The Bull Market Is Lying to You — Here’s What the Charts Are Really Saying
The following is an excerpt from a private clients market update that went out last week…
I’ve been increasingly concerned about stocks for weeks now. In the last week I’ve gone from concerned to outright worried.
Let me be blunt, I now believe the odds of a 10% correction hitting stocks is QUITE HIGH. And if things really come unhinged, we could see a 20%-25% bear market unfold by this summer.
I am not writing this to be dramatic. I’ve been doing this for 10 years. And the current market structure is flashing numerous warning signs that everyone seems to be ignoring.
As I write this, the dominant narrative is that the bull market is doing great because overall breadth is soaring. Because of this, strategists and gurus are claiming that the only real concern in the markets today regards Tech. The rest of the market is doing great.
This is a misguided view. Tech IS the market. Tech is also the new economy. The stocks that are rallying today are in the old economy. Put another way, these are NOT the stocks you want to see exploding higher.
Let me give you some specifics…
Wal-Mart (WMT), which is a defensive stock, is trading like a growth stock, up 30% since December. It now trades at a forward P/E of 44. Wal-mart!
Exxon Mobil (XOM) is up 35% over the same period. It is now trading at 20 times forward earnings (a five-year high). The chart is ridiculous for an old economy, energy giant.
Put simply, the WRONG companies are holding up the stock market. When Consumer Staples is the TOP performing sector in the market, the overall market is VERY sick.
Which brings us to my #1 concern: the gap between the NASDAQ (big tech) and the rest of the market. I’ve shown this chart before: it is a chart of the MAG-7 ETF (MAGS) relative to the broader market (the S&P 500). My question every time I’ve shown this has been…
Are the Mag-7 about to rip higher and rejoin the bull market… or is the overall market going to drop down to the MAG-7?
I now believe the rest of the market is about to play catch up to the downside. And ultimately, I believe the S&P 500 will drop ~10%, bringing it to the 6,300s.
In terms of preparing for a market collapse, I rely on a proprietary indicator that has triggered before every major meltdown in the last 50 years. This signal caught the 1987 crash, the Tech Crash, the Great Financial Crisis and more.
We detail this trigger, how it works, and what it’s saying about the markets today in How to Predict a Crash.
Normally we’d sell this report for $499, but in light of its recent warning, we’re making 99 copies available to the investing public.
To pick up one of the last copies…
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research