You’ve Been Watching the Bellwethers, I Hope

Shah Gilani Sep 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

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