The long-term bubble set off by QE in the US, Europe and Japan been called the ‘bubble everything.’ Now however as the punch bowl is being taken away, it looks like we are in the ‘crash everywhere.’
2019 is going to be the year of market routs, at best it will be the year of bear drudgery.
Few are crying ‘crash’ but it is everywhere you look.
The US is going to ‘get it’ in.I wrote some while back that the US and German markets were twins and that the UK and France were similarly but differently welded together.
France and the UK will not escape this crash but Germany is showing the way.
The future of the US market is likely shown in the following chart.
QT or Reverse QE as I like to call it is the mother of this contraction and the tide of money is leaving the global periphery but it is fast drying up in the US core too. Germany, however strong its economy can not shrug off this tide and it is showing a trailer of the market to come in the US
Here is the Dow and Dax together.
The Dax is down 21% from its high.
That would be nasty in the US, but this is likely just the beginning of this slump not the final moments so a lot worse is to come for both the US and Germany.
The following chart shows the potential for a Dotcom Crash 2
Many will look back at the trillion dollar valuations of Amazon and Apple and point to them as the market top, but right now this bear move is early so there is still time for the bearish to cover their positions and sit out the future.
I’m 85% in cash now and I will guarantee you I will not be calling the end of the world is the market halves, I will be buying.
We all know that to sell at the top and buy at the bottom is the way to invest and trade but few can leave the party early or be one of the first to arrive. When the market is high people feel elated and look forwards to even more bounty to come, they then ride the crash to the floor, coining every lost paper profit as real, grimly holding on for a miracle, then they sell at the bottom sure the world like their portfolio is finished. They then sit on the side-lines groaning about the tragedy of it all and watch the bitter show of a long slow recovery. This is why most people do not last more than a single boom bust cycle.
So the call for investors is simple, is it going to fall a lot or stabilise at these levels. You can miss out on the fat zone between these outcomes as it is not going to happen.
I believe we are in for a crash or grinding bear, so as the current correction has unfolded I first sold my unloved shares, the as the market confirmed my theories I sold my liked stocks and now finally I am unloading my conviction shares. All the time I’m holding back from buying any new candidates.
So unless you are a perma-bear or a ‘buy and hold’ it’s a good idea to at least do some housework on your holdings.
The rule should always be, if you wouldn’t buy the stock today, why are you holding it.
It’s a very tough attitude but in tough times it suddenly seems less onerous.
Good luck to all investors and traders and remember if you don’t know which direction the markets heading you shouldn’t be in it.