06 Jul Beware Of The Current Stock Market Dead Cat Bounce
The S&P 500 index closed Friday on a high of 3152. This is a 45% rally which is fantastic in any language. As a market analyst and trader my mind boggles as to this wildly optimistic situation in the middle of the worst pandemic the world has seen since the black plaque early in the 19 th century. As a seasoned trader of more than 30 years, I have seen my fair share of ups and downs in stock markets. Today’s market reminds me of many previous market crashes where we experienced the soul crushing dead cat bounce occurrence. I say soul crushing because that is exactly what a dead cat bounce does to you. After the trauma of the first crash, investors wipe the sweat from their brows when the market shows a fantastic bounce, …….. why does this sound so familiar ……… oh wait? It is happening right now! One must also keep in mind that the big players had to break out all their piggy bank savings for a rainy day to support the markets. The next thing we know the market starts to fall again to test the previous low, which we technicians call a double bottom as can be seen on the graph below. This is where the soul crushing part comes in. Bear in mind that the piggy banks are now empty so the support to turn the market around is now not so easy to do.
In a previous article I explained why I believe that we are seeing a bogus bounce in the stock market right now. Some new evidence are starting to surface and we should take a good hard look at it.
Here are a few disturbing fact of the world today.
- The biggest problem in the world today is excessive debt at all levels of the economy, sovereign, corporate, financial and personal. There are only two ways these debts can get settled. The first is a sudden collapse of the financial systems like banks and the huge derivative bubble. This scenario will dump the world into a sudden and most severe depression where everything will reset at an enormous cost to the world and its citizens. The second and more likely course will be a slow leaking of the values of stocks, bonds, property and cash investments which will take many years to complete.
- Central banks ( CB ) which use interest rates to control everything have no more room to maneuver as rates are nearly zero already. Printing more money will only worsen the situation, yet it is being used everyday to prop up the markets.
- Unemployment in the world is in the 100’s of millions and many jobs will never come back as economies are finding new ways to defeat Covid-19.
- More than 46 million Americans ( about 30% of the work force ) have filed for unemployment benefits since Covid started.
- International Labour Organizations estimate that almost 50% of the world’s workforce could lose their jobs due to the pandemic. If people do not work, they do not buy! Can you imagine the impact on business if halve the word’s buyers stop buying!
- 1000’s of businesses big and small are closing down recording losses in the trillion’s of dollars.
- The travel industry is on the verge of total collapse. The cruise business, Carnival just announced losses of $4.4 billion and have sold 6 of their cruise ships. Global tourism is a $5T market with indirect support businesses making a $9.2T contribution to the world’s GDP. The two together represents 11% of the world’s GDP.
- The Swiss watch industry lost 81% of its exports in April and 68% in May.
- It is estimated that in the USA more than a 100 million loans have not been paid.
- The global printing of money since covid started is more than $18T. This is 22% of global GDP.
- The world’s 6 biggest money printers are: US $6.5T, EU $3T, Japan $2.1T, China $1.2T, Italy $1.1T, France $ 0.8T.
- The biggest implosion will be in the bond and credit markets followed closely by stocks and property markets when the $2 quadrillion derivative bubble go bust. The older generation will remember that at the end of the second world war you used a wheelbarrow to take your worthless paper money to the baker to buy a bread. Zimbabwe today is a prime example of what happens when paper money becomes worthless. These examples are the direct result of excessive money printing.
The American dollar as we know it is heading for a huge collapse not too far from now. China is fast changing the world financial system to become the global currency of choice. You can watch this very insightful video here
The good news is that there is an easy solution to this coming catastrophe. Buy physical gold and silver bullion. When the financial systems collapse, the age old trading tradition of using gold and silver pieces will save us from going hungry. Can you imagine where the prices of bullion will go to when the whole world starts to chase gold and silver? Gold and silver cannot be printed or digitized. It does not rust and cannot be destroyed. There is only so much gold and silver in the world and no more. Before Covid-19 I warned that the supply side will become a problem. Right now many bullion dealers are struggling to keep up with the demand for bullion, especially silver. Remember that when the world gets scary you want Wealth You Can Touch. The forecast for gold from the current $1774 is $2365 at the end of 2020 and for end 2021 it is $2885.
When gold and silver prices start to run, they run hard!
Do not get left behind!
Call ( 072 636 1022 ) or email today to place your orders.