{"id":173425,"date":"2020-07-09T14:04:44","date_gmt":"2020-07-09T18:04:44","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=173425"},"modified":"2020-07-09T14:04:44","modified_gmt":"2020-07-09T18:04:44","slug":"retail-traders-investors-squeezed-to-buy-high-risk-assets-again","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/07\/retail-traders-investors-squeezed-to-buy-high-risk-assets-again\/","title":{"rendered":"Retail Traders & Investors Squeezed to Buy High-Risk Assets Again"},"content":{"rendered":"
July 9, 2020<\/div>
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By TheTechnicalTraders<\/u><\/a>\u00a0<\/strong><\/p>\n

– Yes, we certainly live in interesting times.\u00a0 This, the last segment of our multi-part article on the current Q2 and Q3 2020 US and global economic expectations, as well as current data points, referencing very real ongoing concerns, we urge you to continue using common sense to help protect your assets and families from what we believe will be a very volatile end to 2020.\u00a0 If you missed the first two segments of this research article, please take a moment to review them before continuing.<\/p>\n

On May 24th<\/sup>, 2020, we published this research article<\/strong><\/a> related to our super-cycle research. It is critical that you understand what is really happening in the world as we move through these major 21 to 85+ year super-cycles and apply that knowledge to the data we have presented in the first two segments of this research post.\u00a0 Within that article, we quoted Ray Dalio from a recent article published related to his cycle research.<\/p>\n

\u201cIn brief, after the creation of a new set of rules establishes the new world order, there is typically a peaceful and prosperous period. As people get used to this they increasingly bet on the prosperity continuing, and they increasingly borrow money to do that, which eventually leads to a bubble.
\nAs prosperity increases the wealth gap grows. Eventually, the debt bubble bursts, which leads to the printing of money and credit and increased internal conflict, which leads to some sort of wealth redistribution revolution that can be peaceful or violent. Typically at that time late in the cycle, the leading empire that won the last economic and geopolitical war is less powerful relative to rival powers that prospered during the prosperous period, and with the bad economic conditions and the disagreements between powers, there is typically some kind of war. Out of this debt, economic, domestic, and world-order breakdowns that take the forms of revolutions and wars come new winners and losers. Then the winners get together to create the new domestic and world orders.\u201d<\/p><\/blockquote>\n

That rather chilling statement suggests one thing that we all need to be aware of at this time: what the current and future economic cycles will likely present and how the world will navigate through this process of a cycle transition.<\/p>\n

Before you continue, be sure to\u00a0opt-in to our free market trend signals<\/strong><\/a>\u00a0<\/em>
\nbefore closing this page, so you don\u2019t miss our next special report!<\/em><\/p>\n

In our opinion, the massive cycle event that is taking place may not disrupt world order as Mr. Dalio suggests.\u00a0 There is a very strong likelihood that credit\/debt processes may become the \u201ccollateral damage\u201d of this cycle transition, but not much else changes.\u00a0 The world order and powerful nations across the globe are keenly aware that starting WWIII because of a credit\/debt crisis is not in anyone\u2019s interest.\u00a0 The world has enough capability to address these concerns without blowing the planet to pieces in the process.<\/p>

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Our super-cycle research suggests we have entered a period that is very similar to 1919~1920 \u2013 a \u201croaring good time\u201d most likely has already extended beyond reasonable levels.\u00a0 Our research suggests a massive peak in cycle events near 2023~24 after an already substantial support cycle from 2007~08 to 2023~24.\u00a0 This span of time, roughly 17 years, is very likely to be a blend of the Unraveling & Crisis phases of the super-cycle. We believe the broader Crisis phase will continue to transition throughout a span of time lasting well into 2031~2034.\u00a0 This suggests we may have another 11 to 15+ years of a massive unwinding cycle throughout the globe.<\/p>\n

SUPER-CYCLE RESEARCHER DATA FROM OUR RESEARCH TEAM<\/strong><\/h3>\n
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Our research team believes the COVID-19 virus event sent these super-cycles into Warp-Speed recently.\u00a0 The US stock market was poised to rally early in 2020 and may have experienced a multi-year rally had it not been for the COVID-19 disruption that took place in Mid-February.\u00a0 The destruction of the economy related to the COVID-19 shutdown is still playing out.\u00a0 Recent news suggests 41% of businesses that closed on Yelp have shut down permanently<\/a>.\u00a0 Now, consider that this means for consumers and local governments related to earning and revenue capabilities?\u00a0 Workers have been fired and have completely lost earnings capabilities.\u00a0 Business owners now face credit\/debt issues and possible bankruptcies.\u00a0 Local governments have lost revenue from taxes, payroll, sales, and fees and permits.\u00a0 This destructive cycle continues until the economy has shed the \u201cexcess\u201d within all segments of core economic function.<\/p>\n

MORE DATA & MORE PREDICTIONS<\/strong><\/h3>\n

Within the first two segments of this article, we\u2019ve highlighted numerous data points and charts to more clearly illustrate the current global market environment.\u00a0 We have to consider the reality of what is happening on the ground throughout the world and, in particular, what is happening in the US and most major economies right now.\u00a0 If 30 to 40%, or more, of local businesses, are closing permanently, this suggests that 30 to 50% of tax revenues for local governments will also vanish.\u00a0 It also suggests that these displaced workers and business owners will need to find new sources of income\/revenue over the next 12+ months.<\/p>\n

As much as we would like to think a \u201cV-shaped\u201d recovery is highly likely, it\u2019s not going to happen is 30 to 50% of the US economy is suffering at levels being reported currently.\u00a0 Yes, you could have investors pile into the US stock market because they believe the US economy is the most likely to develop a strong recovery in the future, but that will likely happen after the excess has been processed out of the economy through a business\/credit contraction phase.\u00a0 The current stock market valuation levels seem to ignore the fact that consumer and business activity has likely collapsed by a minimum of 25 to 45% (or more) over the past 90+ days \u2013 and may not recover to levels anywhere near the early 2020 economic activity levels.<\/p>\n

Still, if you listen to the news and watch the data related to the real estate market, you would think there has been no disruption in the US economy.\u00a0 Supposedly, homes are still selling quickly and the market is very robust.\u00a0 The Case-Shiller 20 city home price index is well above 220, the highest levels ever reached for this index.\u00a0 This suggests home prices have risen to levels that are likely 15% to 30% higher than the peak levels in 2006-2007 \u2013 yet we\u2019ve just experienced a massive economic disruption across the globe where 25% to 45% (or more) of our economic earning and income capability has vanished.\u00a0 Read between the lines if you must \u2013 something doesn\u2019t seem to be reporting valid data at the moment.<\/p>\n

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The Consumer Price Index has recently started falling.\u00a0 The only times in history where the CPI level has initiated substantial downward trends are throughout major recessionary or contraction economic phases.\u00a0 It is very likely that the decrease in the CPI level is reflecting a supply glut pricing effect as a result of the COVID-19 shutdown process.\u00a0 When consumer activity drops dramatically while supply channels continue as normal, a supply glut happens.\u00a0 When this happens, price levels must adjust and address the over-supply of goods and raw materials stacking up in warehouses, containers, and ships.<\/p>\n

If the consumers earning and spending capabilities are disrupted long enough, the manufacturing and supply side of the equation can\u2019t react fast enough to the immediate decline in demand.\u00a0 Therefore, the supply glut continues for a period of time as manufacturers attempt to scale-down the production levels to address for proper demand levels.\u00a0 Obviously, lower demand equates to lower sales volumes and lower-income levels for manufacturers and sales outlets.\u00a0 This translates into layoffs at the factories, sales outlets, and all levels in between.\u00a0 The cycle continues like this until an equilibrium is reached between supply and demand.<\/p>\n

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This translates into lower-earning expectations for much of the US and foreign markets compared to previous expectations.\u00a0 While the S&P 500 stock price levels have recovered to nearly the early 2020 price levels, it seems rather obvious to us that Q2 earnings data will likely shock the markets with dramatically lower results and forward expectations \u2013 in some cases these numbers may be disastrous.<\/p>\n

When Nike released their Q4 (May 2020) earnings and showed a nearly $800 loss because of the early COVID-19 shutdown, this should have presented a very real understanding of how all levels of retail, manufacturing, and consumer services would also likely show a dramatic economic contraction taking place.\u00a0 Currently, we are watching for news of new US businesses entering the bankruptcy process.\u00a0 This recent article suggests business bankruptcies are skyrocketing<\/a> higher \u2013 yet are still below the 2008~09 levels.\u00a0 Please keep in mind that we are only 90+ days into this COVID-19 virus event \u2013 so this data is still very early reporting.<\/p>\n

Still, the numbers are very telling\u2026<\/p>\n

\u201cUS filings totaled 3,427 on June 24, according to data from Epiq seen by the Times. The reading also closes in on the financial-crisis reading of 3,491 companies entering bankruptcy in the first half of 2008. \u201c<\/p>\n

If you are reading the same data I read from that statement, the difference between the 2008 levels and current levels is only 64 additional bankruptcies in the US \u2013 less than a 2% difference in total bankruptcies.<\/p>\n

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The reality of the current market conditions is that we are only 90+ days into this processing of all this new data and attempting to understand what is likely to become a new operating norm for global economies.\u00a0 In 2008-09, the unwinding process took place over a full 12 to 16-month process.\u00a0 The recovery process too much longer \u2013 more than 5+ years.\u00a0 Currently, the unwinding process of the COVID-19 collapse took less than 30 days and the recovery process took a little over 90 days.<\/p>\n

If our research team is correct, the speed at which the current recovery took place is nothing more than a reactionary recovery to a problem that was sudden and full of uncertainty.\u00a0 The Q2 data will likely solidify the uncertainty and unknowns into very real economic values (losses) and may shock the US stock market into a downward price reversion phase.<\/p>\n

We believe one of the best hedging tools any skilled technical trader can use right now is Gold and Silver (Precious Metals).\u00a0 We continue to urge our friends and followers to maintain a portion of our portfolio in precious metals as a hedge against risk and unknowns throughout most of 2020 and beyond.\u00a0 If the Q2 data does what we believe it will do, shock the markets, then a moderately violent and volatile downside price move is pending.\u00a0 Simply put, you can\u2019t destroy 25 to 45% of an active economy and displace millions of workers while sustaining high price valuations \u2013 unless you have a bubble-like euphoric investor mentality.\u00a0 That, ladies and gentlemen, is exactly what we believe is happening right now.<\/p>\n

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The super-cycle event that took place between 1920 and 1929 was nothing more than a euphoric bubble-like event where investors and traders had \u201cno fear\u201d.\u00a0 Everyone was leveraging everything they could to try to jump into the markets because they believed nothing could stop the rally. \u00a0Keeping this in mind, you may want to read this recent research post about parabolic bubbles<\/strong><\/a> we published on June 23, 2020.<\/p>\n

When bubbles burst, most commonly done when investors suddenly come to their senses in terms of real valuation expectations, the downside price moves can be extremely distressing.\u00a0 We urge you to properly understand that may happen with Q2 earnings data and new announcements.\u00a0 We also urge you to understand the COVID-19 virus event may have moved the super-cycles into some type of \u201cwarp-speed\u201d.\u00a0 If our research is correct, we could be speeding towards a massive unwinding\/crisis cycle phase very similar to 1929~1945.<\/p>\n

Please read all the previous segments of this article and please properly position your portfolio to protect your assets.\u00a0 There will be lots of other trades in the future for all of us.\u00a0 These bigger price moves are not suddenly going to end because of Q2 or Q3 data.\u00a0 Be patient and stay protected.\u00a0 Q2 data is almost here and we are about to see some realization of the COVID-19 economic destruction process.<\/p>\n

Get our\u00a0Active ETF Swing Trade Signals<\/strong><\/a>\u00a0or 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\u00a0Passive Long-Term ETF Investing Signals<\/a><\/strong>\u00a0which we are about to issue a new signal for subscribers.<\/p>\n

Chris Vermeulen
\nChief Market Strategies
\nFounder of Technical Traders Ltd.<\/p>\n

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.\u00a0 It is provided for educational purposes only.\u00a0 Our research team produces these research articles to share information with our followers\/readers in an effort to try to keep you well informed.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By TheTechnicalTraders\u00a0 – Yes, we certainly live in interesting times.\u00a0 This, the last segment of our multi-part article on the current Q2 and Q3 2020 US and global economic expectations, as well as current data points, referencing very real ongoing concerns, we urge you to continue using common sense to help protect your assets and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-173425","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173425","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=173425"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173425\/revisions"}],"predecessor-version":[{"id":173435,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173425\/revisions\/173435"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=173425"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=173425"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=173425"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}