Archive for category: $SPY

The financial sector is poised for a very strong rally into the end of 2021, and early 2022 as revenues and earnings for Q4:2021 should continue to drive an upward price trend. The US Federal Reserve is keeping interest rates low. At the same time, the US consumer continues to drive home purchases and holiday shopping. Strong economic data should drive Q4 results for the financial sector close to levels we saw in Q3:2021. If that happens, we may see a robust rally in the US Financial sector over the next 45 to 60+ days.

The strength of the recent rally in the US major indexes shows just how powerful the bullish trend bias is right now. Some traders focus on the downside risks associated with the US Federal Reserve actions and/or the concerns related to inflation and global markets. I, however, continue to focus on the strength in the US major indexes and various sector trends that show real opportunities for profits.

Comparing Sector Strength

The following two US market sector charts highlight the performance over the last 12 vs. 24 months. I want readers to pay attention to how flat the Financial Sector has stayed since just before the 2020 COVID event and how the Financial Sector has started to trend higher over the past 12 months. This is because the shock of COVID briefly disrupted consumer activity. Yet, consumers are coming back strong, driving retail sales, home sales, and the continued strong US economic data. Therefore, it makes sense that the Financial sector should continue to show firm revenue and earnings growth while the US consumer is active and spending.

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Over the past two years, Discretionary, Technology, and Materials drove market growth compared to other sectors. Remember, the initial COVID virus event disrupted market sector trends over the last 24+ months.

(Source: StockChart.com)

Taking a look at this 1 Year US Market Sector chart shows how various sectors have rebounded and how the Discretionary and Materials sectors have flattened/weakened.

Pay attention to how the Energy and Real Estate sectors have been over the past 12 months. Also, pay attention to how the Financial sector is strengthening.

I believe that the continued deflation/deleveraging that is taking place throughout most of the world will continue to drive global central banks to stay relatively neutral regarding rising interest rates. This will likely prompt an easy money policy throughout most of 2022 and drive continued revenues/earnings for sectors associated with consumers’ engagement with the economy.

If inflation weakens into 2022 while wage and jobs data stays strong, we may see more moderate strength in the Financial, Healthcare, Discretionary, and Technology sectors over the next 6 to 12+ months.

Read more about Global Deleveraging Here: Delivering Covid Bubble Possible Volatility Risks In Foreign Markets

(Source: StockChart.com)

Financials May Pop 11% Or More Over The Next 6+ Months

This Weekly IYG, IShares US Financial Service ETF, highlights the recent sideways price trend in the Financial sector and the potential for a 9% to 13% rally that may take place as the markets shift into focus for the Q4:2021 earnings. Yes, inflation is still a concern, but as long as the US consumer continues spending and engaging in the economy, the Financial Services and US Banks should show strong returns.

If the US markets rally into the end of 2021, possibly reaching new all-time highs again, this trend may carry well into 2022 and drive Q4:2021 and Q1:2022 revenues and earnings for the Financial sector even higher.

This Weekly XLF chart shows a very similar setup to IYG. I firmly believe the recent fear in the markets related to the US Federal Reserve, the new COVID variants, and the global markets deleveraging process is missing one critical component – the strength of the US markets and the strength of the US Dollar.

As the rest of the world struggles to find support and economic strength, the US markets continue to rebound on the strength of the US consumer, the recovering economy, and the growth of these sectors. As long as the US Federal Reserve does not disrupt this trend, I believe Q1:2022 could be much more robust than many people consider. I also think the deflation/deleveraging process will work to take the pressures away from recent inflation trends.

What could this mean for 2022?

Early 2022 may well work as a “rebalancing” process for the global markets – possibly taking the pressures away from the strength in energy, commodities, and staple products/materials. This means pricing pressures will decrease while consumers are still earning and spending. The Financial sector should benefit from these trends over the next 6+ months.

Watch for the Financials to start to increase throughout the end of 2021 and into early 2022. There are many ways to consider trading this move, but ideally, I think the rally will take place before the end of February 2022.

Q1 is usually relatively strong, so that this trend may last well into April/May 2022. It all depends on what happens that could disrupt the current market sector trends. If nothing happens to disrupt the strength of the US Dollar and the strength of the US markets, then I believe the Financial Sector has a very strong opportunity for at least 10% to 11% growth.

Want to learn more about the potential for a financial sector rally?

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio.

Have a great day!

Chris Vermeulen
Chief Market Strategist

I get asked all the time what my opinions are regarding the markets. As much as I could go into really deep details regarding technical analysis and other factors of my research, the simple answer is that we’ve been living through 2~4+ years of incredible market trends and unprecedented global central bank efforts to support and contain market risks. This is something we have not seen at these levels since the end of WWII and after the Great Depression.

Is there a Speculative Bubble Deleveraging Risk In The Global Markets?

The one thing that keeps popping up in my mind is the deleveraging of credit/debt and speculative risk assets over the next 2 to 3+ years. Let me explain what I mean by this statement.

Before the first COVID event (February 2020), the global markets were already within a moderate strengthening phase with relatively stable global trade, economic, and central bank participation. Everyone was still waiting for inflation to rise while employment and economic data continued to strengthen. When COVID hit, things changed very quickly.

• Global lockdowns disrupted the labor and supply markets.
• Consumers shifted gears while settling (or moving) into more rural locations attempting to wait out the new COVID threat.
• Global central banks and governments attempted to navigate the catastrophic COVID event while settling population and finance issues.
• An unprecedented amount of stimulus, global central bank financing, and speculative capital was unleashed over a very short 3 to 4-year span of time.
• The success of the global economy prior to 2020 prompted a very deep and efficient speculative market trend in 2020 and beyond.
• Now, that speculative bubble appears to be bursting – at least in certain areas of the markets.

Let’s explore a bit of data and charts.

This first Monthly chart highlights trends in various global market indexes. ARKK, the ARK Innovation Fund, HSI, the Hang Seng Index, DAX, the DAX Index, SPY, the S&P 500 ETF, and HXC, the Golden Dragon China Index. Each of these represents a unique component of global markets and sectors.

ARKK represents technology, innovation, and a more broad global investment style focused on stronger or more highly volatile price trends.

HSI represents a broad market China Index that includes various markets sectors – including Technology, Medical, Consumer, Real Estate, Finance, and others. These companies are listed in China and do a majority of their business in China.

DAX represents a broad market German Index.

SPY represents a broad market US Index

HXC represents the US-listed Chinese Companies doing a majority of their business in China.

The purpose of showing you this chart is to highlight the deleveraging that is already taking place in ARKK, HXC, and the HSI. The DAX and the SPY are still trending higher, while the ARKK, HSI, and HXC are trending strongly to the downside.

It is my opinion that the global markets, particularly China/Asia, are already in the midst of a massive speculative deleveraging event – a post-bubble rally phase initial collapse process. Certain technicians sometimes call this an “unwinding” or “unraveling” event. Ultimately, the US has seen two of these types of events over the past 30 years – the 1999-2000 DOT COM bubble burst and the 2008-09 Housing Market collapse.

What I found interesting is the HXC price levels have already fallen to levels near the March 2020 COVID lows. Whereas the HSI price levels have also fallen to very near the March 2020 COVID lows, it has also fallen into negative price trending from 2014-15 price levels.

Could Speculative Deleveraging Stay Localized This Time?

I think global volatility and bigger price trends will be something we need to prepare for in 2022 and 2023 – possibly even longer. Yet, my opinion is the US, and other stronger global economies may be partially immune from this speculative deleveraging event.

Why?

Because not every US corporation or citizen has put themselves in a similar scenario as I believe many in China and Asia possibly have after nearly 30+ years of extreme growth trends.

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The US has experienced the 1999-2000 DOT COM bubble and the 2008-09 Housing Market crisis over the past 30 years. At the same time, China/Asia has grown from moderate obscurity in the 1980s-1990s into extensively powerful economies. Along the way, over a relatively short period of time, a generation or two of the populous has seen assets rise thousands of percent over the past 20 years. This leads to a highly speculative investment class – almost feeling as though anything they touch turns to gold.

But it doesn’t always work out that way – does it?

This HXC chart highlights the incredible rally after the February 2020 COVID event as well as the moderate growth phase from 2005 to 2016. Notice the big growth that took place in 2017. This was a period of very strong economic growth where Chinese companies started listing on US exchanges to tap into a strong US investor class.

After COVID hit in 2020, this speculative investing trend skyrockets over 180%. Then, it collapsed.

Bitcoin May Follow This Deleveraging Trend If Panic Sets In

The recent rally and peak in Bitcoin have also caught my interest in seeing if this deleveraging event follows through in large Cryptos? Since the initial Bitcoin collapse in early 2021, Bitcoin has rallied strongly as the US markets recovered and inflation started to rise later in 2021. Now, a very strong pullback in Bitcoin has started at the same time large Chinese Real Estate developers and other corporations are beginning to experience severe credit/debt concerns.

Is there a correlation between Chinese/Asian consumer/economic strength and Bitcoin? Has the rise in Bitcoin prices over the past since 2015 been fueled by the rising speculative and investment trends in China/Asia?

We’ll know soon enough.

If the global markets continue this process of speculative trading deleveraging, we’re going to see an increase in volatility and deeper price trends take place before the process completes. I suspect there is a huge amount of underlying credit/debt that is struggling in certain areas of the world right now. This type of speculation tends to drive a mentality of FOMO (fear of missing out) and YOLO (you only live once). I remember after the DOT COM bubble burst, I would talk to people that were so entrenched in the bubble, and they bought all the way through the collapse – believing it would bounce back.

This deleveraging event should stay somewhat immune from certain larger market economies. Yes, there will likely be more volatility and bigger price swings. But, eventually, the strength of consumers and economic trends will settle most of this process fairly quickly for the largest global economies.

2022 and 2023 are sure to be great years for traders. Sectors will rotate and trend. The world’s strongest economies will rotate and trend. The increased volatility will create risks, but it will also create incredible opportunities for profits.

Get ready; it looks like this deleveraging event is just getting started.

Want to learn more about deleveraging and volatility risks in the markets?

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio.

Have a great day!

Chris Vermeulen
Chief Market Strategist

As we’ve been watching the markets recoil away from risks related to the new Omicron COVID variant and other factors, one simple thought keeps running through my head. What if the markets suddenly shift away from this panic selling and resume a rally/recovery trend – possibly pushing to new all-time highs before the end of the year?

Recently, the Put/Call ratio reached a moderate-high near 0.84. I interpret this as long traders buying protection in the event of an extended breakdown in the US/global markets. In the past, typically, when the Put/Call ratio reaches levels above 0.80 – the markets are very close to a bottom.

Prior Downside GAPS Setup A Potential Rip-Your-Face-Off Rally

Next, I noticed the GAP in price on the Dow Jones Industrial Average and the Transportation Index. That got me thinking, “a sudden reversal in price, possibly resulting in a series of price squeeze events, may prompt a strong rally phase back above the GAP levels.” If this happens, we may see a 5% to 7% rally in the US markets take place to restart the Santa Rally phase.

INDU Gap Near $35,600 May Become A Clear Upside Target

This Daily INDU chart shows the GAP I’m talking about and shows what I expect may happen if the markets shake off the Omicron fears and get back into bullish trending mode.  It won’t take much to drive the INDU 7% higher from recent lows if fear subsides and traders pile into long positions expecting Q4:2021 to be strong and the Santa Rally to kick in.

TRAN Gap Near $16,800 May Provide Additional Confirmation Of A Bullish Rally Phase

This Daily TRAN chart shows a similar GAP in price that could also trigger a big rally towards new all-time highs if the markets suddenly shift gears. The fear that settled over the global markets because of the Omicron virus strain may have pushed the markets into a fairly deep pullback. As we’ve seen repeatedly, when these pullbacks end, the US markets shift back into strong bullish price trending and often rally to new all-time highs.

This GAP on the TRAN chart may further confirm that the downside price pressure has ended and a new rally phase is setting up for the US markets.

Just a few days ago, I posted a research article showing results from a proprietary data mining utility I use that illustrated the typical bullish market strength in November and December. You can read that article here: Thetechnicaltraders.com.

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I believe the global markets will attempt to move past the fear we’ve seen related to the Omicron virus strain. It is becoming more evident that many nations are already somewhat prepared to deal with it throughout December/January. If there is sudden news that it, or any new virus strain, is far more dangerous, things could change very quickly. But I believe the US markets are searching for support and are very likely to end 2021 at or near new all-time highs – supporting a very strong Santa Rally.

Watch for end-of-day SQUEEZE events to push price levels higher and higher over the next few days – possibly targeting these GAP areas or higher.

Want to learn more about what affects the markets?

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio.

Have a great day!

Chris Vermeulen
Chief Market Strategist

Global financial markets were already hobbled by the original COVID-19 virus – struggling to regain their economic foundation after many months of the unprecedented central bank, government, and humanitarian efforts to move us towards recovery.  Now, the Omicron strain of the COVID virus has potentially toppled the apple cart while global inflationary and economic concerns are peaking.  What’s next?

Why Traders Need To Consider Future Risks

This recent article caught my attention as I caught up on today’s morning events (Source: Yahoo! Finance). It highlights the incredible inflationary trends occurring because of disrupted supply channels related to the original COVID-19 disruption. Could you imaging what would happen if a new virus strain prompted further lockdowns and labor/supply disruptions for another 12+ months – or longer?

The massive amounts of stimulus and money printing that has taken place over the last 4+ years by global central banks may be acting as an anchor for growth and starting to weigh down global markets. Easy money policies lead individuals and corporations to borrow more and more capital expecting growing returns from sales. What happens when we start to see a mild economic slowdown take place, possibly complicated by inflationary price trends and consumers that pull away from making big purchases?

That exact type of scenario is playing out in China right now, and it is relatively easy to see that excessive debt and lack of economic growth lead to a disastrous outcome (Source: Yahoo! News). When you add extreme inflation into that mix, the equation becomes even more volatile.

Why is the stock market falling again?

The answer is pretty clear I think. Traders and investors around the globe continue to fear the worst for the new Omnicron COVID strain, and for good reasons.

• They don’t see the current vaccines working on it – yet.
• Various countries are talking about lockdowns again.
• Unemployment could spike.
• Inflation could spike out of control if lockdowns happen.
• The stock market could collapse.
• Housing could collapse.
• Certain Global Central Banks & Governments Could Collapse.
• And many more…
• I will show you how to protect and grow your capital with a simple strategy.

Custom Index Show Price Weakness has Already started

This Weekly Smart Cash Index, which tracks global market trends more efficiently, shows a decidedly Bearish price trend has been in place since February/March 2021. On the right edge of the chart, the recent price weakness is about to break below the $177 level – breaking downwards and attempting to reach new price lows.

This downward pressure on global markets shows how the US markets are acting in an opposite trend (trending higher right now) while global markets have experienced an extended price decline over the past 8+ months. If the Omicron virus strain prompts new lockdowns and/or supply and labor disruptions, we may see a significant collapse in foreign markets over the next 6 to 12+ months. Possibly taking place while inflation spikes higher – leading to a bigger problem for economies struggling to recover.

This Weekly Custom Volatility Index highlights a very interesting divergence between price trending and the RSI trends. While the Volatility Index was pushing higher and higher over the past 6+ months, RSI shifted into a downtrend – suggesting the momentum of the US stock market uptrend was weakening dramatically.

Now, with Omicron here, the US markets could break downward – pushing the Custom Volatility Index back below 6.0 or 7.0 and possibly falling to extreme lows near 1.0 or 2.0 for an extended period.

Reality Check!

Generally, there is no easy or quick way to make money/build wealth, especially if it happens to almost everyone at the same time, which we are all experiencing.

With equities and home values surging this past year, nearly everyone has seen their wealth/investments jump 50 – 100+% with very little effort. These types of gains are not normal. It’s an anomaly, a glitch in the system, or a short-term windfall because of an event, something has been rigged/manipulated for it to happen.

The wealth you have accumulated in the past year must be protected as if your life depends on it. I hate to burst everyone’s bubble, but if you feel it’s easy to make money with stocks and real estate and you do not think you need to protect it, then you may be in for a rude awakening. When bubbles burst and manipulation stops working, prices revert to the mean or worse very quickly. Everyone without a game plan/strategy is caught off guard.

My last index investing entry signal from June 2020 is up over 55% and keeps collecting dividends. This type of annual return is not normal for a simple investing strategy. Also, the shorter-term index trades I do continue to pull money out of the market with each new market cycle and are collecting dividends along the way as well.

I’m protecting my capital and those who follow me because eventually, one of these market corrections will turn into a crash, or very long bear market and wipe out everything you earned since the covid event in 2020, and possibly much more.

As much as I want and expect the market to keep rallying to new highs, you MUST have a game plan in case that does not happen. The number one rule that all successful traders and investors live by, is knowing where you will exit a position if things do not work out.

Do you know where and when you should move to cash,bonds, or gold if things start to get ugly?

If you are a passive investor and want to know when to move your retirement account out of stocks to avoid a bear market, I can help. This simple market cycle gauge uses technical analysis, momentum, and sentiment to know when major trends have reversed direction. This strategy will reduce portfolio volatility and can help you retire with an account 2-4x larger by avoiding bear markets and entering at a lower price.

If you are a more active investor or trader and want to profit from market rallies and be protected during more minor market corrections by moving your money from the stock index ETF into the Bond ETF when things become uncertain or get ugly, I share these TEP trading signals and positions as well.

This week, and possibly even TODAY, this market could trigger a position change that could save/make you a lot of money depending on how you are currently positioned.

If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio.

Have a great day!

Chris Vermeulen
Chief Market Strategist