Global financial markets were already hobbled by the original COVID-19 virus – struggling to regain their economic foundation after many months of the unprecedented central bank, government, and humanitarian efforts to move us towards recovery. Now, the Omicron strain of the COVID virus has potentially toppled the apple cart while global inflationary and economic concerns are peaking. What’s next?
Why Traders Need To Consider Future Risks
This recent article caught my attention as I caught up on today’s morning events (Source: Yahoo! Finance). It highlights the incredible inflationary trends occurring because of disrupted supply channels related to the original COVID-19 disruption. Could you imaging what would happen if a new virus strain prompted further lockdowns and labor/supply disruptions for another 12+ months – or longer?
The massive amounts of stimulus and money printing that has taken place over the last 4+ years by global central banks may be acting as an anchor for growth and starting to weigh down global markets. Easy money policies lead individuals and corporations to borrow more and more capital expecting growing returns from sales. What happens when we start to see a mild economic slowdown take place, possibly complicated by inflationary price trends and consumers that pull away from making big purchases?
That exact type of scenario is playing out in China right now, and it is relatively easy to see that excessive debt and lack of economic growth lead to a disastrous outcome (Source: Yahoo! News). When you add extreme inflation into that mix, the equation becomes even more volatile.
Why is the stock market falling again?
The answer is pretty clear I think. Traders and investors around the globe continue to fear the worst for the new Omnicron COVID strain, and for good reasons.
- They don’t see the current vaccines working on it – yet.
- Various countries are talking about lockdowns again.
- Unemployment could spike.
- Inflation could spike out of control if lockdowns happen.
- The stock market could collapse.
- Housing could collapse.
- Certain Global Central Banks & Governments Could Collapse.
- And many more…
- I will show you how to protect and grow your capital with a simple strategy.
Custom Index Show Price Weakness has Already started
This Weekly Smart Cash Index, which tracks global market trends more efficiently, shows a decidedly Bearish price trend has been in place since February/March 2021. On the right edge of the chart, the recent price weakness is about to break below the $177 level – breaking downwards and attempting to reach new price lows.
This downward pressure on global markets shows how the US markets are acting in an opposite trend (trending higher right now) while global markets have experienced an extended price decline over the past 8+ months. If the Omicron virus strain prompts new lockdowns and/or supply and labor disruptions, we may see a significant collapse in foreign markets over the next 6 to 12+ months. Possibly taking place while inflation spikes higher – leading to a bigger problem for economies struggling to recover.
This Weekly Custom Volatility Index highlights a very interesting divergence between price trending and the RSI trends. While the Volatility Index was pushing higher and higher over the past 6+ months, RSI shifted into a downtrend – suggesting the momentum of the US stock market uptrend was weakening dramatically.
Now, with Omicron here, the US markets could break downward – pushing the Custom Volatility Index back below 6.0 or 7.0 and possibly falling to extreme lows near 1.0 or 2.0 for an extended period.
Generally, there is no easy or quick way to make money/build wealth, especially if it happens to almost everyone at the same time, which we are all experiencing.
With equities and home values surging this past year, nearly everyone has seen their wealth/investments jump 50 – 100+% with very little effort. These types of gains are not normal. It’s an anomaly, a glitch in the system, or a short-term windfall because of an event, something has been rigged/manipulated for it to happen.
The wealth you have accumulated in the past year must be protected as if your life depends on it. I hate to burst everyone’s bubble, but if you feel it’s easy to make money with stocks and real estate and you do not think you need to protect it, then you may be in for a rude awakening. When bubbles burst and manipulation stops working, prices revert to the mean or worse very quickly. Everyone without a game plan/strategy is caught off guard.
My last index investing entry signal from June 2020 is up over 55% and keeps collecting dividends. This type of annual return is not normal for a simple investing strategy. Also, the shorter-term index trades I do continue to pull money out of the market with each new market cycle and are collecting dividends along the way as well.
I’m protecting my capital and those who follow me because eventually, one of these market corrections will turn into a crash, or very long bear market and wipe out everything you earned since the covid event in 2020, and possibly much more.
As much as I want and expect the market to keep rallying to new highs, you MUST have a game plan in case that does not happen. The number one rule that all successful traders and investors live by, is knowing where you will exit a position if things do not work out.
Do you know where and when you should move to cash,bonds, or gold if things start to get ugly?
If you are a passive investor and want to know when to move your retirement account out of stocks to avoid a bear market, I can help. This simple market cycle gauge uses technical analysis, momentum, and sentiment to know when major trends have reversed direction. This strategy will reduce portfolio volatility and can help you retire with an account 2-4x larger by avoiding bear markets and entering at a lower price.
If you are a more active investor or trader and want to profit from market rallies and be protected during more minor market corrections by moving your money from the stock index ETF into the Bond ETF when things become uncertain or get ugly, I share these TEP trading signals and positions as well.
This week, and possibly even TODAY, this market could trigger a position change that could save/make you a lot of money depending on how you are currently positioned.
If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio.
Have a great day!
Chief Market Strategist