical investors.  Don’t misread this data – there are still homes selling in the US market, buyers are just being far more selective and discerning in regards to their purchases and timing.

Anyone who understands Supply and Demand theory knows that when price levels are perceived to be excessive, consumers slow their purchases considerably as the supply is determined to be overvalued in price.  This slowing of purchasing results in a supply glut that will eventually push price levels lower (attempting to attract more buyers).

It is this process of shifting perceptions in the Supply and Demand relationship that is likely taking place right now in the Real Estate market.  Low rates in combination with the COVID-19 virus are not prompting more sales of Real Estate right now.  Consumers simply don’t have the confidence (perception) that future price appreciation in Real Estate will be substantially based on the current market environment.  Thus, the perception of the value of Real Estate changes from optimism to caution.

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

2020 PENDING HOME SALES DATA

Source: https://www.investing.com

A large portion of the issue related to Real Estate is consumer confidence in their ability to earn real incomes and the stability of employment and opportunity related to their future.  The COVID-19 virus event has really disrupted a large portion of the US consumer market as well as the future expectations of consumers and spending habits.  This disruption is likely to take at least 12 to 24+ months to settle before any real bottom is likely to take place on a broad scale.

Real consumer spending has collapsed in April and May 2020.  Even though the US government has spent trillions attempting to support the US economy, the continued shutdown of cities and states has cut consumers’ jobs, incomes, and the need to go out and spend like normal.  Even though they may be saving some extra money throughout this time, the destruction to local and state economies/revenues is devastating.

MAY 2020 REAL CONSUMER SPENDING DATA

Source: https://www.investing.com

The one aspect of the low-interest rates that we do expect to peak soon is the refinance market.  Stronger homeowners with solid income opportunities are able to refinance at lower rates now and that activity seems to be spiking.  This is very similar to what happened in 2009-2011 where stronger consumers were able to take advantage of very low-interest rates and were able to shed the 5 to 7%+ mortgages and refinance at much lower levels.  Once these transactions peak, these homeowners will likely be settled in their homes for another 5 to 10+ years with new lower rates (unless something disrupts their financial/income situation).

MAY 2020 MORTGAGE REFINANCE INDEX

Source: https://www.investing.com

CONCLUDING THOUGHTS:

Combining all of this data into a consensus analysis for technical traders, we come to the conclusion that a wave of refinancing has likely peaked and that consumers are now in the early stage of attempting to understand what the recovery will look like going forward over the next 6 to 12+ months.  Add into the mix that we have a US Presidential election taking place in 6 months and the potential policy and tax changes that could take place as a result of this election and we have a real “consumer abyss” setting up over the next 6+ months.

With the Fed doing all they can to support the markets, the COVID-19 virus still causing shutdowns and other issues and the consumer waiting for some clear skies and positive expectations, the US and global economy could be stuck in a mode of greatly decreased consumer activity over the next 6 to 12+ months – which translates into a shift in perspective related to business creation, optimism, income/earnings and much more.  A dramatic shift in consumer expectations over a longer period of time could result in far more damaging longer-term issues for assets, state and local governments, and more.

Once the wave of refinancing is completed, we’ll have to see how the housing market data relates to increased consumer optimism.  At this point, we don’t believe anything is likely to change consumer attitudes until after the November 2020 elections.  Skilled technical traders should prepare for some really big price swings over the next 12+ months. This is the time for technical traders to shine with the setups and data that is being presented right now as well as in the future.

You don’t have to spend days or weeks trying to learn my system.  You don’t have to try to learn to make these decisions on your own or follow the markets 24/7 – I do that for you.  All you have to do is follow my research and trading signals and start benefiting from my research and trades.  My new mobile app makes it simple – download the app, sign in and everything is delivered to your phone, tablet, or desktop.

I offer trading signals for active traders, long-term investors, and wealth/asset managers.  Each of these services is driven by my own experience and my proprietary trading systems and modeling systems.  I have a small team of dedicated researchers and developers that do nothing but research and find trading signals for my members.  Our objective is to help you protect and grow your wealth.

Please take a moment to visit www.TheTechnicalTraders.com/tti to learn more about our passive long term investing signals, Also, get our swing trading signals here www.TheTechnicalTraders.com/ttt.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Trader Ltd.

M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up?

M2 Velocity is the measurement of capital circulating within the economy.  The faster capital circulates within the economy, the more that capital is being deployed within the economy to create output and opportunities for economic growth.  When M2 Velocity contracts, capital is being deployed in investments or assets that prevent that capital from further circulation within the economy – thus preventing further output and opportunity growth features.

The decline in M2 Velocity over the past 10+ years has been dramatic and consistent with the dramatic new zero US Federal Reserve interest rates initiated since just after the 2008 credit crisis market collapse.  It appears to our researchers that these extended periods of zero interest rates deflate the capability of money circulating throughout the economy and engaging in real growth opportunities for investment and capital inflation.

It also suggests that the US Federal Reserve, while attempting to support the US economy and global markets, maybe destructively engaging in policy that removes the capital function from the markets in a systematic process.  Eventually, something will break related to M2 Velocity and/or the global economy.  As more capital pours into less liquid assets and/or broader investment funds and Bonds, this process ties capital up into assets that take investment away from Main Street and the lower/middle class.  There is less capital available to support the ground level economy as more and more capital ends up buried in longer-term investment assets.

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

VELOCITY OF M2 MONEY STOCK

US FEDERAL FUNDS RATE CHART

We believe the collapse of the M2 Velocity rate is similar to a slow decline of economic capacity and output over a longer period of time.  We believe this process will likely end in a series of defaults and bankruptcies as a result of capital being stored away into longer-term assets and investments (pensions, investment funds, and other types of longer-term assets).  As this capital is taken away from the core engine of economic growth (main street and startups), the process of slowly starving the economy begins.

We believe we’ve already entered a period of decline that has lasted at least 15+ years and the “blowout process” that ends this decline will be somewhat cataclysmic.  One way or another, the function of capital must return to levels of activity that supports a ground-level engagement of economic growth and opportunity.  A healthy balance of capital available to all levels of society and deployed in means to support growth and opportunity is essential for the proper health and future advancement of global economies.

It appears that after 2008-09, the global economy disconnected from reality as investors began relying on institutional level investments and speculation in large scale assets instead of ground-level investments and core economic function.  This translates into a very euphoric mode for stocks and commodities where capital chases capital around the planet seeking out undervalued and opportunistic investments…  until…

Pay attention to what happens over the next 4 to 5+ years related to the COVID-19 virus event.  We believe this virus event could be a “monkey wrench” in the capabilities and functions of the global economy over the next 5+ years. Pay attention to what is really happening as capital plays the “dog chasing its tail” routine and the central banks attempt to stimulate economic activity by printing more and more money.  If you understand what we are trying to suggest in this article – printing more and more money at this stage of the game is like saying “diving our of the 20th-floor window is not enough – let’s go up to the 50th floor and give it a try”.

Hang tight, there are going to be some very interesting and big price swings over the next 4+ years in the US and global markets.  Skilled technical traders should prepare for the opportunity of a lifetime if they understand what to watch for and how to protect assets.

You don’t have to spend days or weeks trying to learn my system.  You don’t have to try to learn to make these decisions on your own or follow the markets 24/7 – I do that for you.  All you have to do is follow my research and trading signals and start benefiting from my research and trades.  My new mobile app makes it simple – download the app, sign in and everything is delivered to your phone, tablet, or desktop.

I offer trading signals for active traders, long-term investors, and wealth/asset managers.  Each of these services is driven by my own experience and my proprietary trading systems and modeling systems.  I have a small team of dedicated researchers and developers that do nothing but research and find trading signals for my members.  Our objective is to help you protect and grow your wealth.

Please take a moment to visit www.TheTechnicalTraders.com to learn more.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

Is A Blow-Off Top Setting Up

Our research team has become increasingly concerned that the US Fed support for the markets has pushed price levels well above true valuation levels and that a risk of a downside price move is still rather high.  Recently, we published a research article highlighting our Adaptive Dynamic Learning (ADL) predictive modeling system results showing the US stock market was 12% to 15% overvalued based on our ADL results.  Today, Tuesday, May 26, the markets opened much higher which extends that true valuation gap.

We understand that everyone expects the markets to go back to where they were before the COVID-19 virus event happened – and that is likely going to happen over time.  Our research team believes the disruption of the global economy over the past 70+ days will result in a very difficult Q2: 2020 and some very big downside numbers.  Globally, we believe the disruption to the consumer and services sector has been strong enough to really disrupt forward expectations and earnings capabilities.  We’ve been warning our friends and followers to be very cautious of this upside price trend as the Fed is driving prices higher while the foundations of the global economy (consumers, services, goods, and retail) continue to crumble away.

Our biggest concern is a sharp downside rotation related to overvalued markets and sudden news or a new economic event that disrupts forward expectations.  Obviously, Q2 data will likely be a big concern for many, yet we believe something else could act as a catalyst for a reversion event.  Possibly global political news?  Possibly some type of extended collateral damage related to the global economy? Possibly something related to earnings expectations going forward through the rest of 2020 and beyond?  We believe things are not “back to normal” at this stage of the recovery and we believe the markets are moderately over-extended at this time.

Before we continue, be sure to opt-in to our free market trend signals 
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ES ADL PREDICTIVE MODELING WEEKLY CHART

This Weekly ES (S&P500 E-Mini Futures) chart shows our ADL predictive modeling system’s expected future price level targets which suggest the current market price level is 12% to 15% (or more) above these target levels. Remember, the ADL system uses a custom price mapping technology that is designed to identify “price/technical DNA markers” within historical data – then attempt to map out future price level activity and track the highest probable outcomes of these price DNA markers.  The objective of this research tool is to show us what type of price activity is highly probable based on historical data and predictive modeling research.  This unique trigger on the ES chart consisted of 5 historical DNA markers and suggests a future probability of 70% to 87% regarding future price target levels.

One aspect of our research while using the ADL predictive modeling system and our other tools it the concept of “price anomalies”.  These are rallies or sell-offs that extend beyond support or resistance levels and when price levels trend away from ADL predicted target levels.  We created the term “price anomaly” and explain it to our members as “some external force is pushing the price above or below the projected target level.  Once this force abates or diminishes, the price will likely move, very quickly, to levels near the ADL predicted target levels.”.

Currently, the US Fed is engaging in a moderate support effort for the US stock market and it is reportedly buying $5+ billion a day in bonds and assets.  Although it may seem impossible to fight the fed, we believe the markets (like nature) are almost impossible to fool and control.  We believe that price will react to market conditions and that future price rotation (both up and down) will continue to be more volatile than many traders expect.

CUSTOM VOLATILITY INDEX WEEKLY CHART

This Custom Volatility Index chart highlights the extremely low levels recently established by the COVID-19 market sell-off.  These new low levels have created the deepest sell-off levels on this chart in 20+ years.  It has also established a new, highly volatile, downward price channel that our researchers are following to help us determine where resistance will likely be found.

We believe a new downward price rotation is setting up for some time in the near future that will establish a tighter price channel and assist us in determining when and where the ultimate price bottom will setup and complete.  With the VIX levels still near 27~29, we are certain that volatility has not decreased even though price levels have attempted a solid recovery over the past 8+ weeks.

CUSTOM SMART CASH INDEX WEEKLY CHART

This Weekly Custom Smart Cash Index chart highlights the true function of price within the US stock market and highlights the overall weakness still at play within the current markets.  Even though the NQ has rallied to near all-time highs, the Smart Cash Index is showing the broader market is still rather weak and that recent price activity has stalled into a sideways/flag formation.  The broader market buying that took place near the end of March 2020 and throughout April 2020 has stalled.  The Fed became the market for the past 8+ weeks and as the Fed diminishes its activity, it will be up to the markets to manage trends and future expectations going forward.

Our researchers are concerned that a sudden breakdown in the Smart Cash index may prompt a bigger downside price move in the global markets.  Our research team has continued to issue warnings to our members to run protective stops on any open long positions, to properly size trades to avoid excessive risks and to properly hedge your trading using precious metals, miners, and Bonds.  In short, these risks are very real.  You can still make a profit trading the long side of the markets, but we suggest that you take all the necessary steps to protect your trades.

CUSTOM US STOCK MARKET INDEX WEEKLY CHART

This last Weekly Custom US Stock Market chart highlights two very important levels related to our Fibonacci Price Amplitude Arcs.  These arcs represent critical Fibonacci support and resistance levels that arc across time and price levels.  It is important to understand these levels will present very real inflections in price – at least we expect them to create price inflections.

Currently, there is the YELLOW Fibonacci price arc that is acting as resistance near the current highs and the MAGENTA Fibonacci price arc that is much longer-term.  This longer-term Fibonacci price arc may be stronger than the current shorter-term arc.  Our researchers believe the current Fibonacci arc levels on this chart will prompt price to “flag out” in a sideways price channel before potentially breaking downward.

As we continue to watch for weakness across these charts and trends, we urge skilled technical traders to be prepared for a sharp spike in volatility over the next 4+ weeks.  It appears we are only 2 to 4+ weeks away from reaching these major price inflection points.  Currently, we believe a downside move is the most probable outcome based on our ADL predictive modeling system results as well as the technical patterns seen on these charts.

Overall, we believe the increased volatility levels in the US stock market will present some incredible trading opportunities for technical traders.  Big swings, near-perfect technical patterns and setups, quick profits, and broader sector rotations.  This is the type of market where skilled technical traders can really enjoy a target-rich environment.  We just have to be selective in how we determine when to enter trades and to not take excessive risks.

I’m offering you the chance to learn to profit, as I do with my own money, from market trends that I hand-pick for my own trading.  These are not wild, crazy trades – these are simple, effective, and slower types of trades that consistently build wealth.  I issue about 4 to 8+ trades a month for my members and adjust trade allocation based on my proprietary allocation strategy– the objective is to gain profits while managing overall risks.

You don’t have to spend days or weeks trying to learn my system.  You don’t have to try to learn to make these decisions on your own or follow the markets 24/7 – I do that for you.  All you have to do is follow my research and trading signals and start benefiting from my research and trades.  My new mobile app makes it simple – download the app, sign in and everything is delivered to your phone, tablet, or desktop.

I offer membership services for active traders, long-term investors, and wealth/asset managers.  Each of these services is driven by my own experience and my proprietary trading systems and modeling systems.  I have a small team of dedicated researchers and developers that do nothing but research and find trading signals for my members.  Our objective is to help you protect and grow your wealth.

Please take a moment to visit www.TheTechnicalTraders.com to learn more.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

Chuck Jaffe Talks Technical Analysis on Money Life – Indexes & Metals

Chuck Jaffe, the host of Money Life, is a veteran financial journalist and nationally syndicated financial columnist whose work appears in newspapers from coast to coast. Today he talks with Chris Vermeulen.

Chuck has been named to MutualFundWire’s list of the 40 Most Influential People in Fund Distribution and was the first journalist to make the list. Over the course of his career, he has won numerous awards for business and personal finance journalism.

Chris Vermeulen has been a technical analyst and trader since 1997, he has been through a few bull/bear market cycles in stocks and commodities. He has the pulse on the market and timing key turning points for investing and short-term swing traders. Chris states “2020 is going to be an incredible year for skilled traders.  Don’t miss all the incredible moves and trade setups.”

If you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

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 Long-Term Investing Signals which we issued a new signal for subscribers.

Ride Chris’ coattails as he navigates these financial markets and builds wealth while others struggle during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.