Largest Crash of our Lifetimes is here! For Starters - Go Watch this guy as he is 100% spot on. twitter.com
Lets start with a Chart of the VIX From October 12th (the bottom of the last market rally).
Using the 1hr $VIX Chart, you can see we have 5 open gaps. We filled the last gap TODAY:
And in fact - we now have a gap overhead!
And the VIX bottomed directly into its 100month SMA.
If you watch the SPX and the $VIX side by side, this rally has been mechanical and algo driven, filling both SPX and VIX gaps during the entire rally.
Onto the SPX.
SPX I think set a very sneaky bull trap at the 200dma this week. We are back into an upper trendline which is where the 50w sits as well.
SPX has a small open gap at 4200 - but that is going to be REALLY tough to fill from here. What SPX does have is open gaps all the way down to 910 from 2008
Here is where the real pressure come from - Bond yields are about to
Each Selloff in the SPX from this upper trendline area has been around a 20% drop. This would take us down to ~ 3200 on SPX and fill lots of downside gaps.
The REAL Driver - Bonds.
The bond market has largely priced in all of the Fed Rates Hikes and has moved on. What it is starting to look for now is "what is next". What comes next is the slaughter of earnings in Q1 of 2023.
Here I show the 2yr Bond (which is basically the shadow Fed Funds Rate) in candles, the actual Fed Funds Rate in Orange, and $TLT in Blue.
What you can see is that basically EVERY TIME that the 2yr (candles) crosses BELOW the Fed Funds rate (Orange Line) - the long bond (blue line) starts a massive rally as the next Fed rate cut cycle is coming into play.
What Bulls don't understand is that when the Fed is cutting rates in a global recession - that isn't bullish. It's VERY bearish because the underlying economy is deteriorating and the companies earnings are crashing. If you aren't long Bonds already, start building a position. TLT could easily double in the next year.
The 2s/10s Yield Curve is the most inverted it has been in HISTORY
You want to buy bonds when the curve start to UN-INVERT as this means the front end of the curve is going to 0, and you will get massive capital appreciation of long bond holdings like TLT
Energy has already caught on
Energy stocks are WAY overdone - and Oil is starting its next big leg down. Oil is extremely sensitive and has already caught on to the coming massive global recession in 2023.
How to Play This
1) Buy Long bonds like $TLT or $ZROZ
2) Short indexes/banks/Semi Conductors / Energy
