Stock Market Crash 2022

stock market crash 2022

In addition to the many reasons we have provided in previous updates, two extra factors could lead to a more robust correction in the 4th quarter.

Stock market crash 2022: Reason No. 1

The current Kansas City financial stress index reading (KCFSI) illustrates the populace is not in a state of total disarray, despite higher prices, the war in Ukraine, etc. The readings above are bearish from a contrarian perspective. In 2008 and during the COVID crash the readings moved into the bullish zone. It is rare for readings to rise above one standard deviation, and the most notable exception being the housing crash.

KCFSI chart 1990-2022

Source: https://www.kansascityfed.org

 

Even COVID pushed the index slightly below 3.00. We suspect that there is a decent chance that the massacre of 2022 (which could last well into the 1st quarter of 2023) could push the gauge past 3.00. In doing so, it will create an enormous buying opportunity. The current reading is a paltry -0.27.

Our G.P. index (Gnosis Panoptes) continuously surges to new highs. Since roughly December, it has put in a new high almost every month. This is highly unusual, and it indicates that we should expect several unique/exceptional to extreme developments over the next 3 to 18 months.

The more substantial correction expected in the 4th quarter would qualify as something unique. We also think that this index has green-lighted or confirmed that the U.S. peaked in March 2022 and that the current rally the USD is experiencing, projected to last to 2023, could be the last major rally for decades to come. In the interim, there will be extreme global polarization as a new group of nations vie for control. Leading the way will be China and Russia. China via money and Russia via weaponry: Continued under Random musings

Stock market crash 2022: Reason No. 2

The monthly charts are trading in the extremely overbought ranges, but the weekly charts are trading in the insanely oversold zones. This kind of setup almost always leads to a substantial correction, but only after the markets mount a strong rally. This setup has never failed to deliver, and the only question is whether the subsequent correction will be wild or highly intense.

The massacre setup calls for the index (in this case, the Dow) to test its old highs (the two red arrows pointing at the blue line drawn over the price chart). Ideally, it generates a negative divergence signal while testing its old highs or trading to new highs (this is even better). As the weekly charts are trading in the oversold ranges, the MACDs in the monthly charts should experience a bullish crossover in the overbought ranges. After that, the MACDs almost always move into the extreme zones of the overbought ranges. When this development coincides with a surge in bullish readings, it almost always indicates that a top is close at hand. The most important part of this setup calls for the crowd to be ecstatic. If they are not euphoric, the massacre scenario will not bear fruit.

Anxiety Index.jpgbull neutral bear chart

 

If one wants to succeed over the long run, one must be prepared to experience temporary paper losses (also known as drawdowns). The steady hand wins the game in the long run, while the nervous nelly keeps losing his hair, knickers, and wallet. The trend, ladies and gentlemen, is your friend, and a good friend will never let you down. However, a foe will knock your block off when your attention starts to drift.

The Covid crash did not start on a note of Euphoria, nor did the current correction, which ended roughly nine days ago. Hence the third and most destructive wave has to occur on a note of Euphoria. This upcoming crash is likely to generate Anti-inflationary forces. However, if Western leaders continue to use Don Quixote as their role model, then stupid policies could mute the effects of these forces. Countries that use their brains instead of their rears should benefit from these deflationary forces.

Westerners seem to delight in electing the dumbest and most vile of creatures to the highest offices in government. Suppose one pays close attention to the number of egregious policies and regulations passed after COVID. One will find a direct correlation between prices and stupid policies. Western leaders suffer from an insufferable dose of menticide.

The actual “hard money” definition of inflation “is an increase” in the money supply, and the price increase is only a symptom of the disease. Real inflation began the day we got off the Gold standard. Over the past several months, our main argument has been that hyperinflation would not be an issue.

 

If the massacre of 2022 plays out as envisioned, the following could come to pass:

  1. Suddnely, a large segment of the population will be ready to work as their savings will be devastated. This includes a large swath of baby boomers returning to the markets

  2. Demand for everything from natural gas to petrol would drop, resulting in lower prices.

  3. The masses will be in a state of panic, so they will demand that central bankers come to the rescue. Interest rates will be lowered, and the Fed will create at least another 5 trillion USD to stabilize the markets.

All crashes are engineered events, and this has been especially true after we went off the Gold standard. Again, prices might not cool down in some parts of the world simply because the west continues to drag on this war with Russia and now China.

 

­Historical Sentiment values

Historical-Sentiment-values.png

Conclusion

We hope the developments over the past few weeks cement the point that one needs to be in the action mode rather than reactive mode. When you react, you will always miss out on the primary move. The battle of the trenches will only get more intense. Those that stick their heads out too early are apt to get shot. Translation; those that allow their emotions to talk will consistently lose and lose big in the future.

The market is merciless, the masses mindless, and only the trend player wins, for they clearly understand this concept: “the trend is your friend, and everything else is your mortal foe.”
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Extreme volatility must be treated as a positive development when the trend is positive. For it indicates that the primary force in play is uncertainty; in other words, an opportunity is around the corner.

A few months ago, a significant number of individuals were complaining that being in cash was burning a hole through their pockets. We were constantly barraged with emails asking for more plays. And voila, now it is all quiet. Looking at this from a Mass Psychology angle indicates that a bottom is close at hand. Market update March 9, 2022

We are going to pay closer attention to how new subscribers react. Individuals that are with us for less than 15 months, in general, tend to overreact to the news and daily prices. The most reactive are subscribers that have been with us for less than nine months. Their actions have helped provide powerful confirmations that a bottom was close at hand many times in the past. Their reactions during the COVID crash were quite interesting; within nine days of fear levels spiking, the markets put in a bottom. Let’s see if this proves to be true this time around.

It always looks terrible in the heat of the moment. Can anyone state that they did not feel it was different “this time” when the markets crashed during the COVID pandemic? It always feels like it is different. History never repeats itself (exactly), but it does rhyme. So, the only information one should focus on is that a massive amount of hype is being used to make the situation look even worse. All the good news is being ignored, and every piece of negative data is pounced on. This is the same approach they took during the COVID crisis. Market update March 9, 2022

stock market crash 2022 will be a wake-up call for passive investors

The crash expected in the 4th quarter will be a wake-up call for all the passive investors. These chaps should be called hopers, for they hope that the individuals they have entrusted their money with are good investors. Given the intensity of the current correction, which we predicted last year, the ensuing correction could be delayed until the end of the 4th quarter or to the 1st quarter of 2023.

Even though volatility levels will remain at elevated levels for the next few months, the markets are expected to trend higher.

 

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