You can be a fundamentalist, or you can be a chartist or you can be both. In my case I can now be both as both views point in the same direction.
Anyone who has been reading my pieces here on Forbes for 20 some years will know I’m not a perma-bull or perma-bear. I flip flop. After the market crashes I’m a bull and when it gets into pre-crash mode I’m a bear. I’ve a pretty good record and please go check it. I say this as a pre-amble because all I see are crashes ahead.
Even the latest news of the Federal Reserve slowing its QT to a dribble is hardly good news even though the market likes it, at least tonight (19/3/25)
Late last year I was expecting the Nasdaq to go on a final bubble rally before it came off the rails, that was going to be a year or two into the future, but now I think the crash is here. It’s a big call and I hope I’m wrong, but to say it like it is, I’m out of the US market entirely and most of my other positions are closed with some pivot to defence, special situations and precious metals. I hate being in cash, but that is where I mainly am.
So we are now at a critical point in the Nasdaq.
So to give you some background, it a random world where your outlook is covered by impenetrable fog, just like the stock market tend to be, its 50/50 that you a half way along your journey, be it up or down. If you don’t believe me go argue with some math professors. If you give it some credence the following chart is 50/50.
The cause of his is up to you to decide but you might also consider that the driver of this correction is not going away. You don’t ave to believe it now, you just have to follow what comes next and if the course is followed you have a good guess at he destination.
I have found this simple analysis very profitable in the past and if you go looking at the previous charts, indecies or otherwise, you will see this premise show its face on the way up and on the way down, over and over again. It is caused by stochastic processes, which tend to be anywhere you care to look in a highly random market.
To turn the situation around, literally means something has to turn this situation around, so without that, we will be in a long term bear until further notice. That makes me unhappy because I’m no shorter and bear markets are extremely hard to make money in.
Like it or not geopolitics are now driving the markets. Why else have US military companies been falling for months and European ones been rising. Apparent sufficient people perceives a US/European defence rupture. As they say ‘Who knew??’
Maybe I need a tinfoil hat.
Anyway that leads to a profit opportunity, slim, fragile but worth looking out for.
Hedge funds are going to hedge, well at least quite a few of them, so if the market goes into further decline, longs are going to have to be closed and consequentially shorts also. Now the thing is, any stocks shorted against the Mag7, will pop up. The dogs will roar and the stars will fall. In the US this hedging is likely to be significantly of long term government bonds, so trading that is not necessarily a fat opportunity to make money for a private investor. However there are bound to be stocks in the US that will pop in a drop and they will be the short legs of hedges. Look out or them and if you fancy trading the storm without being short, that’s where to look.
In the UK that’s life insurers, in the US its good to keep an eye on stocks like Exxon, who are natural shorts for those hedge fund hotel residents riding the trillion dollar techs.
Keep an eye on big oil and obvious long term short candidates.
Now the Federal Reserve has decided to dramatically slow its QT and is calling a heighten risk of stagflation, that shouldn’t bebad news that’s good news, its bad news that’s bad news. At least for now, the liquidity drain that drags on the market has been significantly slowed and the Federal Reserve is showing it cares. However that is merely a reflection of how much strain the economy and the market is now under with the new levels of political instability in the world and that stress is not going away. I wish it would as I could get back to playing my favourite game of being long good companies with low valuations.
The Federal Reserve can only do so much however and what can go right?
Look out below.