The Bear Market awakens...

Nov 19, 2018 100 Comments

Update: while I do believe this is the start of a bear market. Tech has wiped off 1 Trillion in value over the last month and much of the tech sector is registering the most oversold readings in many years . So we are do for a big rally in the short term over the next several weeks probably (barring any crazy bad macro news).

I covered most of this a while ago....

https://www.teamblind.com/article/Close-to-the-Bull-Trap-phase-of-the-market-cycle-sNzEBUKZ

Trade War isn't ending anytime soon. This increases CPI (much more CPI increases coming next year). Tarriffs going up 250% in January. FED can't really back down...they can slow down a bit...but they are backed into a corner to some degree. They have 4.1 Trillion they have to dump into the market ontop of raising rates a bit. Trump's budget calls for a 1 Trillion + deficit per year...and the FED can't buy the debt up. All of these factors lead to higher treasury interest rates. Which makes the stock market much less appealing since there are much safer investment vehicles available that are now returning great guaranteed rates.

Beyond that...many companies in tech have been valued at 100x-300x multiples based on 150% YoY growth. Did you really think that would last forever? No company can grow 150% every year forever. Once growth slows the growth rate of the stock has to correct...extremely hard. If you are wondering NO we have not even gotten close to a full correction for the high growth sector yet.

Global markets in bear market. US market will enter a bear market fairly soon I believe. Tech led the way up and will lead the way down.

In the coming years...expect the the US treasury rates to impact the corporate debt market (bond market) which has ballooned. This will be the Big Short 2.0 (The Central Bank 0% Rate Bubble...The Poppening) and will cause the next financial catastrophe. I'll share insight on that in the future...but when that happens...look out. It could be worse than 2008...Hopefully not. Time will tell. In any case still have some time on that one. But it's time to pay attention.

The chart below is NVDA on a monthly time-frame. I have the volume profile up so you can see where the support is....we have a tiny bit of support at the $110 area...but most of the support is actually under $40. I'm showing you this chart to give you context for all the high growth tech companies who's stocks are up 100% YoY every year. When they go parabolic...they come down even faster. MY best guess on NVDA is that it pauses at $100 until the next ER...and then crashes down to $45. NVDA FAANG etc all great companies...but clearly their stocks were overvalued and now we're going to start to find out what the true value is. Price discovery can be painful. Good luck to all. Not financial advice.

The Bear Market awakens...

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TOP 100 Comments
  • Facebook Etiys
    Good charts again. I think we will see a repeat of dot com crash in the next year. But other asset classes will also go bust unlike dot com crash eg. Residential and commercial real estate will all go bust on a scale closer to 2008 than a normal recession. Junk bonds are going to be toast and have ballooned hugely. So it could be a worse hit to the economy, whereas dot com crash barely registered as a recession. If/Once the realization sinks in that there will not be a QE3, the shit will hit the fan. But this will play out over the next year or so. I'm not buying into any rallies in the meanwhile.
    Nov 19, 2018 26
    • Capital One cofisblind
      @Etiys you are going to go long at the ATH if nasdaq reaches an ATH? You realize how ridiculous that sounds right?
      Nov 20, 2018
    • Facebook Etiys
      Yep. Not understanding this is why small time speculators lose money. Since we are only ~15% from ATH, for now a new ATH being held would indicate that the bull run is intact.

      I sold 100% of my stocks in July and went from all cash to all short QQQ in mid October. So this rule is part of my exit condition.
      Nov 20, 2018
    • Capital One cofisblind
      I can guarantee your ridiculous strategy does not do as well as buying index funds and holding on. You are literally throwing away 15% gains and buying at a time with higher risk of loss. Holy fuck how are you at Facebook? The tech companies have really loosened their hiring practices
      Nov 20, 2018
    • Facebook Etiys
      You want to interview and test how smart you are? DM me.

      I am not trying to convince anyone. Everyone can invest their money how they see fit and as it suits their temperament etc.
      Nov 20, 2018
    • Capital One cofisblind
      I’m just saying, that is an absolutely terrible strategy that if you employed over time would surely be beat by purely passive investing. Setting a threshold for entry after a stock is a certain level below ATH is fine, the opposite is ridiculous.
      Nov 20, 2018
  • New / Eng uhYr23
    OP, I'd love to create and analyze these graphs myself. Now I just have to believe (or not believe) in people's analysis, while I can't tell if they're right or wrong. The problem is as a fellow dev I'm too busy leetcoding! Do you have suggestions or source/blogs/books that help me get to speed?
    Nov 19, 2018 12
    • OP
      At a minimum you’re usually looking at a 50% retrace from ATH and in bad cases upwards of 95%
      Nov 19, 2018
    • OP
      Parabolic price movements bankrupt bad traders
      Nov 19, 2018
    • OP
      People lose homes jobs and families.
      Nov 19, 2018
    • New / Eng uhYr23
      We are in parabolic range now?
      Nov 19, 2018
    • New / Eng uhYr23
      The nvidia you posted is.
      Nov 19, 2018
  • Amazon ly4307
    You’re spot on. We have been artificially fueling an unsustainable market, the low interest rates, 3% unemployment and stock gains can’t continue. If it feels like a bubble, it’s because it is.
    Nov 19, 2018 1
    • OP
      ^^ This lady gets it.
      Nov 19, 2018
  • McAfee JohnMcPee
    Is it time to get schwifty?
    Nov 19, 2018 1
  • Microsoft TegridyBud
    You're just showing a bunch of graphs with lines connecting them . Do you even know what any of that shit means ?
    Nov 20, 2018 11
    • Lending Club @@@@@::::
      2553 is the low of the year around April, what if it breaks? What after that?
      Nov 20, 2018
    • OP
      No on really knows. It depends on macro economic factors and how the fed trump and others respond to them. My personal opinion on it is that Nasdaq will be below 5,000 within 6 months and possibly as low as 3,500 before the end of 2019. SP is much harder to track imo bc of buybacks and other factors. But I wouldn’t be surprised if SP corrected by 30-40% before 2019 was over.
      Nov 20, 2018
    • OP
      Btw SP could rally into year end from here but imo the upside is very limited. Even if we somehow hit 3,000...I think we would just come back down unless macro factors changed.
      Nov 20, 2018
    • Lending Club @@@@@::::
      From 7000 to 5000 - possibly 3500? I just crapped in my pants, hide cash under bed?
      Nov 20, 2018
    • Facebook Etiys
      No just keep it in money market funds or short term treasury funds :-) as close to hiding under bed as possible.
      Nov 20, 2018
  • LinkedIn
    LCFTW

    LinkedIn

    PRE
    Goldman Sachs
    LCFTWmore
    FB, MSFT, etc actually have pretty low P/E tho
    Nov 19, 2018 2
    • Cisco randynash
      Msft is good.

      FB will evaporate like friendster and orkut
      Nov 19, 2018
    • OP
      💯
      Nov 19, 2018
  • Symantec O (1)
    Tech & Energy is in bear market. Rest of the sectors seem to be well off. Time to buy utilities with good dividends?
    Nov 19, 2018 2
    • OP
      Not sure but yes I’d say you’re better off with value and dividend stocks than tech right now. Short term treasuries are a good bet. Cash is a good bet.
      Nov 19, 2018
    • Oath / Eng lol 😂
      What utilities do you recommend?
      Nov 20, 2018
  • Intel / Other 10% ESPP!
    ITT: a bunch of fancy looking graphs engineers don't understand
    Nov 19, 2018 1
  • Yelp Doberman
    We’ve been running without pants since at least 2014. I really don’t get why anyone would be surprised now.

    As much as one would like to believe given the wizardry of modern day monetary policy sophistication, money doesn’t fucking fall out of the sky magically.
    Nov 20, 2018 0
  • Amazon Northman
    MSFT is solid. FB is a value trap. AMZN looks pricey still but I think has growth and cash flow likely to justify current value. Just may take a while to see 2000 a share again.
    Nov 19, 2018 0
  • Cisco randynash
    Well, we were Weimar republic for a few years printing money.

    Now that the machine has stopped, asset values will have to come down. The fed would do well to stop after the next rate hike.

    But yes, a lot of leveraged margin traders and a lot of homebuyers in expensive markets and a lot of 401ks are going to go down.

    Sorry folks, the world is ending because the dollar is too strong, inflation because of wages and tariffs, negative savings rate and trumpanzee created a gigantic budget hole at a time when we should've been more prudent.

    I hope you don't have debt because otherwise you'll be busted bad
    Nov 19, 2018 0
  • Lighthouse chikndinr
    this post is stupid, on many levels
    Nov 19, 2018 6
    • VMware / Eng chigga
      Lol, see nvda tank further tomorrow 😂
      Nov 19, 2018
    • New DuQvV7x
      Agree with what @Lighthouse said.

      Clearly OP doesn’t understand what the Fed does.

      I’m out
      Nov 19, 2018
    • OP
      I absolutely do understand what the fed does. I may not have written it clearly enough but I have a very good handle on the situation.
      Nov 20, 2018
    • OP
      If either of you would like to actually contribute something of value rather than just criticize that would be swell.
      Nov 20, 2018
    • New DuQvV7x
      “FED can't really back down...they can slow down a bit...but they are backed into a corner to some degree”

      Explain this and link to what fact it is based on.
      Nov 20, 2018
  • OP
    Nov 19, 2018 2
    • Amazon ly4307
      Also, I’m a lady 🙋🏻‍♀️
      Nov 19, 2018
    • OP
      Apologies! Amended my statement. Ma’am.
      Nov 19, 2018
  • Oracle Pearman
    It’s highly overpriced market a correction was long overdue , and specially the tech stocks were out of proportion from the amount of value they were creating ...
    Nov 19, 2018 0
  • VMware / Eng chigga
    Unless there is some good news, it will definitely go to 130 eod tomorrow!
    Nov 19, 2018 0
  • OP
    Nov 19, 2018 4
    • Lending Club @@@@@::::
      Can you add some description to the charts for layman like me, I don’t understand anything
      Nov 20, 2018
    • OP
      This chart shows the cyclical nature of the market. Bottom row is unemployment rate. We’ve. Bottomed out. SPX TNX shows the relationship between the bond market and the sp500 it’s built a massive H&S pattern basically indicating the s&p 500 is coming down hard at some point reasonably soon. No one knows when. Top chart shows S&P 500 and how over inflated it is. Above it the RSI shows that we’ve created a bearish divergence on the monthly chart. Also indicating very limited upside. Also following same pattern as 2008 roughly.
      Nov 20, 2018
    • OP
      Nov 20, 2018
    • OP
      Nov 20, 2018
  • GoodRx BobAxelrod
    Worse than 2009? The S&P was up 25% that year! I'm guessing you meant 2008 and the first part of 2009.
    Nov 19, 2018 3
    • OP
      Yes you are correct.
      Nov 19, 2018
    • Amazon Northman
      Man, I remember Feb 2009. Felt like the bottom was falling out on the world.
      Nov 19, 2018
    • GoodRx BobAxelrod
      Doesn't top Sept Oct 2008 tho
      Nov 19, 2018
  • eBay CEbi00
    Can you elaborate why is there a bond bubble and how will this collapse or pop ?
    Nov 19, 2018 2
    • OP
      Sent
      Nov 19, 2018
    • U.S. Dpt. of Veterans Affairs / Other 😃😄😃meh
      Can I get a copy of that too?
      Nov 20, 2018
  • Dell LUHV04
    If I have liquid cash , should I keep it liquid and away from the stock market ?
    Nov 20, 2018 1
    • OP
      Depends on your outlook. There are definitely people buying here. We may rally into year end. I think the RR is not there for buying here but not everyone agrees with me. FAANG very oversold on weekly charts now so a bounce is coming at some point soon.
      Nov 20, 2018
  • Square / Eng SQ
    Many tech companies valued at 100-300x multiples? That's a bit overkill.
    Nov 19, 2018 1
    • OP
      Square 1052 trailing 12 month P/E, Go daddy 171, hubspot 388...these were from February but you get the point.
      Nov 19, 2018