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Major Stock Market Turning Point Is Taking Place

By Chris VermeulenStock MarketsNov 30, 2021 05:23PM ET
www.investing.com/analysis/major-stock-market-turning-point-is-taking-place-200610018
Major Stock Market Turning Point Is Taking Place
By Chris Vermeulen   |  Nov 30, 2021 05:23PM ET
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Global financial markets were already hobbled by the original COVID-19 virus – struggling to regain their economic foundation after many months of the unprecedented central bank, government and humanitarian efforts to move us towards recovery. Now, the Omicron strain of the COVID virus has potentially toppled the apple cart, while global inflationary and economic concerns are peaking. What's next?

Why Traders Need To Consider Future Risks

This recent article caught my attention as I caught up on today's morning events (Source: Yahoo! (NASDAQ:AABA) Finance). It highlights the incredible inflationary trends occurring because of disrupted supply channels related to the original COVID-19 disruption. Could you imaging what would happen if a new virus strain prompted further lockdowns and labor/supply disruptions for another 12+ months – or longer?

The massive amounts of stimulus and money printing that has taken place over the last 4+ years by global central banks may be acting as an anchor for growth and starting to weigh down global markets. Easy money policies lead individuals and corporations to borrow more and more capital expecting growing returns from sales. What happens when we start to see a mild economic slowdown take place, possibly complicated by inflationary price trends and consumers that pull away from making big purchases?

That exact type of scenario is playing out in China right now, and it is relatively easy to see that excessive debt and lack of economic growth lead to a disastrous outcome (Source: Yahoo! News). When you add extreme inflation into that mix, the equation becomes even more volatile.

Why Is Stock Market Falling Again?

The answer is pretty clear, I think. Traders and investors around the globe continue to fear the worst for the new Omnicron COVID strain, and for good reasons.

  • They don't see the current vaccines working on it – yet.
  • Various countries are talking about lockdowns again.
  • Unemployment could spike.
  • Inflation could spike out of control if lockdowns happen.
  • The stock market could collapse.
  • Housing could collapse.
  • Certain global central banks and governments could collapse.
  • And many more.

Custom Index Show Price Weakness Has Already Started

This Weekly Smart Cash Index, which tracks global market trends more efficiently, shows a decidedly bearish price trend has been in place since February/March 2021. On the right edge of the chart, the recent price weakness is about to break below the $177 level – breaking downwards and attempting to reach new price lows.

This downward pressure on global markets shows how the U.S. markets are acting in an opposite trend (trending higher right now), while global markets have experienced an extended price decline over the past 8+ months. If the Omicron virus strain prompts new lockdowns and/or supply and labor disruptions, we may see a significant collapse in foreign markets over the next 6 to 12+ months. Possibly taking place while inflation spikes higher – leading to a bigger problem for economies struggling to recover.

Smart Cash Index Weekly Chart.
Smart Cash Index Weekly Chart.

This Weekly Custom Volatility Index highlights a very interesting divergence between price trending and the RSI trends. While the Volatility Index was pushing higher and higher over the past 6+ months, RSI shifted into a downtrend – suggesting the momentum of the U.S. stock market uptrend was weakening dramatically.

Now, with Omicron here, the U.S. markets could break downward – pushing the Custom Volatility Index back below 6.0 or 7.0 and possibly falling to extreme lows near 1.0 or 2.0 for an extended period.

Volatility Index Weekly Chart.
Volatility Index Weekly Chart.

Major Stock Market Turning Point Is Taking Place
 

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Major Stock Market Turning Point Is Taking Place

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Comments (11)
Doug Favell
Doug Favell Nov 30, 2021 11:28PM ET
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Powell and Yellen talking the market down today. They know we need a 10% +/- correction here before the final run to 5200. Don’t forget the debt ceiling and December Fed meeting now in queue.
Chris Johnson
Chris Johnson Nov 30, 2021 11:16PM ET
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For once I think Chris is right... Maybe he finally stopped being dilusional
Rise Unlimited
Rise Unlimited Nov 30, 2021 10:56PM ET
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How about an article on the locked in surplus home owners have every month, raises, savings, PPP loan bonuses with revenue covid growth, increase in early retirement, money dumped into any “token”, overweight population and empty rich land not being used for anything. Can we just sprinkle seed over a few k acres and fire people to turn them into farm workers and call it a day hahaha They need to go to school btw. Firing everyone now..made my decision.
Larry DeAngelis
Larry DeAngelis Nov 30, 2021 10:38PM ET
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chrisKeep up the good work. Let the amateurs keep buying the dips.
Rise Unlimited
Rise Unlimited Nov 30, 2021 10:38PM ET
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Daytraders are the most highly skilled traders. Most option traders just waste everyones time. Investors..invest other peoples money. Losers will be other people and most option traders for the next couple of years.
Michael Galassini
RoyHobbs Nov 30, 2021 10:38PM ET
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Daytraders are punters.....skilled not so much
Bay Creek History Detectives
Bay Creek History Detectives Nov 30, 2021 8:49PM ET
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Thanks Chris. On the contrary, if Pfizer's Covid antiviral pill gets approved, and if it works against Omicron. We get the everything rally :) One can hope. LOL
Rise Unlimited
Rise Unlimited Nov 30, 2021 8:49PM ET
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If it works and gets approved Americans will prefer free money so will us it as an excuse..anti vax, pay more more, school isnt for me, chinas fools, protest snowflakers. Mooooon everything and token something though.
Sabi Sab
SabiSab Nov 30, 2021 8:28PM ET
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Excuse me!  Why are you changing your tunes everyday?  Yesterday, you have a totally different outlook on the market!
Loudermilktits Loudermilktits
Loudermilktits Nov 30, 2021 8:28PM ET
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Because he is a hack
John McFarlin III
John McFarlin III Nov 30, 2021 8:22PM ET
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Dude, look around at some charts, IT IS HAPPENING! The 76 year old Stock Broker just said "Dow 36,000 was my long-term price target..."
Chris Poulos
Chris Poulos Nov 30, 2021 8:08PM ET
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i dont think omicron is going to amount to much. heard an interview from a doc in SA that said it was so mild you could barely tell that you were sick.  what is more worrying is how over valued stocks are & how deluded many investors seem to be ... dow 40k? sure. 50k? why not. 70k? ... ummm, you need to look back at the nasdaq in 2000.
Pilot TwoFive
Pilot TwoFive Nov 30, 2021 8:08PM ET
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Doesn’t matter what the reality of the NU virus is it’s the outsized govt intervention that is the concern.  We have already proven we will do irrational things in the face of a little flu.
James Pattison
James Pattison Nov 30, 2021 8:02PM ET
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Ive read alot of his stuff since the covid crash… and he has been wrong about everyone ive seen… but this time will be different
Loudermilktits Loudermilktits
Loudermilktits Nov 30, 2021 8:02PM ET
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Chris might be the worst "analyst" https://investing.com allows to post.
Sabi Sab
SabiSab Nov 30, 2021 8:02PM ET
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Loudermilktits Loudermilktits  Nah, he might come in second worst.  The worst must be Satendra Singh in Natural Gas.
Loudermilktits Loudermilktits
Loudermilktits Nov 30, 2021 7:02PM ET
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This dude and the bs he spits... Chris, do us all a favor and go away
Tony Huynh
Tony Huynh Nov 30, 2021 5:56PM ET
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You were bullish on your last article lol
 
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