You’ve Been Watching the Bellwethers, I Hope

|September 21, 2020

Today shouldn’t be any kind of surprise to you.

In fact, I know you saw this selloff coming because you had a roadmap with every signpost and mile marker redlined and highlighted with flashing “bellwether” levels to guide you.

You have been paying attention to your Capital Wave Forecast, haven’t you?

We’ve got more to go on the downside, so don’t be in any rush to buy this dip.

Last week there were scary undercurrents right below what looked like a calm exterior.

The Dow Jones Industrials off a mere 8.42 points at the end of the week, or 0.03% didn’t signal anything. Nor did the S&P off .62%, or the Nasdaq Composite off a mild .56% on the week.

But that calm hid a lot of churning, especially on Friday when volume soared as triple-witching trading revealed how investors were unwinding, rolling over, and repositioning themselves, some to the upside, but decidedly more leaning towards the downside.

Volatility, as measured by the VIX, fell early in the week, but picked up on Thursday when the Nasdaq Composite started giving back some of its gains. The warning I picked up on was the VIX falling when stocks started slipping the week before. It should have been rising but the drop happened on account of early unwinding of bearish positions ahead of triple-witching Friday, not bullish bets.

Bullish speculators were fooled.

They were fooled on the hype surrounding SNOW’s IPO too. Warren Buffett, who never buys IPOs, was allocated some SNOW, which blindly bullish idiots used to blow smoke up other investors skirts about its potential.

To me SNOW’s IPO trading frenzy signals the top of the market. At one point on its opening day, at $319 a share, the company’s valuation was $88 billion. Note to self, SNOW loses money, and in their SEC filed S1, they identified their total addressable market at only $81 billion.

The valuation speculators were giving SNOW was a flashing “irrational exuberance” sign, to me.

Of course, I’ve been warning you about irrational exuberance, we’re there; we’ve been there for more than a week now.

Things could get a lot worse before we get to legitimate buy-the-dip levels since we’ve broken most of the support levels on the bellwethers I tallied for.

Be careful out there.

Until then,

Shah

Shah Gilani
Shah Gilani

Shah Gilani is the Chief Investment Strategist of Manward Press. Shah is a sought-after market commentator… a former hedge fund manager… and a veteran of the Chicago Board of Options Exchange. He ran the futures and options division at the largest retail bank in Britain… and called the implosion of U.S. financial markets (AND the mega bull run that followed). Now at the helm of Manward, Shah is focused tightly on one goal: To do his part to make subscribers wealthier, happier and more free.

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It’s also what investors and markets are singing and dancing to right now, particularly the lyrics: “More, more, more / How do you like it, how do you like it?”

And as former Citigroup Inc. (NYSE:C) CEO Chuck Prince told the Financial Times in July 2007, long after the disco era passed and right before the financial crisis, “As long as the music is playing, you’ve got to get up and dance.”

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Don’t get me wrong – just because I’ve started to write about how crazy the market’s become, how it’s like déjà vu all over again, doesn’t mean I’m not bullish.

Because I am – bullish, that is.

Because, you know, it’s all good until it isn’t.

Because, “as long as the music is playing, you’ve got to get up and dance.” That’s what Chuck Prince, Citigroup’s chief executive in July 2007, told the Financial Times. The party would end at some point, but there was so much liquidity it wouldn’t be the U.S. subprime mortgage market stopping the music.

It took another 15 months for Prince’s preamble prediction which was, “When the music stops, in terms of liquidity, things will be complicated,” to come true, at least that part. The part about subprime mortgages not being the cause was just a little off. Just a little.

Does that mean we have another 15 months? Maybe.

The Dow was up 723 points last week, or 2.6%. It’s now 3.2% from its all-time highs of last February. The S&P 500 notched another all-time high last week, ending the week up 3.3%. And the Nasdaq Composite hit a record high, ending the week up 3.4%.

Since the March 23, 2020 lows, in only five months, the Dow is up 54.11%, the S&P 500 is up 56.78%, and the Nasdaq Composite, wait for it…is up 70.47%

But, it’s all good… until it isn’t.

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Ever wish for an “endless summer?”

Of course, you have.

Ever wish for an endless stock market rally?

Of course, you have.

Well, at least one of your wishes has come true.

Now here we are again, facing the end of summer and wondering how many more days, weeks, months, quarters, years, decades the market’s going keep on rallying.

I’ll save you the wondering, the answer is the market’s going to keep on rallying. Until that is, one, or two, or three things happen, either by themselves, but more likely, in conjunction with one another.

Here’s what they are.

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