Up until today I’d tell you that the markets have actually been playing off the Ukraine news overall. They mostly have been trading on the charts. Up until today we saw three attempts in the past week to buy off of the January lows, the first time being overnight Sunday in the futures markets and yesterday the last. Now those attempts have failed as yesterday the market sold off hard and the Nasdaq closed below that low and now this morning all of the averages are gapping below them as Russia has began a war against Ukraine.
A break of the lows was going to happen at some point even without today’s news, because we’re in a bear market. The warning signs have been flashing now for months and people have had months to prepare for this breakdown now. When I say that I want to remind you that one of the biggest mistakes I ever made in the market was not getting ahead of the March 2020 crash. You see, I saw news about the new covid virus appearing in China about two months before the shutdowns and global panic began, but I ignored it.
I even got two emails from people on my email list (there are a lot of smart people on it) telling me what was coming, but I didn’t want to believe it. It seemed fantastic and I didn’t take the time to ask myself if they were right or not.
And I ended up getting out after things peaked out in the markets, losing about 10% of my money by selling just as the market technically broke.
If I had taken what people were warning me seriously I could have not only not lost money, but perhaps shorted some stocks to make some money.
The key is there are moments in the markets when you have to pay close attention and big market moves often have forewarning.
This one now we are in had plenty of it – and the lesson I took from my 2020 mistake was try not to ever miss out on a major market turn again.
It’s easy to get distracted by meaningless day to day market action or get complacent. You need to step aside every few months and ask yourself is there any major events that could turn into big ones (this Ukraine crisis started in December and there was no reason to think any real negotiation would happen with the US and Russia that would prevent the crisis from growing) or giant slow motion market or economic changes starting?
The thing is the declines in stocks did not begin last week, but month ago when the internals of the stock market began to turn down. The ARKK ETF fell over 30% way before Ukraine became a national headline in the United States. Inflation began last year, not last week, and the corporate bonds have been falling since Thanksgiving. Remember how IWM broke down in December below it’s 200-day moving average? Market leaders Netflix and FB crashed before last week too. The point is the Ukraine news IS NOT creating a huge trend change in the market, that trend change began slowly last year. Ukraine is simply accelerating moves that were going to happen anyway.
I talked about the two key market pivot points (one that you can buy and make money in going up now) in my post Monday. And in the video I did with Matt Frailey posted Tuesday morning he went through a lot of key market charts – the first one if you grasp you can use as THE BEST WAY TO MAKE MONEY NOW for the next few years despite the declines in the stock market.
The major US stock market averages are now transitioning into a full blown stage four bear market. This happens when a market’s 200-day moving average acts as key resistance.
That is now starting.
Despite all of this, people have been trying to buy the January low as a bottom. Despite yesterday’s market dump almost all of the order flow on Fidelity went on the buy side. Take a look at this screen shot.
Despite the market falling to its January lows yesterday – and the Nasdaq 100 closing below it – on Fidelity traders were diving into buying trying to game a bottom. Look at TSLA at the top. And the only thing with more sell orders than buy orders on the list is the SQQQ short ETF.
On the list are a lot of garbage stocks too.
This is not how market bottoms are made.
So, there are many people who were apparently doubling down yesterday in desperation or just thinking it must be good, not looking at the charts or the trends or anything – and buying.
They are now trapped and some are likely to get margin calls if the market doesn’t rally off of the gap down opening the whole day.
Hopefully we’ll get another short-term bottom like we did in January soon.
There are things happening now though that have been bearish leading up to this moment.
One is that the bond market is falling. When the market tried to rally this month bonds barely went up at all and resumed making new lows before yesterday’s stock market action, as you can see from the LQD ETF.
LQD falling like this represents higher yields for corporate bonds. That means tightening credit conditions and rising financing costs.
THAT IS NOT BULLISH FOR STOCKS.
The Nasdaq is now in a very dangerous spot.
This looks like it is starting another leg down.
And people were going nuts judging by Fidelity trying to buy it?
What they need to be doing is focusing on what is going up – commodities and now gold and silver, which the CEF ETF owns both of.
I own a core position in CEF.
We are witnessing the start of massive secular cycle change in the financial markets. It’s like a mishmash combo of the 2000 top and the 1970’s inflation/stagflation era. I believe money can be made by investing in the things that did well in the 1970’s and recognizing that there is likely to be big market volatility and busting bubble stocks and sectors like as what happened when the market topped in 2000.
The thing is most of the small traders in the markets now just began trading in the past two years – so they have no memory of these periods, and most don’t have much comprehension of them either. They need to study up on those time periods fast.
People on margin in these markets playing the popular Robinhood and Fidelity buys are going to need to put on crash helmets now, just like those caught in the internet bubble bust in the Spring of 2000 did.
Cathie Wood + ARKK = JANUS FUND.
Again please check out the post I wrote Monday about the key pivot points in the markets. You can find it here.
Gold is well above $1900 this morning and silver is up big too.
-Mike
