Dailydart Trader - Market Timing Charts and Stock Picks

Passive buy and hold Investors, in general, are starting to panic: XLU, dividends, bonds.

It has been an interesting year, with stocks down nearly 25% and the bond ETF TLT down over 40% since the 2020 highs. The passive buy-and-hold investor is becoming panicked, and we can see this in the stock market through the mass selling of utility stocks, dividend stocks, and bonds.

When the masses become fearful, they liquidate nearly all assets in their portfolios which is why we see the Big Blue chip stocks selling off along with precious metals. As investors liquidate around the world, they focus on where their money can still be preserved. With most currencies falling in value, there is a flood toward the U.S. dollar index as the safety play.

Global Currency Trends – Monthly Charts

As the US dollar index rises, we tend to see precious metals fall. As you can see from the charts below, almost all currencies are falling in value, helping to sharply increase the US dollar index. This is a headwind for precious metals until it finds resistance at the top.

Gold Monthly Chart Comparing 2008 Bear Market and 2022

Let’s take a look at the monthly chart of gold. I believe gold entered a new bullish supercycle in 2019, which is very similar to the Supercycle that started in 2001.

I believe the recent bear market in equities can be compared to the 2008 bear market. Technical analysis shows that gold could correct another 16% lower and match the same 34% correction we saw in 2008.

The price of gold is threatening the 1674 support level. If the price is broken on the monthly chart, it will signal a large sell-off to roughly the $1300 to $1400 level for gold.

While the circumstances and economy are very different from 2008, the price charts paint a very similar picture. I believe there’s still a long way to go for gold to find support, and it may take another 8 to 12 months to unfold. I also believe that the precious metal sector will be one of the first assets to bottom and then start a multiyear rally, similar to the 2009 to 2011 rally.

While the 34% correction starting to take place may look very large, it is in line with what we’ve seen in the past. Though price charts don’t repeat, they do tend to rhyme, so I’m expecting a similar type of scenario. I’m sure it will unfold a little differently and take a different length of time to mature.

Price Stage Analysis – Gold Starting Stage 4 Decline

The price of gold is on the verge of breaking down from a stage three topping phase. Once the breakdown is confirmed, it will be in a stage four decline, also known as a bear market. It’s important to note that we can have bear markets within supercycles.

Just like when gold started at the new super cycle in 2001, which lasted until 2013, there can be large corrections and smaller bear markets within the bullish Supercycle.

Dollar Index Rockets Higher and Has More Room to Run

The US dollar Index has been one of the hottest assets to own this year. I believe the rising value of the dollar index has been putting downward pressure on the metals sector all year. As you can see from the quarterly chart below, The US dollar index still has more room to run to match the high set in 2001.

Keep in mind; I still think there are another three to five more bars before the dollar forms a top and reverses direction. Each bar on the chart is three months because this is the quarterly chart. Thus we potentially still have a year of sideways or lower gold pricing ahead of us.

Gold Miners Will Be Under Pressure If Gold Falls

If gold breaks down and the bear market in equities continues, we will see gold mining stocks continue to sell off. The large-cap gold stocks ETF GDX shows a potential 44% decline in price over the next year. While this may sound bad, it will become an extraordinary opportunity in due time.

I believe silver and silver mining stocks will follow gold stocks as well.

In short, I’m very excited about what is unfolding in the precious metals sector. And while it may still be early, I’m keeping my eye on the sector for the start of a new super cycle rally in 2023, which could be life-changing for investors.

TheTechnicalTraders created the Consistent Growth Strategy that can be manually followed or auto-traded in a self-directed retirement account for people who do not want to spend their valuable time in front of a computer. Save time to do what you love and lower stress to enjoy every moment of today.

Consider what tactical investing can do when you only own assets rising in value. I challenge the status quo and do things differently. It may be slower and not as exciting as the precious metals sector, but it preserves capital, makes money when assets are trending higher, and sidesteps corrections and bear markets.

Concluding Thoughts:

In short, the world and even more so, the financial markets and assets have a habit of applying the maximum pain to investors before reversing direction. In fact, there is a “Max Pain” calculation in the options market to know where the maximum pain/losses will be for the stock market, and it’s crazy scary how the market will reach this price level during options expiry days on many cases.

The bottom line here is that the worst thing that could happen to most investors and capital in the markets now would be a multi-year bear market and drawdown in the markets. This would cripple anyone nearing retirement and everyone already retired. Having your nest egg cut in half will send shockwaves worldwide to the largest group of investors, being baby boomers and retirees. In addition, it will likely create a flood of people looking for jobs to subsidize their retirement, crushing dreams and plans along the way. And unfortunately, I think that’s just the beginning of potentially a big unraveling of the economy, and gold will do well eventually, but it is a little early yet, in my opinion.

The average investor is positioned for higher prices with the buy-and-hold strategy and feels stuck with their substantial drawdown. Things could be much worse for stocks, like 40% lower, if the charts play out like they are indicating. The big question is, will you be comfortable with your situation if that happens?

Im a huge fan of cutting losses simply because I do not believe in holding assets falling in value. It goes against the reason we invest. It can be very difficult biting the bullet and taking a loss, but I learned a long time ago its better to exit losing positions that could keep falling and move into new ones that are rising.

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Every week I remind investors I work with that now is not the time to expect to make huge money. Instead, it is about capital preservation. Focus on not losing; growth will naturally come in due time.

My team and I created a proprietary ETF portfolio for investors who want to avoid substantial market swings and instead slowly and reliably grow their accounts with less stress and more enjoyment.

If you have any questions, my team and I are here to help you safely navigate both bull markets and bear markets with our Consistent Growth Strategy.

Chris Vermeulen
Chief Investment Officer
www.TheTechnicalTraders.com

Sept 25, 2022

Two big possible factors this week for the stock market. Might be the NYA losing support on the below NYA chart, and the Jupiter story.

I just did some research and wrote about it. I should be clear that you may find this article a little unsettling if you are nearing retirement or have already retired. On the other hand, it’s an eye-opener because the financial markets and different asset prices paint an interesting picture.

But, I believe being armed with the proper information and knowledge leads to better outcomes, so I’m sharing this possible scenario that could unfold in the next 3-10 months and last for many years and directly affect our lifestyle.

If you don’t take proper action, you could be exposed to and experience something called the sequence of returns risk, which I will explain in great detail in my soon-to-publish white paper, so be sure to join the free newsletter. So, let’s jump into things!

There is a concept that the US Fed may be pushed into raising rates above nominal inflation rates to stall inflationary trends. Historically, the US Federal Reserve had raised rates aggressively to near or above annual inflation rates before the US economy moved away from inflation trends.

THE POTENTIAL SCENARIO AS TOLD BY THE CHARTS AND HISTORY

Suppose US Inflation trends continue to stay elevated throughout the end of 2022 and into early 2023. In that case, the US Fed may continue to raise Fed Funds Rates (FFR) to unimaginable levels more quickly than many traders/investors consider possible. Could you imagine an FFR rate above 6.5%? How about 8.5%?

What would that do to the Mortgage/Housing market? How would consumers react to credit card interest rates above 24% and mortgages above 10%? Do you think this could happen before inflation trends break downward?

The reality is that the markets and future have a way of surprising us and doing what we once thought was not possible. So being open to some of these extreme measures and situations is something we should consider and consider what they could do to our businesses, lifestyles, and retirement.

Historically, this must happen for the US Fed to break the persistent inflationary trends in the US – take a look at this chart.

The best-case scenario given the historical example is that Annual Inflation trends move aggressively to the downside by Q1:2023 or earlier. That will allow the US Fed to move away from more aggressive rate increases, which could significantly disrupt US & Global asset markets (pretty much everything).

Suppose Annual Inflation stays above 6~7% throughout the end of 2022 and into early 2023. In that case, I believe it is very likely the US Federal Reserve will be pushed to continue raising rates until a definite downward trend is established in inflation.

ALGOS, ILLIQUIDITY, DERIVATIVES ARE ACTIVE CULPRITS

There are two examples showing the US Fed acted ahead of a major downturn in inflation: one in the late 1980s and another in late 2007. Both instances were unique in the sense that the late 1980s presented similar sets of circumstances. Computerized trading, illiquidity, and excessive Derivatives exposure prompted the 1987 Black Monday crash and the 2007-08 Global Financial Crisis. (Source: https://historynewsnetwork.org/article/895)

CURRENT STAGE 3 TOPPING PATTERN MAY TURN INTO STAGE 4 DECLINE

My research suggests the US markets are fragile given the current Inflationary trends and pending Federal Reserve rate increases. As I told above, the best-case example is to see Inflation levels dramatically decline before the end of Q1:2023. It is almost essential that current inflation levels drop back to 2~3% very quickly if we are going to see any measurable slowdown in Fed rate increases.

Secondly, the continued speculation by traders/investors remains very high, in my opinion. Given the historical example, traders should be pulling capital away from risks very quickly and attempting to wait out any potential Fed rate decisions. Below, I’ve highlighted where I believe we are on the Stock Market Stages chart. This is not the time to become overly aggressive with your retirement account/nest egg.

Many traders and investors are now buying this pullback in stocks, thinking it’s a buy-the-dip type of play. I think things are about to get ugly, and what we have seen thus far in 2022 is just the 12-year bull market ending, but the downtrend has not even started yet.

The time to buy the hottest sectors, like in 2020, will eventually come, and when it does, the Best Asset Now strategy (BAN) can generate explosive growth for traders, but now is not the time.

PROPRIETARY INVESTOR STRATEGY CONFIRMS CYCLE TRENDS

My proprietary Technical Investor strategy (TTI) has moved into GREEN trending bars – aligning very closely with the MAGENTA ARROW on the Stock Market Stages chart above. I’ve drawn both a GREEN & RED arrow on this chart to highlight the potential trending outcomes that likely depend on how quickly Inflation levels drop.

If Annual Inflation levels drop below 3% before we start Q2:2023, then I believe we may see a softer US Fed and more significant potential for a recovery in the US/Global markets over the next 18+ months.

On the other hand, suppose Annual Inflation levels stay above 6~7% over the next 6+ months. In that case, I believe the US Federal Reserve will attempt to continue to raise rates aggressively – eventually resulting in a “bear market” breakdown event in the US/Global asset markets.

COMPARING 2008 BEAR MARKET BREAKDOWN WITH 2022 PRICE ACTION

The last time we experienced a major Inflationary event where the US Federal Reserve was not actively supporting the US economy with QE policies was in 2007-08. This event prompted a -57% decline in the SPY before bottoming out and a -55% decline in the QQQ. Many of you lived through that market collapse and have strong feelings about how destructive that move was for everyone.

2022 BEAR MARKET BREAKDOWN

This time, after 12+ years of QE, prompting the “Everything Bubble,” – just imagine what could happen if my research is correct. But let me be very here. I am not forecasting, predicting, or saying this will happen. I do things differently when it comes to trading and investing. I only own assets and hold positions that are rising in value. I do this by following price charts and managing risk and positions.

You won’t ever catch me trying to pick a bottom, averaging down into losing positions, and you won’t find me trying to pick a top, either. What you will experience if you follow my work is that I always research and know all the possibilities an asset could move, and I plan to navigate each one safely. Once the price charts confirm a direction, I position my portfolio to profit from the new trend, which can be up or down.

A TOUGH YEAR EVEN FOR EXPERIENCED INVESTORS

This year alone, the S&P 500 is down over 18%, and treasury bond ETF TLT is down 28%. As a result, anyone investor using the buy-and-hold strategy with any mix of stocks/bonds in their portfolio is under tremendous pressure and likely starting to worry about outliving their retirement funds.

Here is a little background on the market markets for you. First, there have been 26 bear markets since 1929, with an average loss of 35.62 percent and an average duration of 289 days. Mind you, some of those bear markets were only a few months long, while others were multi-year declines, with some taking 5, 12, and even 17 years to return to breakeven.

But the reality is breaking even with your assets is still a significant loss. After many years of being in a drawdown like that, don’t forget you are paying 0.50% – 2% annual fees from ETFs, mutual funds, and possibly advisor fees. Simple math shows that with a 17-year drawdown spending 1+% year to hold these losing positions, you still have a 17+% loss when assets return to breakeven because of these costs.

I know all this sounds bleak, and rightly so, it is. But there is good news. Market corrections and bear markets can be identified early and safely navigated if you know what to look for and follow the market VS. buy and hope, or try to pick market bottoms and tops.

2022 has been a very tough year to make money from the markets, not because of the market decline but because of the stage 3 phase in which the stock market is currently. It does not know if it wants to find a bottom and rally or roll over and start a steep bear market swan dive.

You can see how my Consistent Growth Strategy (CGS) has preserved our capital during these difficult times.

CONCLUDING THOUGHTS:

The bottom line here is that the worst thing that could happen to most investors and capital in the markets now would be a multi-year bear market and drawdown in the markets, which would cripple anyone nearing retirement and everyone already retired. Having your nest egg cut in half will send shockwaves worldwide to the largest group of investors, the baby boomers, and anyone retired. In addition, it will likely create a flood of people looking for jobs to subsidize their retirement and crush many dreams, and that’s just the beginning of potentially a big unraveling of the economy, I think.

Labor rates will fall as millions of individuals look for work, we will be in a recession, and businesses will be laying off millions of employees, making it even harder to get a job. We are already seeing layoffs taking place. Then we could see the real estate market (residential and commercial) starting to fall apart. Things start to get a little depressing beyond that, so I’ll stop here, but you get my gist, I hope.

The average investor is positioned for higher prices with the buy-and-hold strategy. The critical thing I am trying to share with you is what could happen on the downside if things continue to erode and that you should think about how your lifestyle could change in the next 3-10 months if/when this happens and if you think you will be comfortable with your situation.

Every week I remind investors I work with that now is not the time to expect to make money. Instead, it is about capital preservation. Focus on not losing; growth will naturally come in due time.

If you have any questions, my team and I are here to help you safely navigate both bull markets and bear markets with our CGS Investing Strategy.

Sept 18, 2022

Our SPX monthly chart looks to be testing possible RSI support. This month may be a decisive one for the bulls and bears. We need to hold the below Fibonacci support on the SPX.

Recent CPI/Inflation data suggests the current wave of global inflation is far from “transitory” and may persist for many months – possibly years. Some believe it is primarily a supply-side issue related to the COVID shutdowns. I think it is a combination of factors driving higher inflation right now (capital creation, stimulus, a broad speculative phase that existed after COVID, and supply side issues).

The result is the US Fed may now find itself pushed even further to raise rates aggressively to combat inflation trends. This may push the US/Global markets into a new downward price phase as we near a broad Pennant/Flag formation that apexes near December 15, 2022.

FED DECISION COULD PUSH GLOBAL ECONOMIES IN DANGEROUS DOWNWARD PRICE PHASE

The CPI/PPI numbers inherently lag economic trends by 4 to 6+ months. I’m sure the US Fed is aware of the risks related to any further aggressive rate hikes. Yet, I’m also sure the Fed will do whatever is necessary to move ahead of perceived inflation trends.

The two charts below, the CPI & PPI Year-over-Year data, clearly show the increasing cost factors for producers and consumers, which started nearly 9+ months after the COVID lockdowns in March 2020. The reality of the world at that time was that supplies were diminishing because almost everything throughout the world was shut down or operating at significantly reduced capacity.

Now, as we move back into a mode where capacity and supply are rebuilding, we’ll see how quickly these inflationary trends weaken – if at all. The world is still dealing with supply-side issues, and the US economy continues to run stronger than many other foreign economies. Thus, the demand side may stay elevated for a while – unless the Fed turns aggressive with rate hikes and destroys consumer demand to some degree.

SPY MOVING TOWARDS APEX BREAKOUT/BREAKDOWN BEFORE DECEMBER 15, 2022

All eyes will be on the US Fed next week as traders/investors prepare for what may become a very big price cycle/phase. I believe traders/investors have continued to anticipate a different Fed with Powell at the helm. The strength of the markets over the past 30+ days suggests traders believe the Fed will be more cautious of bursting economic prosperity than it may have been in the past.

After living through the DOT COM bubble, the 2008-09 Financial Crisis, and COVID, any new broad destructive economic phase brought about by the US Fed pushing rates too high could have catastrophic results.

SPY FLAG/PENNANT APEXING NEAR DECEMBER 15, 2022

This Monthly SPY chart highlights the current strength of the US S&P 500 SPDR ETF – still +82.5% above the COVID lows and +16.70% above the pre-COVID highs.

This Weekly SPY chart shows the same Flag/Pennant formation, yet I want to highlight the potential for a breakdown price trend targeting $359~361 (near the pre-COVID highs) and a deeper level near $312~318 (YELLOW LINE). Both levels represent 100% Measured Price Moves correlating to existing price trends from the peak near the start of 2022.

If we do see a breakdown in price trend because of an aggressive Fed rate decision, traders and investors need to understand where the next support levels may be found. It is doubtful that inflation will persist past Q1 or Q2 2023 as supply capacity is restored and the post-COVID constraints return to normal. Yet, we still have many months of unknowns related to how the US Fed will act and if any new event will disrupt global supply channels (think energy, credit markets, debt).

Right now, traders and investors need to stick with the first rule of trading: Protect Capital from excessive risks and only trade when the strongest opportunities exist.

LEARN FROM OUR TEAM OF SEASONED TRADERS

In today’s market environment, it’s imperative to assess our trading plans, portfolio holdings, and cash reserves. As professional technical traders, we always follow the price. At first glance, this seems very straightforward and simple. But emotions can interfere with a trader’s success when they buck the trend (price). Remember, our ego aside, protecting our hard-earned capital is essential to our survival and success.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

Recovery time also varies significantly depending upon the magnitude of the drawdown:

Depending on a trader’s age, they may not have the time to wait nor the patience for a market recovery. Successful traders know it’s critical to keep drawdowns with reason, as most have learned this principle the hard way.

We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition. Click on the following link to learn how: www.TheTechnicalTraders.com.

Sept 11, 2022

Gold bulls may have a tough go from here, looking at our weekly gold chart.

When the US Dollar is appreciating in value and trending upward, Natural Gas price trends upward as well to put moderately extreme pressures on the SPY & Crude Oil. As most energy transactions are conducted in US Dollars, this makes sense. Yet, with the recent agreement signed by Russia & China to conduct future energy transactions in Rubles & Yuan (Source: Nikkei Asia), will it result in more muted price trends in the future?

When the US Dollar rises, Natural Gas bullish price spikes seem to inflict greater disruption events in Crude Oil and the SPY. It appears that when Natural Gas spikes excessively, global nations are trapped in a US Dollar based economic crisis to supply electricity, heat, and other economic essentials to their communities.

US DOLLAR STRENGTH MAY DISRUPT ENERGY & CURRENCY VALUATIONS AS RECESSION LOOMS

This disruption in economic stability translates into greater risks for consumers, manufacturers, governments, and others. The shock of rising Natural Gas prices while the US Dollar is strengthening presents a real problem for many foreign nations dependent on importing energy.

This is likely why the recent Natural Gas price spikes have helped drive the SPY lower over the past 6+ months. The concern that rising energy costs could work to break economic function in certain nations becomes very real when Natural Gas moves to $3.50. It becomes even more critical when Natural Gas rises above $6~7.

My research suggests energy will continue to play a significant role in driving future trends in the global markets that conduct business transactions in various currency forms. It will simply push buyers & sellers to hedge foreign currency risks related to US Dollar strength or weakness. In short, the energy transactions will still be executed in a US Dollar base valuation – although they will be executed in foreign currency denominations.

There is one aspect of the deal between Russia & China that we’ll have to watch over the next 10+ years. Will this deal strengthen the Ruble & Yuan, or will it isolate these currencies and work to peg the Ruble/Yuan toward similar valuation levels? In a way, this is a bold move by Russia & China attempting to move their currencies into position to battle the US Dollar. But at the same time, if it fails to support the Ruble & Yuan, then it may work to devalue them in tandem.

The currency alliance between Russia & China may act as an anchor between the two currencies where any future broad global trends may drive both the Ruble & Yuan in a similar direction. The result could be an Oil/Energy based Ruble/Yuan correlation to the US Dollar or British Pound.

If Natural Gas begins to slide downward over the next 6+ months and breaks below $5.50, then I believe we may see a resurgent upswing in US stocks and other assets. Until then, I think the continued economic and global energy crisis will hang over the US markets headed into Winter 2022.

There is a chance that US markets may start a Christmas Rally over the next 30+ days and attempt to move into some type of end-of-year rally phase. But the global risks related to energy prices, inflation, and the US Fed may continue to disrupt rally attempts closing out Q4:2022. In short, we may not see any real relief from energy/inflation pressures until Q1 or Q2 2023.

Don’t try to be a hero with these market trends. Learn to protect your assets and target your trading style toward the best opportunities for profits.

On another note, if you are holding stocks and bonds in your portfolio, I highly advise you to watch this video I did with Craig. Bonds could fall another 20-30% from here and will send most baby boomers back to work, killing their retirement plans if you are not proactive.

LEARN FROM OUR TEAM OF SEASONED TRADERS

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

Recovery time also varies significantly depending upon the magnitude of the drawdown:

Oct 1, 2022

The Jupiter story, might have been the low for stocks. The NYA getting back above 14000, may confirm.

GOLD STARTING STAGE 4 DECLINE: A REPEAT OF 2008?

Global Currency Trends – Monthly Charts

Gold Monthly Chart Comparing 2008 Bear Market and 2022

Price Stage Analysis – Gold Starting Stage 4 Decline

Dollar Index Rockets Higher and Has More Room to Run

Gold Miners Will Be Under Pressure If Gold Falls

Concluding Thoughts:

Sept 25, 2022

Two big possible factors this week for the stock market. Might be the NYA losing support on the below NYA chart, and the Jupiter story.

THE WORST CASE SCENARIO FOR RETIRED OR NEARLY RETIRED INVESTORS WHO ARE 55+

THE POTENTIAL SCENARIO AS TOLD BY THE CHARTS AND HISTORY

ALGOS, ILLIQUIDITY, DERIVATIVES ARE ACTIVE CULPRITS

CURRENT STAGE 3 TOPPING PATTERN MAY TURN INTO STAGE 4 DECLINE

PROPRIETARY INVESTOR STRATEGY CONFIRMS CYCLE TRENDS

COMPARING 2008 BEAR MARKET BREAKDOWN WITH 2022 PRICE ACTION

2022 BEAR MARKET BREAKDOWN

A TOUGH YEAR EVEN FOR EXPERIENCED INVESTORS

CONCLUDING THOUGHTS:

Sept 18, 2022

Our SPX monthly chart looks to be testing possible RSI support. This month may be a decisive one for the bulls and bears. We need to hold the below Fibonacci support on the SPX.

WILL INFLATION DATA RESULT IN MORE AGGRESSIVE ACTION BY THE FED?

FED DECISION COULD PUSH GLOBAL ECONOMIES IN DANGEROUS DOWNWARD PRICE PHASE

SPY MOVING TOWARDS APEX BREAKOUT/BREAKDOWN BEFORE DECEMBER 15, 2022

SPY FLAG/PENNANT APEXING NEAR DECEMBER 15, 2022

LEARN FROM OUR TEAM OF SEASONED TRADERS

Sept 11, 2022

Gold bulls may have a tough go from here, looking at our weekly gold chart.

NATURAL GAS PRICE DRIVES CRUDE-SPY TRENDS WHEN USD IS APPRECIATING

US DOLLAR STRENGTH MAY DISRUPT ENERGY & CURRENCY VALUATIONS AS RECESSION LOOMS

LEARN FROM OUR TEAM OF SEASONED TRADERS