The Next Great Depression - A Massive Shift Soon
Actualizado
I've written at length about how I feel about the stock market. I've talked about how price action closely resembles the years leading up to the Great Depression, and I've also discussed why I think a large crash needs to happen in order for some structural changes to be made.
Here are a few of those posts:
Where I called a potential blow-off top:
Where I talk about why I think a crash is necessary:
A crash can happen for any number of reasons. Humanity has grown exponentially in the last 200 years. This causes stresses on our economy, environment, and our species as a whole. When any number of things happen (war, environmental change, viral epidemics, even greed itself), our society's fragility becomes exposed. Right now, it happens to be COVID-19 (the new coronavirus), but it could be anything. Any external variable that puts stress on our infrastructure has the potential to expose the flaws in our hyper-connected, top-heavy world. What do I mean by top-heavy? I mean it in terms of wealth concentration. In the event of disaster, the bottom 90% of the world has very little resources to protect themselves. When you have a top-heavy system built on a shaky foundation...you can guess what would happen.
From a technical standpoint, yes, stocks can continue to go up until at least the U.S. Presidential election. Perhaps the DJI can surpass 30K or even 40K, but ultimately I think we'll visit some lows not seen in many years. This can easily be the top here as well, with major indexes unable to invalidate the major bearish divergence on the monthly chart (drawn above). No one can time it perfectly, but I do continue to believe that this current rally is a "seller's rally" or an opportunity for people to take their money and run.
I think today's selloff resulted not only from fears of the virus disrupting major supply chains and global economic efficiency, but from the rise of Bernie Sanders. A Bernie presidency would likely send markets reeling, in a period of major economic uncertainty. Regardless of whether or not his policies are a good idea in the long run, I think it could cause some serious upheaval in the short term. I think some stock traders are anticipating a rise in democratic socialism, and trying to front run a deeper market selloff.
Once we get a drop (and I do think we're in for a MAJOR stock market selloff), how low we go will really depend on how our governments react to it. It can go far lower than probably most people are expecting, simply from a technical standpoint. The technicals just show the parabolic growth. As I mentioned above, parabolic growth cannot be sustained because of how stress on the system impacts the fragile underlying nature of such growth. What we've seen over the last several decades is not slow, sustained growth. It's not healthy. And I think this will be exposed soon.
Looking at the linear chart for the S&P 500, it can drop 50% and still be at the 200 Month Moving Average. That's how overextended this rally is.
In conclusion, I think there will be a massive shift in financial markets, the ripple effects of which can last decades. I think it will take this much time for things to get sorted out. Of course, I may be wrong. All I'm doing is speculating, observing, and offering my opinion. This is not financial advice.
-Victor Cobra
Here are a few of those posts:
Where I called a potential blow-off top:
Where I talk about why I think a crash is necessary:
A crash can happen for any number of reasons. Humanity has grown exponentially in the last 200 years. This causes stresses on our economy, environment, and our species as a whole. When any number of things happen (war, environmental change, viral epidemics, even greed itself), our society's fragility becomes exposed. Right now, it happens to be COVID-19 (the new coronavirus), but it could be anything. Any external variable that puts stress on our infrastructure has the potential to expose the flaws in our hyper-connected, top-heavy world. What do I mean by top-heavy? I mean it in terms of wealth concentration. In the event of disaster, the bottom 90% of the world has very little resources to protect themselves. When you have a top-heavy system built on a shaky foundation...you can guess what would happen.
From a technical standpoint, yes, stocks can continue to go up until at least the U.S. Presidential election. Perhaps the DJI can surpass 30K or even 40K, but ultimately I think we'll visit some lows not seen in many years. This can easily be the top here as well, with major indexes unable to invalidate the major bearish divergence on the monthly chart (drawn above). No one can time it perfectly, but I do continue to believe that this current rally is a "seller's rally" or an opportunity for people to take their money and run.
I think today's selloff resulted not only from fears of the virus disrupting major supply chains and global economic efficiency, but from the rise of Bernie Sanders. A Bernie presidency would likely send markets reeling, in a period of major economic uncertainty. Regardless of whether or not his policies are a good idea in the long run, I think it could cause some serious upheaval in the short term. I think some stock traders are anticipating a rise in democratic socialism, and trying to front run a deeper market selloff.
Once we get a drop (and I do think we're in for a MAJOR stock market selloff), how low we go will really depend on how our governments react to it. It can go far lower than probably most people are expecting, simply from a technical standpoint. The technicals just show the parabolic growth. As I mentioned above, parabolic growth cannot be sustained because of how stress on the system impacts the fragile underlying nature of such growth. What we've seen over the last several decades is not slow, sustained growth. It's not healthy. And I think this will be exposed soon.
Looking at the linear chart for the S&P 500, it can drop 50% and still be at the 200 Month Moving Average. That's how overextended this rally is.
In conclusion, I think there will be a massive shift in financial markets, the ripple effects of which can last decades. I think it will take this much time for things to get sorted out. Of course, I may be wrong. All I'm doing is speculating, observing, and offering my opinion. This is not financial advice.
-Victor Cobra
Nota
You can see that the bearish divergence predicted a large drop, coronavirus or not. The same thing happened before 2008. Nota
next levels for the DJI if support can't be held here. Now is really the time to see if the decline can be limited to 30%, or if we need to head towards deeper levels of 50%+ down. Nota
There's a decent chance that the drop is over for stocks. This would be the optimistic view. We now have a lot of options, in terms of where we can go. Yes, I called that the recent rally would be sold heavily, but we're now entering the zone where we could see an end to the selling, but only if an adequate response is made. Unfortunately, it doesn't seem too likely that things will turn around and reverse to "normal" so quickly. This is the first place where I feel okay saying, "yeah, MAYBE we don't have lower to go," but at the same time...the technicals are set up for the severe decline to continue.Nota
I also give a reasonable probability that the Dow will need to drop back towards pre-Trump levels at least. At that point, we can enter a serious economic crisis, particularly if those levels fail to hold. We would then be back to where we were during the 2008 crisis, and with much less to protect ourselves.Nota
My pink boxes are the main target zones.Nota
Looks pretty possible that we can see a repeat of the Great Depression here. The Dow can hit as low as 4000 by 2025. That's IF they don't recognize the looming debt crisis and restructure right away. Stimulus will help short term...but not for long. 
Publicaciones relacionadas
Exención de responsabilidad
La información y las publicaciones que ofrecemos, no implican ni constituyen un asesoramiento financiero, ni de inversión, trading o cualquier otro tipo de consejo o recomendación emitida o respaldada por TradingView. Puede obtener información adicional en las Condiciones de uso.