The market has been so overbought for so long, that most investors were ignoring the clear warning signs that we were in trouble.
For instance…
The Russell 2000 had diverged sharply from the S&P 500:
The same goes for high yield credit:
There was no shortage of macro or geopolitical problems either.
Collectively, Central banks had tapered off their QE purchases by 66%. With Central Banks serving as the largest props for the market over the last five years, this was a massive headwind for stocks. The Russian/Ukraine conflict continued, as did the Israel/Hamas conflict, Abenomics was failing in Japan, and more.
Also, there was plenty of other issues to signify that the market was primed for a sell-off. Margin debt (money borrowed to buy stocks) was at a new record high. Bullishness was almost off the charts. And complacency, as measured by the VIX was the highest on record.
In short, the market was primed for a collapse. The question now is whether it’s just a correction or the start of something larger.
From a historical perspective, the market sees the most crisis in September or October.
This pattern (March mini Crisis, September-October BIG Crisis) has occurred in 1907, 1929, 1987, 2000, 2008, and possibly now today.
So the odds favor the market staging a brief correction now, with a larger crisis or more coming later this year.
Banking crises since 1970 by month.
Source: International Business Times.
Be prepared.
This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html [9].
This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.
Best Regards
Phoenix Capital Research