Archive for category: $SPY

Thank you for following our multi-part research (Part I, Part II) into the possibility of a China/Asia market collapse and our hypothetical analysis of what that event might consist of and how it may play out.  So far, we have discussed the Chinese housing market rotation as well as the recent trends within the past 7+ years, expansion and foreign investments made by many Chinese and successful Asian investors.  All of this research raises some interesting questions for us to consider.

• Just how much risk exposure have these Asian/Chinese investors set themselves up with?
• How deep of a property price or equity price decline would be enough to set off a panic mode?
• How tightly are the assets in China/Asia associated with equity/debt that was used to explore foreign investments and additional debt?
• How varied and deep do these “debt rabbit holes” go in terms of derivative assets, layered debt and more?
• How has the expansion of credit/debt in China expanded out into other foreign markets?
• How has the US and other central bank easing policies fostered a risk-taking role in Asia over the past 7+ years?

And finally, the BIG question:

What would it take for China/Asia to move from an investments/risk-taker mode to a protectionist/crisis mode?

One of the first things we need to consider is the expansion of credit that originated after the global market credit crisis (2008 to 2010) was still evident in China and Asia – although not quite as deep in form and structure as it was in the US, Canada, Europe and others.  Our previous research reports show that China’s property market and equities markets were not subject to the types of deep declines the US and other established economies experienced.  This was likely because China, at the time, was still experiencing a middle stage economic expansion period where China could continue to fund and export enough raw and finished materials to keep their economy running at 6%+ without much issue.  Of course, after 2015~2016, China was able to accomplish this by devaluing their currency, expending billions in reserves to build and product excess cities and finished material as well as foster and finance hundreds of large-scale projects throughout the globe (Africa, Europe, Asia, Mexico and South America).

In other words, the growth that China is experiencing is almost a shadow of the real growth because it has been enacted by shadow banking, shadow debt and leveraged expenses based on reserves while decreasing the Yuan valuation in order to maintain this economic shell game.  As long as their markets don’t contract more than a certain amount and investors are able to continue rolling their capital into this shadow banking system without any fear – nothing will likely change.  But when it does change, it should be very dramatic and quick.

Recent Chinese economic expansion has been partly a result of renewed global economic activity as well as the capacity of the Chinese government to use capital reserves to support their economic transition process – as evident by the $1 trillion in capital reserves that vanished between 2015 and 2017.

When one considers the recessionary economic cycles chart, above, as well as the US Presidential election cycle, one could explain this contraction as a general global contraction in relation to the uncertainty of a US election.  Yet, the size and scope of the capital reserve decline (over $1 trillion) within the scope of an expanding global economy, as well as expanded investment projects within China, means only one outcome could result in this reserve decline – reserves were used to support banking and finance facilities in an effort to avoid a collapse of credit/debt mechanisms.

These are tell-tale signs that the Chinese, and likely other Asian/Indian countries, are trapped in an expansive credit/debt environment that is likely very similar to what happened in the US/UK to set off the 2008~2010 global credit crisis.  The only difference this time is that it appears to be the Chinese have run themselves into this debt trap and the fragility of their economic footing is showing signs of cracking.

What would it take to cause the floor to crumble under the Chinese/Asian economies?

A deep (-32%) price correction occurred between 2015 and early 2016 that coincides with the reserve decrease as well as the property market price decline.  As our research shows, this also coincides with a mass exodus of capital from within China to outside sources (USA, Canada, UK and elsewhere).  If a decline of this nature in equities that was also associated with a property price decline resulted in a $1 trillion decline in China’s reserves, think about the potential chaos that could be associated with a new property price decline associated with an equity market decline.

The next portion of this report will explain the magnitude of this potential move in very clear relative terms and explain why we believe all traders should be aware of this move as it is setting up.  We hope you are enjoying this research and the detail in which we are bringing this to you.

53 years experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.

We believe this move will present tremendous opportunities for all traders and we believe www.TheTechnicalTraders.com is the only source for this type of detail and success.

Our articles, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors to explore the tools and techniques that discretionary and algorithmic traders need to profit in today’s competitive markets. Created with the serious trader and investor in mind – whether beginner or professional – our approach will put you on the path to win. Understanding market structure, trend identification, cycle analysis, volatility, volume, when and when to trade, position management, and how to put it all together so that you have a winning edge.

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PART I

Recent news of the US enacting $60 billion in economic tariffs on China as well as reactionary tactics from China have everyone spooked.  The US stock markets and global markets tanked last week as this news hit the wires.  At www.TheTechnicalTraders.com, we have been warning of a massive upside move in precious metals as well as global market concerns for the past 12+ months.  Our recent research shows just how fragile the global markets are to external factors as well as strengths in the US and other established economies.

This multi-part special report will delve into the immediate and future risks that are associated with the fundamental and economic likelihoods of credit market contractions and economic rotations within the China, India, South East Asia markets in relation to recent news events.  We hope to clearly illustrate the opportunities and risks that will likely play out over the next 12 to 48+ months for investors and traders.  Let’s start by trying to keep it simple with some very clear examples of what has transpired over the past 4 to 5 years and how we believe things will change in the near future.

This chart of property price cycles (advancing price cycles vs. declining price cycles; highlighted for your convenience) in Beijing, China, clearly illustrates the expansion and contraction cycles experienced in the capital city/region of China.  One can clearly see the expansion of the peaks vs. troughs as these price cycles have played out over the past 10 years.

What we find interesting about this chart is that the upper boundary appears to reside within the +8.5% or slightly greater expansion range, while the price contraction cycles continue to explore deeper and broader downside boundaries over this same range.

This leads one to consider the possibility that Real Estate prices and cycles in China may be much more speculative in nature than we may have considered in the past.  It also points to the concept that the Global Credit Crisis (2008 through 2010) may have created a consumer mentality that wealth can be created by speculating on real property throughout these cycles.

Additionally, we see some correlation to the real price valuations of Beijing property in the following chart.  Any analyst can clearly see that prior to 2008, the rotational price levels were much narrower than after 2008 (roughly 2~3% in range vs. 7 to 15% in range).  This volatility in pricing is one key factor that is leading us to our conclusion that the current downward price cycle (see the above chart) may lead to a substantially lower downside price target range in Beijing (and other areas of the world).  Our analysis leads us to believe this early stage price rotation is an excellent opportunity for investors and traders to prepare for and begin to execute trades to attempt to profit from these events.

Recently, we posted an article regarding the massive increase in pre-foreclosures in most US metros.  Our intent was to illustrate just how dynamically this price cycle is changing and to highlight the potential for investors to be prepared for a move.  Our current research into the potential for a China/Asia market implosion is based on the assumption that the past years of easy money, quantitative easing, support for property markets across the globe and massive support for an expansion cycle are nearing an end event.  If our analysis is correct, this end event cycle will present incredible opportunities for smart investors by attempting to capitalize on early and middle stage market events.

This current data, as shown above, clearly illustrates this price cycle event is very early in the rotational process and this presents a huge opportunity for investors.  Our research team at Technical Traders Ltd. has been actively following these trends and global market indicators for years.

We specialize in developing advanced price modeling systems that assist us in determining what may happen in the future and we attempt to capitalize on these moves with our subscribers.  These members receive advanced warnings of these types of setups and we alert them to critical trade setups in real-time – as they happen.  We urge you to visit our website to learn more about our services and products and we hope you find our research informative and relevant to current market events.  If you want to be ahead of the markets with our continued research and content, please consider becoming a valued member of our Wealth Building Newsletter.

With 53 years experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.

Chris Vermeulen
Technical Traders Ltd.

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With the news today from the US Fed and the rate hike, we should all be asking ourselves “where are we in the market cycle” so that we can prepare for and identify proper trades that may set up in our future.  One thing is for sure; we are not in the perpetual easing environment of the past 7+ years.  The Fed indicated they are expecting at least two more rate increases are expected this year and also hinted that a forth may be possible depending on the economic activity.

Our research team at www.TheTechnicalTraders.com is always trying to identify trends and opportunities before they happen for our members and partners.  We have a pretty good track record at calling the markets for 2018 and have called many of the markets moves weeks in advance.  Please review some of our recent market research to see for yourself how well we’ve been picking apart this market.  Today, we are going to illustrate where we believe the US markets are in relation to a typical market cycle and what we should be watching for in our immediate future.

A typical market cycle can often be identified by watching two components of the economy: the Bonds and Commodity prices.  When Commodities rise and Bonds fall, the market cycle is considered middle to late stage expansion and traders should be playing any continue bullish price moves as late-stage opportunities in a bullish trend.  When Commodities fall and Bonds rise, the market cycle is considered middle to late stage contraction and traders should be playing early bottom picking trades as well as late stage bearish trend trades.

One can see from this simple Economic Cycle that Market Tops are typically preceded by moves in Commodities and Bonds.

When we look at the global commodity price valuations going back many years, we will quickly see that commodities have recently been historically low and this could result in a dramatic increase in commodities in the future which would be one of the primary signs of late stage expansion.  The expansion in global commodity prices rotated lower in late 2014 as oil fell to recent lows and as the global central banks eased off the quantitative easing and money printing.  Recently, just before the US elections in 2016, the global commodity price index reached the lowest level since 2004-05 and started climbing higher.

Therefore, we have already begun to experience one of the key components of a market cycle top – rising commodity prices.  We would watch for Bonds to decrease as well as Capital Goods, Basic Materials and Energy sectors to rotate out of a historical price channel.

Of unique interest is that late stage economic rallies are often identified by a rally in the precious metals markets as fear of a top or of late stage corrections become more pronounced.  Over the past few months, we’ve been warning of a potential Wave 3 leg higher in both Silver and Gold.  Many people may not understand the scope of this potential move and the potential it may have on your trading.  The size of this move could be substantial.  The last rally in the metals that originated after the prior to the 2009 market crash resulted in a price advance from roughly 78 to nearly 435 – a 557% increase in just under 7 years.

What would a similar move in the metals look like today?  Could it happen?  Would it be as dramatic?

Gold closed $1332.50 today.  A 250% increase would put gold at $3331.25.  A 350% increase would put gold at $4663.75.  A 450% increase would put gold at $5996.25.  So, is a $6000 price for Gold reasonable?  Possibly, give certain market setups that prompt a similar price advance as we had seen after 2002.  It would all depend on how this new market top unfolds and the level of fear that resides in the global markets.

The last precious metals signaled a trade was in February we profited 20% in only 7 days profiting from falling prices. The next trade setup could be much larger.

As the US fed pushes rates higher, more and more consumers will be pushed to their financial limit that will drive some level of economic contraction.  It is almost like the US fed has no understanding of supply and demand functions as related to their policies.  As they push the rates higher trying to front-run inflationary concerns, they don’t understand that many borrowers can’t sustain raising rates at this pace.  In the process, many borrowers will be pushed into foreclosure and possibly bankruptcy as the fed attempts to normalize rate levels.

As traders, our job is to find the opportunity that exists and to try to capitalize on price movements and from swings in valuations that occur throughout this game.  The US fed and global central banks will do what they do – we really don’t have any control over them or their decisions.  As traders, our job is to be ahead of these central banks and take advantage of the opportunities they provide to us.

We likely still have many months of preparation to further understand and develop our strategies for these future moves.  We invite you to visit www.TheTechnicalTraders.com to learn what we do and why we believe we offer the best research and analysis available to traders.  We are in the trenches just like you are.  We live and breath this stuff and we use our advanced skills and technology to try to keep our members aware of what is going to happen days and weeks in advance.  Please review some of our most recent research report to see how accurate we are.

Our articles, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors to explore the tools and techniques that discretionary and algorithmic traders need to profit in today’s competitive markets. Created with the serious trader and investor in mind – whether beginner or professional – our approach will put you on the path to win. Understanding market structure, trend identification, cycle analysis, volatility, volume, when and when to trade, position management, and how to put it all together so that you have a winning edge.

We invite you to join our other members in preparing for and profiting from the opportunities the markets generate.  Our most recent trades are already performing quite well – hope to see you in the member’s area.

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