SPX - The second wave has started As we can see on the chart we have broken through the upward channel and we are ready for a correction. The correction on theory should have the TP1 target, but I think there is something else that could be going on. I have the following fundamental reasons for thinking that we will see much deeper drop:
- The elections are comming in America and this creates a lot of uncertainty, because of the different policies that could get implemented if whoever gets elected. This makes investors worried and they could pull their invesments out till all of this has cleared.
- The second wave of the virus has officialy started already in some countries like South Korea and also in Europe we see huge increase in new confirmed cases. There are many theories about a second wave in September which would be even stronger and this could scare investors aswell and pontetially close lead to closing down businesses which would triger even lower bottom.
- The stimulus packages are not going to last forever! They actually helped people through unemployment and also gave a little economy boost, but once it is over, people won't spend money and the economy will slow down again.
- There are many tenants who can't pay their rent and the landlords won't be able to recieve that rent, which they need to most likely pay for their mortgage, so this will lead to a chain reaction which will again slow down the economy and most likely cause housing crash.
- There are many people who can't repay their loans, because they don't have a job or stable income, so there would be a higher default rate on loans.
- The small businesses were damaged heavily by the virus and many of them won't recover, so this will hurt the economy and the people.
- The gains we saw in the market are unrealistic and right now everyone is just buying in without good fundamentals, so this is bound to fall sharp at one point or another, because the banks have to take out their profits. When this happens and it is most likely happening right now, the market will fall and wipe out as aways the retail investor.
My advice is don't short the economy just yet, rather be well diversified and reduce the risk! Make sure you have some money on the sidelines and be ready to buy into the market if we fall. Aways invest for the long-term and just be ready to buy more. Leave your comments bellow, if you like the idea give it a like!
