By now you’ve probably already heard, more than $3 trillion in global stock market losses took place over the last two trading sessions. An all time record, for back-to-back trading sessions.
This morning, let’s put these global losses in perspective…but not just from the last 2 days…let’s instead take a look at declines from the past 13 months. In no particular order, here goes:
Germany: -25% from the highs
Italy: -37% from the highs
China: -24% from the highs
Japan: -27% from the highs
These are brutal declines. And the economic picture that they are painting is even worse…as in, if people aren’t worried about a global depression, they must be smoking crack. This may sound like I am trying to be cute…I am not. This is as real as it gets, and those that are not preparing today will almost certainly regret it tomorrow.
What about US markets? Most will be likely surprised to see these numbers:
S&P 500: -6%
Russell 2000: -16%
Bottom line on US and Global Stock Markets: Equity markets had one last shot at rekindling a bull market. US indexes needed to break out to fresh highs on the current move. Instead, following the Brexit shocker, we are even further away…and the global kicker is that leading international markets are right back into confirmed bear market, crash mode.
US traders will be watching the markets technical levels closely. After zooming lower through the 200 day moving averages on EVERY major index, and combined with the global devastation in stocks, going forward we can expect one primary trading strategy to be employed by the smart money: sell any major rally attempt…also, short any major rally attempt.
The trading we have seen so far is nothing close to “capitulation”…and while it’s too early to say that the markets will crash in the near future, I see major short term risks in US stock prices:
1) margin calls: unless stocks rally sharply…then manage to hold those gains…selling pressure from margin calls will act as a constant weight on the markets.
2) central bank anxiety: in every country where negative interest rates have been deployed, stock markets have been destroyed…led by absolutely massive and record losses in bank stocks. In the 90’s, the term was “bond market vigilantes”…this group forced Bill Clinton into cutting government spending, eventually leading to a surplus. Now, I see “bank stock vigilantes” exercising their own brand of financial justice. Here in the US, the banking index is off a huge 25% from the highs. In Europe, the losses are 50-80%…just brutal devastation in the banking world. The vigilantes are shorting every rally in bank stocks…and there is little to nothing that the powers that be can do about it.
And yes…fear and panic are quickly setting in among central bankers and their commercial banking brethren. Negative interest rates have been the disaster that everyone with half a brain knew they would be. There’s blood in the water now, and if I am correct, the selling pressure is nowhere near complete. Global markets are flashing “bearish engulfing patterns”, technical speak for, “holy sh*t…will the selling pressure ever end?”
BTW, did you happen to catch Alan Greenspan, on Bloomberg or CNBC, over the last 36 hours? I’ll just repeat two of his comments:
1) “This is the worst economic/financial situation that I have seen in my professional career” (and no…he was not talking about Brexit/Europe…he was talking about conditions right here in the US).
2) “This ends in inflation”. Of course Greenspan is right. And there’s this; Greenspan is also a huge gold bug, recommending that we should go back on the gold standard.
Folks, there’s a reason gold and silver are up 23-25% since the start of the year. And there’s a reason why here at the VRA, we are making absolute fortunes, with gains of close to 1100% in our top 2 mining stocks (combined), since the bull market kicked off in PM’s on 1/20/16.
Remember, the precious metals/miner bull market is just now getting underway. Before it’s over, gold will break $10,000/oz and silver will break $175/oz. But the real action will continue to be in the miners, as they appreciate 3-5 x faster than the metals themselves.
The precious metals bull market of our lifetime is upon us. If you own the right companies, a wealth affect on steroids is underway.
Until next time, thanks again for reading…