Dow 2020 Crash Watch
This is now on the table. Let us review three prior Dow volatility shocks. But first, let us remind you of the Sabbatical Cycle.
Illustrated below is a chart of the seven-year cycle. Take 2015 and add on 7; which equals 2022, suggesting that if a bear market does occur, a low may be found in 2022. In 2015 we had a 12% sell off just prior to the 2016 US elections.
Back to main topic. The most volatile years in the Dow over the last 100 years are: 1929, 1937, and 1987. Currently, the Vix is above 35, and if this continues to stay high then the crash risk remains.
Fundamentals
The virus effect in the US is estimated to get worse, and with risk assets priced to perfection, a quick and violent adjustment is set to reset prices, or worse, begin a deep trend to lower prices.
Here is a list of risk-creating news items over the past two years:
- - Tariffs, trade war.
- - C19 Virus supply chain attack.
- - Central banks out of ammo (unless they change the rules: Fed to buy stocks).
- - Russia/Saudi oil price war (to attack US Shale).
Bubbles waiting for the pin:
- - World wide corporate debt.
- - World wide sovereign debt.
- - World wide housing market.
- - US student loan debt.
- - US shale debt (part of corporate debt).
- - Market leading stocks priced to perfection (Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Google (GOOGL), Facebook (FB)).
- - Passive investing via ETFs (including, stock, debt and volatility ETFs).
- - High frequency trading (Algo's work on the way up and down).
- - Central bank balance sheets.
- - Wall street financial engineering (CDOs, COCOs).
- - Zombie Banks (DB, HSBC).
Just to name a few.
Of course the need for cash will explode and contagion selling will occur. Please notice how gold is not acting like it did in the 2008 GFC crisis. Gold may escape contagion selling; and what does that tell you.
Changes in the world are the source of all market moves. To catch and ride the change, we believe a combination of Gann Angles, Cycles, Wyckoff and Ney logic is the best way to ride the change, after all these methods have been used successfully for 70+ years.
NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net