Update on the market crash
[22:14] Duursma, Yuri.
summary of the potential market crash 2021-2022 analysis + why
•Short↘️🔻(waiting for the right time)
written on: 20:26 Thursday, October 28, 2021 (updated on Wednesday November 10th)
Central European Time (CET)
S&P 500 Index (and the entire market with it)
We broke out of a rising wedge a couple of
weeks ago. On the 3rd of November, we broke back into the wedge. 2 days later on the 5th, we hit the top of the wedge, following with a rejection to the downside. so we are probably heading towards the bottom of the wedge. The rising wedge closes on $4880. And since there is an extremely high probability that a wedge breaks out towards the downside, the price will drop to arround $4150. However, I think that this event will cause the markets to panic because there are a lot of other factors that are causing problems in the markets.
•Almost every
indicator suggests that we are overvalued in the long term.
94% correlation between the Nasdaq 100 in the 15 years to today, and the 15 years to 2000. The S&P500 shows a 95% correlation. We all know what happened during 2000s, the markets collapsed.
shiller PE ratio is at 40.14 on the day of writing this. The mean is at 16.88 and the median is at 15.86.
40.14/16.88*100≈ 238%
238-100= 138%
This means that we are 138% overvalued.
•The warren buffet indicator is telling us that we are strongly overvalued. The indicator sits at 218%. The exponential trendline
suggests that a Market Value to
GDP ratio of 120% to be
fairly valued.
•long term trendline warren buffet indicator:
We are 71% higher then the long-term trend line.
•We printed a ton of money during the
COVID-19 period. When we had the 2020
march crash, the stock market recovered
insanely fast, even when the economy was
falling. The recovery happened because we
printed so much money to support the
company's (not because the businesses were
performing great). -->
•The markets are not based on fundamentals anymore: 1 million+ people dead due to covid? No problem, the market goes up by 30%.
Millions of people getting unemployed in the
US and the rest of the world? Not a problem,
the market goes up by another 30%. Businesses declaring bankruptcy? It didn't matter. we just kept on going up. Almost
every business was experiencing massive
losses while their stock price was
skyrocketing.
•The inflation of the USD is at its highest point since the 90s (also higher then in 2008) (5.4% at the moment). And normally the inflation grows slowly, but this year in particular the inflation has grown with a rapid rate.
•evergrande is already starting to miss their
payments. They have missed 3 payments so far. The rule is that you get a 30 day period to pay the bills of the missed coupons, when you don't pay back the bills within 30 days, a company defaults. When evergrande defaults, the everything bubble could definitely burst.A gigantic flash sell will happen when Evergrande defaults that can have great consequences for all economy's. But wait, its not only evergrande. its almost every Chinese property company that has massive amounts of debt. No one is talking about that. Debt *always* has to be payed back.
•Evergrande still has to pay 305 billion USD.
They haven't even paid of 1% of their debt.
So who are the biggest bagholders of the
305B in bad bonds? -->
There are several American and Canadian
banks that Evergrande ows money to:
First we've got the Royale Bank of Canada
which has
46B in evergrande bonds with a
market cap of 144B.
If you were wondering why there was that
weird after hours - the stock dropped 64%
during AH in one day, but then they fixed the
"glitch" and the price went back up.
RBC looked worthless and this was just the
real view of the bank's financial state when
the bonds hit zero.
•A lot of people think that China will help evergrande but most of the bagholders are in the US or Canada so why would China help them?
•canadian tv reminding people that bank
deposits are ensured. (The Royale Bank of Canada made this advertisement as well).
•billionaire investors have a lot of cash on
their hands.
•Michael Burry and a ton of other famous investors predict that the markets will collapse. Warren Buffett has stopped buying new shares.
•palantir warns people of a black swan event.
•energy crisis in China and Europe. A lot of factory's in China are shutting down or slowing down because they have no power.
•reverse repo has never been this high. $1.377,197 billion usd (that is more then a trillion!!!). The Fed's reverse repo facility allows big institutions - mostly big banks and money-market mutual funds - to buy securities from the Fed with an agreement to sell them back to the central bank for a specified price at a specific time.
•fibonacci extension tells us that $4939.75 could be the end.
•historic records amount of margin:
When everyone is using a lot of margin in the markets, things can change very quickly for the worse, because their positions can get liquidated. If people with leveraged long-positions starts to get liquidated, more people start to get liquidated since the price has gone down even more. etc. etc. etc. (until the market has fully crashed). Not only that, retail investors are going to panic sell in such an event. the only thing that needs to happen for a trend reversal is a bad event.
•Eliotte waves suggest that a big crash is
going to happen. We are in wave 5 in the long term chart from 2008 until now. so the next wave will be a market correction.
•October 29th could be really bad. Its the 28th at the time of writing this (the 29th in China) and evergrande still hasn't payed its coupons from 29 september. Which means that they could be defaulting very soon. they still owe 304 billion usd.
*update* they defaulted 2 hours ago on November 10th 2021
(they payed the 118 million that had to pay on the 29th, 10 minutes before they were going to default). they sold 2 private jets. On march 23 they have to pay back 2.1B usd. If they were struggling with 118M, how are they going to pay 2.1B? which means that they can delay the payment to the 23th of april before defaulting.
We can easily go down 35-50% to big support
levels but I don't think these support levels are going to hold a crash like this.This crash could be a very big one. 80% or more is not even unrealistic at this point. We messed up so now its time to pay for our mistakes...
Conclusion: the TA looks bad and so does
everything going on in the world right now. If this
ends up happening it will be a fantastic
buying opportunity. The S&p500 could go 10%
higher to the 5000s, but a crash is
inevitable. If it doesn't happen this year, then it
will probably happen in the next 2 years. Its a ticking time bomb. Its just a matter of time when all of this comes together and It *could* happen very, very soon.
Do you really want to risk a 10-20% return when
the market could fall 50% or more? You can
cash out now and buy back 2x the amount of
the shares after the crash. And get 2.5x the
amount of shares that you could buy now.
summary of the potential market crash 2021-2022 analysis + why
•Short↘️🔻(waiting for the right time)
written on: 20:26 Thursday, October 28, 2021 (updated on Wednesday November 10th)
Central European Time (CET)
S&P 500 Index (and the entire market with it)
We broke out of a rising wedge a couple of
weeks ago. On the 3rd of November, we broke back into the wedge. 2 days later on the 5th, we hit the top of the wedge, following with a rejection to the downside. so we are probably heading towards the bottom of the wedge. The rising wedge closes on $4880. And since there is an extremely high probability that a wedge breaks out towards the downside, the price will drop to arround $4150. However, I think that this event will cause the markets to panic because there are a lot of other factors that are causing problems in the markets.
•Almost every
indicator suggests that we are overvalued in the long term.
94% correlation between the Nasdaq 100 in the 15 years to today, and the 15 years to 2000. The S&P500 shows a 95% correlation. We all know what happened during 2000s, the markets collapsed.
shiller PE ratio is at 40.14 on the day of writing this. The mean is at 16.88 and the median is at 15.86.
40.14/16.88*100≈ 238%
238-100= 138%
This means that we are 138% overvalued.
•The warren buffet indicator is telling us that we are strongly overvalued. The indicator sits at 218%. The exponential trendline
suggests that a Market Value to
GDP ratio of 120% to be
fairly valued.
•long term trendline warren buffet indicator:
We are 71% higher then the long-term trend line.
•We printed a ton of money during the
COVID-19 period. When we had the 2020
march crash, the stock market recovered
insanely fast, even when the economy was
falling. The recovery happened because we
printed so much money to support the
company's (not because the businesses were
performing great). -->
•The markets are not based on fundamentals anymore: 1 million+ people dead due to covid? No problem, the market goes up by 30%.
Millions of people getting unemployed in the
US and the rest of the world? Not a problem,
the market goes up by another 30%. Businesses declaring bankruptcy? It didn't matter. we just kept on going up. Almost
every business was experiencing massive
losses while their stock price was
skyrocketing.
•The inflation of the USD is at its highest point since the 90s (also higher then in 2008) (5.4% at the moment). And normally the inflation grows slowly, but this year in particular the inflation has grown with a rapid rate.
•evergrande is already starting to miss their
payments. They have missed 3 payments so far. The rule is that you get a 30 day period to pay the bills of the missed coupons, when you don't pay back the bills within 30 days, a company defaults. When evergrande defaults, the everything bubble could definitely burst.A gigantic flash sell will happen when Evergrande defaults that can have great consequences for all economy's. But wait, its not only evergrande. its almost every Chinese property company that has massive amounts of debt. No one is talking about that. Debt *always* has to be payed back.
•Evergrande still has to pay 305 billion USD.
They haven't even paid of 1% of their debt.
So who are the biggest bagholders of the
305B in bad bonds? -->
There are several American and Canadian
banks that Evergrande ows money to:
First we've got the Royale Bank of Canada
which has
46B in evergrande bonds with amarket cap of 144B.
If you were wondering why there was that
weird after hours - the stock dropped 64%
during AH in one day, but then they fixed the
"glitch" and the price went back up.
RBC looked worthless and this was just the
real view of the bank's financial state when
the bonds hit zero.
•A lot of people think that China will help evergrande but most of the bagholders are in the US or Canada so why would China help them?
•canadian tv reminding people that bank
deposits are ensured. (The Royale Bank of Canada made this advertisement as well).
•billionaire investors have a lot of cash on
their hands.
•Michael Burry and a ton of other famous investors predict that the markets will collapse. Warren Buffett has stopped buying new shares.
•palantir warns people of a black swan event.
•energy crisis in China and Europe. A lot of factory's in China are shutting down or slowing down because they have no power.
•reverse repo has never been this high. $1.377,197 billion usd (that is more then a trillion!!!). The Fed's reverse repo facility allows big institutions - mostly big banks and money-market mutual funds - to buy securities from the Fed with an agreement to sell them back to the central bank for a specified price at a specific time.
•fibonacci extension tells us that $4939.75 could be the end.
•historic records amount of margin:
When everyone is using a lot of margin in the markets, things can change very quickly for the worse, because their positions can get liquidated. If people with leveraged long-positions starts to get liquidated, more people start to get liquidated since the price has gone down even more. etc. etc. etc. (until the market has fully crashed). Not only that, retail investors are going to panic sell in such an event. the only thing that needs to happen for a trend reversal is a bad event.
•Eliotte waves suggest that a big crash is
going to happen. We are in wave 5 in the long term chart from 2008 until now. so the next wave will be a market correction.
•October 29th could be really bad. Its the 28th at the time of writing this (the 29th in China) and evergrande still hasn't payed its coupons from 29 september. Which means that they could be defaulting very soon. they still owe 304 billion usd.
*update* they defaulted 2 hours ago on November 10th 2021
(they payed the 118 million that had to pay on the 29th, 10 minutes before they were going to default). they sold 2 private jets. On march 23 they have to pay back 2.1B usd. If they were struggling with 118M, how are they going to pay 2.1B? which means that they can delay the payment to the 23th of april before defaulting.
We can easily go down 35-50% to big support
levels but I don't think these support levels are going to hold a crash like this.This crash could be a very big one. 80% or more is not even unrealistic at this point. We messed up so now its time to pay for our mistakes...
Conclusion: the TA looks bad and so does
everything going on in the world right now. If this
ends up happening it will be a fantastic
buying opportunity. The S&p500 could go 10%
higher to the 5000s, but a crash is
inevitable. If it doesn't happen this year, then it
will probably happen in the next 2 years. Its a ticking time bomb. Its just a matter of time when all of this comes together and It *could* happen very, very soon.
Do you really want to risk a 10-20% return when
the market could fall 50% or more? You can
cash out now and buy back 2x the amount of
the shares after the crash. And get 2.5x the
amount of shares that you could buy now.
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