Wall Street Collapse: Need Help? We map it out

Clifford Bennett Independent Analyst

We have warned our readers, but if you are caught invested in a bull market that is over, then it is time to invest in this just beginning bear market.

Happy Days.

In case you didn't see it stocks just had a sharp collapse day.

It may not be easy to immediately spot it there over on the right, but that is a NEGATIVE New York Empire Manufacturing Index outcome. An immediate collapse to -0.7%. As we have been saying, the US economy is in trouble in real time right now and the data is coming to show it. As is the case in Australia as well.

In the USA we have been seeing the terrible reality of a slowing manufacturing sector while the stock market kept going up alongside super high inflation. This is the most unsustainable state of affairs any economy can face and screams an over-cooked equity market.

Many months ago I suggested the very wealthy take all their chips off the table, the wealthy 50%, and for the soon to be wealthy to become very aggressive in their trading and hunt a significant market down-turn. No change, except to say this looks like one of those very high probability start of collapse moments.

We were the first to forecast three rate hikes starting this first quarter and we were the first to upgrade that forecast to there being risk of 5-7 hikes this year. Which I again highlighted on ausbiz TV yesterday.

As the market belatedly catches up with economic reality and our forecasts on inflation and rate hikes, Wall Street is still mistaken in understanding why this is bad for stocks. It is not the rate hikes so much as it is the consumer loss of buying power and subsequent retreat.

USA: the economy is in trouble. Inflation is out of control and a wages-inflation spiral is already underway. Retail Sales and Consumer Sentiment continue to collapse.

All this, on top of extreme valuations in the equity market.

My forecast remains US500 4,050 and AUS200 6800.

US500 2 hourly chart

It is only early, but clear indications of a gathering momentum down-trend situation.

EURUSD 2 hourly chart

Euro falling, as our favoured 'buy the US dollar' scenario comes back into play.

US Capital Inflow

Remains elevated and as previously discussed has been one of the main drivers of stocks stretching to extreme valuations. I continue to characterise this as safe-haven flows from global investors rather than greed investing. Nevertheless, the domestic fund off-loading of stock holdings now appears to be over-whelming this still strong flow. Any substantial sell-off could quickly turn that tap of foreign investment off. Thereby exasperating the potential down-trend.

AUS200 2 hourly chart

Dropping to the lower recent range and highlighting everyone should be considering the bear trend scenario and how to deal with it. Declines are an immense opportunity if handled correctly.

Author

Clifford Bennett

Independent Analyst

With over 35 years of economic and market trading experience, Clifford Bennett (aka Big Call Bennett) is an internationally renowned predictor of the global financial markets, earning titles such as the “World’s most a

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.