Stock market warning
<p>The stock market will collapse, there is no doubt, like in 2000 the signs are everywhere.</p>
<p>The Fed has created an gigantic bubble in stocks, the question is, when will it pop? We are near the start of the next collapse.</p>
<p>You know this will happen when you see a mania, when optimism is extreme, when people think the market is a one way bet.</p>
<p>The only reason stock markets are strong is because so many people have been brainwashed by the Fed, the idea that stocks can only go up has created a mania. It is self fulfilling.</p>
<p>The same thing happened in 1929 and 2000, yet on each occasion the stock market collapsed.</p>
<p>If you are long stocks you need to get out before the bubble bursts. I can't say when it will burst, it could be now, in a month, or in six months time. In a bubble people are irrational so it is impossible to tell but it will happen.</p>
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<p><a href="https://www.bettertrader.co.uk/.a/6a0162ff9ddd58970d026bdebe954e200c-pi"><img alt="Cycle" border="0" src="https://www.bettertrader.co.uk/.a/6a0162ff9ddd58970d026bdebe954e200c-800wi" title="Cycle" /></a></p>
<p>We are now in the mania phase, this is accompanied by extreme optimism and delusion.</p>
<p>Key points:</p>
<p>Increased participation from retail investors. More and more retail investors are investing because they think it is easy to money. It is easy now because of the mania, but it won’t last, they don’t know that. Some are so convinced they will become millionaire that they borrow to invest, others quit their job because it is so easy to make money in stocks. Well, the last time I heard similar stories was in 2000, before the stock market bubble burst. What you have to remember is the public is always late to the party, by the time they get involved the smart money moves out. So when you see increased participation from retail investors you know the end is near.</p>
<p>Extreme bullish sentiment: when people think it is easy money sentiment is extremely bullish as it is today. This creates FOMO (fear of missing out) which is why during the mania phase the rally is steep with hardly any pullback.</p>
<p>A new paradigm: This is when people say "<em>this time is different</em>". That is what they said in 2000, technology was going to change the world and make us rich. The mania was driven by the belief that the world was changing because we were in the “new economy”. People rushed to buy tech stocks thinking they would become millionaire. But this rush created a bubble and tech stocks crashed in 2000. Today we have a similar situation, blockchain is the "new economy" and people use this new paradigm to encourage others to buy to blow a bigger bubble and to justify high valuations. But it is an illusion, stocks will crash again. Other indicators include:</p>
<p>Margin debt to GDP at all time high<br>Market Cap to GDP 30% higher than in 2000<br>The cyclically adjusted price/earnings multiple (CAPE) of the S&P 500 is higher than it was on the eve of the 1929 crash. <br>Technical indicators are overbought</p>
<p>It is time to become cautious and I can tell you what to do to prepare for the future. A crash will create new opportunities and remember, why buy today when stocks will be significantly cheaper in the future.</p>
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