04 Mar New Bull Market Or Dead Cat Bounce
Since December 2018, the American stock markets have made a miraculous recovery and the world markets followed the trend. All of a sudden the pain and horror of last December is forgotten ……. dead and buried!
Are we seeing a new bull market or are we seeing a Dead Cat Bounce ?
If we dig a little bit deeper we quickly discover some very interesting financial facts to help us clear our minds.
- A recent article by Daniel Lacalle explains why the stock markets shot up so severely over the last two months. His chart below explains.
The two main reasons for this huge stock market rally is that the economic data was not as bad as was expected. The main reason however was that the Federal Reserve made it known that they were taking a softer stand on the number of rate hikes while the European Central Bank (ECB) announced that they would be much more “accommodating” and the Bank Of China introduced the biggest liquidity injection in 5 years. All this newly created paper money is pushing this huge rally going on right now! The global money supply is the highest it has been in the last two years.
- The future earnings per share chart below actually tells us a much more vivid tale of what is about to happen on the world stock markets. This chart is from Zero Hedge who does great work in this field.
- One can clearly see the huge disconnect between the S&P500 index price and the future earnings prediction. This is very bad news for investors and they will start running away from stocks soon.
- The final vital piece of evidence that we will soon see a huge stock market crash comes from technical analysis which I have been using for 30 years to trade the stock markets. It is one of the most classic and reliable indicators that something serious is about to happen and is called a double top. You can read more about it here! The Elliot wave theory are also starting to give major selling signals for the start of a prolonged bear market. See the explanation here!
In conclusion I would like to stress that this rally we are seeing now, will only make the coming crash more severe. You will be wise to protect your financial future by stocking up on some physical gold and silver before the markets head down brutally fast!