President Dump Delivers BEAR MARKET - Stock Market Battles Between Order and Chaos
Stock-Markets / Stock Market 2025 Apr 07, 2025 - 04:44 AM GMTBy: Nadeem_Walayat
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CI18 Crash / Bear Market Indicator was Triggered on 9th March at 5850. that warned to expect MUCH lower prices even a panic event, which I interpreted as implying 10% to 12% correction i.e. 5520, on break of which 5400, and on break of that to target 5120, given where we were 5520 was on the cards and 5400 was possible which failed to hold and 5120 came bounced and broke to a low of 5074 all within days of the Agent Orange declaring economic war against friends and foes whilst with the MAGA sheep keep swallowing the propaganda Koolaid without understanding trade surpluses in the vassal states such as Europe, Japan and Canada are by design, i.e. the vassal states are meant to pay tribute to the Empire. transfer wealth and resources to the US. China was also meant to be a vassal state but instead increasingly has been viewed as a competing empire that seeks to displace the US hegemony. Unfortunately alls Trump has done is to play into China's hands where the US creates conflict China is seeking alliances, from where the US retreats China expands into this in a few short months the Trump Regime has crippled the US in it's posture vs it's primary rival CHINA, and now stands significantly weaker that barely a couple of months ago, hence we are witnessing flight of capital from the US into Europe, Japan anything but US dollar assets.
One such manifestation of the flight of capital is called the Yen Carry trade unwind. I can tell from the comments that folk don't understand what he carry trade is, basically institutions / investors / traders are borrowing Yen at low interest rates, converting into dollars to buy US assets the size of which ebbs and flows. Currently my best guesstimate is that the Yen carry trade is about $4 trillion, the unwinding of the carry trade is in response to rising Japanese bond yields so some of that $4 trillion of US assets (depending on changing Japanese rates) gets SOLD into Dollars that then gets converted into Yen to pay back the borrowed yen which results in a FALL in stock prices, FALL in the dollar, sends the Yen sharply higher. So as some mistakenly assume it's not a one day event rather a trend that is already in motion, the carry trade IS UNWINDING where there is a clear date in May when Japan is expected to raise interest rates that acts as culmination of the unwind, and accompanied with a capitulation moment / spike in volatility, what hastens the unwind? Trump tariffs uncertainty chaos and the prospects of Japanese rate hikes in response to rising inflation.
And it's not just the Yen Carry trade but it's across the whole spectrum of major currencies though to a much lesser extent i.e. Euro carry trade is about $500 billion, British Pound is roughly $250 billion as up until Trump lunacy the US had acted as a black hole sucking in capital in from across the world that is now being UNWOUND in ebbs and flows as we are witnessing with the huge sell off in US Stocks.
CI18 - Switch remains ON - It doesn't change anything, S&P 5074, down 17.4% from it's high so that 20% bear market is not far off (4916), which means the bear target of 4800 is now barely a stones throw away given waterfall selling underway.
How do I interpret this one man made disaster? it's closer to Covid then the 2022 bear market i.e. it has all the hallmarks of a swift but severe panic event that results in near just a swift rebound, the problem is what are the discounting triggers for such a rebound? QE? Fed rate cut? Japan canceling it's May rate hike? Is that going to be enough? a rally yes but what the market really needs is the tariffs to be reversed which given the Orange Ape does not appear likely. Still waterfall events tend to resolve in violent rallies as the shorts are squeezed.
However, HOWEVER, this may be a prelude to worse to come! How to translate from chaos to order to back to chaos i.e. I have NOT YET given up on a new all time high this year, even 6600 remains doable which looks like a mad target as was 4800 in my latest article as of 5850! it boils down to interpreting ORDER of the machine that is the US and it's various systems vs Trump Chaos, right now the Trump chaos rules supreme hence blind panic, technical's and all the studies be damned!
So what do I see?
I see a swift BEAR MARKET (current)
I see a swift BULL MARKET - New all time highs, how high and how far ??? It needs to get going first, we may only get a lower high i.e. B wave rally.
And THEN I SEE the REAL BEAR MARKET! Just when folk are breathing a huge sigh of relief everyone gets WACKED St. Valentine's Day Massacre style. More in my next article that I aim to post before following Mondays open (14th April) as I am away in Antalyia being warned that if I crash the quad bike I pay, what's one more crash! :)
What am I doing?
I've been lock and loading fresh limits in target stocks during Sunday. Though folk need to realise I don't feel pain, i.e. the sell off, yes I can see my portfolios down big from a couple of months ago but it's not bothering me as I imagined it would, instead I see limits being executed, yes with hindsight I would have bought less earlier but as I have been commenting I had been nudging my big buy orders lower over the past few weeks as i saw the Orange Ape and Deputy Fuhrer seek to kill the bull market. So I would prefer to see the market move further lower, deliver that 20%+ bear market capitulation event so that I can keep buying at deep deviations from the highs. I mean I either want very low prices, or very high prices, where in between is not of much use to me.
Folk can see my percent cash level in the spreadsheet and I often comment about it, I've always iterated that cash is the engine oil of a portfolio hence I always gravitate towards having at least 20% cash which since Trump I've wanted to increase towards 35%, but have not had the opp to do so, i.e. falling prices gets me adding.
So if folk have no cash on accounts then your portfolio has effectively seized up, where if that was me I would leave it frozen until it starts to thaw on higher prices. Good stocks eventually come good and there is a limit what one can do without hindsight so I carry on as normal buying target stocks as they deviate from their highs taking the metrics into account as I go along. if your already out of cash then learn the lesson and don't be in the same boat next time, leave your portfolio for when the market recovers to a point one can take PROFITS!
I aim to get the spreadsheet updated before Mondays open, link in most recent article -
Stocks Bull Market End Game Bear Start Strategy https://www.patreon.com/posts/stocks-bull-end-124716488
Your analyst seeing silver linings in the dark tariff chaos clouds.
Nadeem Walayat
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By Nadeem Walayat
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Nadeem Walayat has over 35 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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