2016 U.S EQUITY SELLOFF AND GLOBAL CRISIS TO HIT 2008 LOWSTechnical Analysis:
Along with the technical indicators that I have outlined in the graph, the following fundamental analysis supports the reason for the incoming financial 2016 crisis. Outlined in the chart are my target dates for the bottom of the market, ranging from Q1 2017 to Q4 2018. Additionally, the right shoulder that formed in the 2001 and 2008 cycles has now been formed, indicated by the magenta arcs. The 1Week, 100D vs 50D moving average has officially crossed at the 2016 top, in which the last tops were 2001 and 2008.
Fundamental Analysis:
We are currently seeing bear market rallies in both S&P and TSX to instill investor confidence, Yesterday was likely the top for both oil and stocks. Here are my 7 reasons
1. Unemployment figures offered to the fed are very manipulated. They involve part time unemployment which was 90% of the added jobs in february, and a part time job does not offer the same economic contribution as a full time, although counted the same.
2. A clear way to gauge consumer confidence is to see how sales are doing in a consumer's biggest expenses: cars and homes. Despite sales, Auto loan delinquencies at all time high and home sales just saw biggest decrease in 6 years
3. A few U.S states are already facing recessionary contraction
4. Debt levels for both central banks and individuals are at extremely dangerous levels . Income is decreasing and leverage is at all time highs, always an indicator at top of market, also M&A activity is at highs from 2008.
5. There is currently a major 30% divergence between the value of junk bonds and US stocks (see $HYG junk bond ETF vs. SPX)
6. I believe the yield curve is fooling everyone; its extremely hard to have an inverted yield when the financing rate is 0.25, and was 0% for 6 years, we would have almost negative yields on 30 year t-bonds. Artificial 0% rates has manipulated the yield curve and QE went directly into equities
7. Japan has still unsuccessfully recovered from 0% fed policy and QE stimulus from the 90s, which shows how dangerous it can be.
Keep in mind that the crisis we are currently facing is global, and extremely deflationary due to credit and liquidity risks. Most people are underestimating its potential damage.
