#trends 0014 : Temperature Check

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Hi All,

Back in April I wrote about “The Market Bubble” in #trends issue 0012. I discussed how I believe we are due for a market correction soon, but the question is…when? If the answer were that easy, I’d be very wealthy. The best I can do is to use indicators to track the possibility of when things may come crumbling down. In the April issue, I highlighted 5 indicators. Let’s see how we are doing so far.

The S&P 500 Index

Analysts still believe we will have a parabolic melt-up for the S&P with a market top of around $4700. Some have actually increased the top to $5000. So basically if we get to the $4700 - $5000 range, you may want to have an exit plan. So far, we have not hit this indicator yet since the S&P is still hovering in the $4200 range. Ironically, the $4200 range was my own personal indicator to put a pause on the market and liquidate what I can. You may be wondering how I came up with this number. There is no magic behind it, its just a number I chose based on taking roughly 10% off of where Analysts were predicting. My theory is to always be 2 steps ahead because if Analysts were telling you the truth about all their exact moves, how would they be able to exit themselves before we do.

Bitcoin 🟧

My philosophy here is that whenever the market correction happens, nothing will be safe including Bitcoin. There will be a panic sell. So far we have had a few drops in Bitcoin, but nothing to panic about. If Bitcoin hits $25K or below, that will be the time to be worried. For this indicator, I will give it an orange box because Bitcoin has definitely pulled back from the over $60K high it was at, but hasn’t hit the anticipated low yet.

Stimulus

I mentioned that once the Stimulus payments stop, things may begin to slow down. So far I don’t know of any more stimulus checks coming, so I will give this indicator a green check mark, as the first one I think we have hit. The only saving grace here is that the 2021 tax deadline was extended from April to May, so this might push things out by a month, so start keeping a close eye on the market in the July/Aug timeframe.

Rent/Mortgage Forbearance

This is a tough one, because different states and lenders are doing different things. Some are extending till end of June, some till end of July and some perhaps till 2022. Therefore, it will be difficult to predict how much weight this indicator will have on the overall market movement. Will keep monitoring as we go.

Hedge Funds going bust

In the April issue, I wrote:

Last week we heard about the bust of the Archegos Hedge Fund which caused the massive sell-off in the market, hence why everything was red. Do you really think Archegos is the only hedge fund that was over-leveraged. My answer would be heck NO.

This week, with the rise of AMC short squeeze, Short Sellers lost $1.2 Billion. As you can see, this is a recipe for disaster and at some point will not end well as this continues. I will give this indicator a green check mark, since we’ve also hit this a few times.


🗺 One More Thing…

I will continue to cover traditional market material on here, but overtime plan to add more crypto related material. I truly believe crypto is the future and all roads will lead there at some point.


🔗 Links

  1. Bank of America and Chase could restart mortgage foreclosures as early as July, but Wells Fargo is waiting until 2022 - CNBC

  2. How to prepare for the end of mortgage payment forbearance - Fox Business

  3. Oregon reinstates moratorium on foreclosures through at least June 30 - The Oregonian

  4. AMC short sellers dealt massive $1.2 billion blow after weeklong stock rally - CNBC


As always, this is not financial advice. I use this as a way to journal my thoughts and share with anyone else interested enough to want to read this, as well as for educational purposes only.