Oh... Now It’s a Bear Market!

It’s official - the SPX is down over 20%. The Nasdaq was down nearly 5%, bringing it to a -31.7% return year to date. Were you forwarded this email? [Sign-up to Rude Awakening here.]( [Unsubscribe]( [The Rude Awakening] Oh… Now It’s a Bear Market! - The S&P 500 was down nearly 4% yesterday, taking it down 21.8% year to date. - The Nasdaq was down nearly 5%, bringing it to a -31.7% return year to date. - Cryptocurrencies, which lately have shown a high correlation to the Nasdaq, have been crushed. Recommended Link [Bloodbath! 80% Dow Drop predicted.]( This little-known “[market doomsday indicator]( has appeared before nearly every major financial crash in recorded history. And now after years of silence, it has begun to ring out again… And if it chimes even just one more time… It could be game over for the markets. With some experts already predicting that we could see a Dow drop of 80% or more practically overnight. If you’re worried about a market crash… Or if you are holding any stocks, real estate or cryptocurrencies… Then I’m urging you to drop what you are doing and watch this now. Because if you miss [this warning]( now, once the crash comes… It will already be too late. [Click Here To Learn How To Protect Yourself]( Sean Ring Editor, Rude Awakening Good morning from sunny Italy. I’m teaching a class later today for the first time in ages. It’s exciting because I’ve got so much to talk about. Sure, they’ll get their introduction to banking and economics. But has there ever been a more interesting time to teach this stuff? Because what we’re suffering through is a clinic in how not to conduct public policy. If we judge policies by their results, rather than intentions, the USG has completely failed on the fiscal front. As far as monetary policy is concerned, the Fed has utterly embarrassed itself. And now they’re talking about a 0.75% “surprise” hike to quell the inflation they themselves created and let run! As if investors aren’t nursing their wounds enough already. It’s like dropping a second bomb on an area after the medical staff tries to move in - after the first bomb was dropped. Of course, the Fed never should’ve been in this position. It should’ve known inflation was anything but “transitory.” It should’ve started hiking, slowly, years ago. But now the tide’s gone out, and there are a lot of companies standing naked on the beach, shrinkage and all… As you know, I’ve said in this very newsletter that the SPX would hit 3,213 before all’s said and done. Now, I’m worried we’ll blow right through it! So before I get into today’s Rude, I want to make sure you watch Jim Rickards’s [urgent warning](. I know we can get hyperbolic about market movements. We’re an excitable bunch, after all. But with what we’re seeing nearly every day, it’s crucial you get the scoop from an expert like Jim. When Jim first started warning of this pattern on March 14th this year, the Nasdaq fell by 12%. When he warned about this pattern again on May 4th, the very next day the Dow recorded its biggest single sell-off since the coronavirus crash. Now he’s saying the next drop will be the biggest drop of them all. Can the Dow plummet by 80% or more because of this event? Anything’s possible nowadays. (Especially with Jay Powell considering 75-bp hikes…) So it’s important you watch [this]( before Wednesday at 2 pm because it’ll be all over by then. I think Jim’s onto something. In this edition of the Rude, I’ll show you why I think he’s right and we’ve got a long way to go. Say Cheese! Credit: [Zero Hedge]( Oh, not him! What I want is a market snapshot. Because you need to know where you are before you can know where you’re going. This is the year-to-date equities picture: JC Parets just tweeted this chart: Credit: [@allstarcharts]( This reinforces my view that we’re witnessing a huge distribution structure. And if you think that’s bad, have some crypto: And my goodness, is Peter Schiff loving this or not? By the way, I disagree. I don’t think this is the end for crypto. It’s just their 2000 dot-com crash. It’ll come back better than its previous incarnation. Commodities have done well, though most retail investors don’t invest in commodities. Ok, not all commodities have done well. Gold and silver have done nothing to hedge for inflation. And Dr. Copper has been in a narrow trading range for much of the last year. Ok, so the entire market except for commodities has gotten its ass kicked. Recommended Link [Trump’s Final Gift To America]( [Click here for more...]( There’s a little-known way Trump could – one day – have his revenge. It involves a Federal Ruling he oversaw in the final year of his Presidency that could change America forever… unleash an estimated $15.1 trillion in new wealth… and create countless ways for everyday Americans to benefit. What is this little understood decision? And how will it impact you? [Get The Facts Here]( Why We’re Not On The Ground Floor Yet The Market Isn’t At Panic Stations In the chart below, you can see the VIX spiking to 80+ during the 2008 crisis and the 2020 corona crash. Right now, we’re only showing a sub-35 reading. We’re just not in panic mode enough, though that may change rapidly. Why? Because Jay Powell’s innards have turned to water. But The Fed Is Panicking… Like most “big economy” central banks, the Fed manipulates the economy by raising and lowering short-term interest rates. Sometimes it messes around in the long end of the curve ([Operation Twist]( and other parts of the bond market ([MBS Purchase Program](. But generally, it lowers the fed funds target band (an overnight rate range) when it wants to stimulate the economy. And it raises the fed funds target band when it wants to cool the economy. Raising rates cause the yield curve to flatten somewhat. The yield curve is a view of the Treasury yields across their maturities. But problems arise when the curve inverts. That is when short-term rates are higher than long-term rates. Curve inversions usually, but not always, precede recessions. Because the market knows the Fed is ratcheting up rates, the short end of the curve is rising and overtaking the long end. Credit: [The Daily Shot]( Now, there’s talk of Powell and Co. [raising the fed funds rate 75 basis points]( (0.75%) at the next meeting on Wednesday. This is a huge mistake. The market needs to digest moves, not get force-fed like a foie gras goose. If they move 75 bps in this meeting and do the same in July, the Fed will burst the bubble it created. Because even after the recent carnage, we’ve got more selling to do. Sentiment Hasn’t Moved Allocations While we’re lacking confidence in our “leadership” - their word, not mine - the market is still overallocated to equity, according to the University of Michigan. Credit: [The Daily Shot]( That means we have a lot more selling if things stay the way they are. Alas, I don’t think that will be the case. Things will get much worse if the Fed raises rates by 1.5% over the next two meetings. Wrap Up My goodness, this is a mess. And what’s worse, it’s a government and central bank-induced mess. If Biden reverses his silly energy and Russia policies, this may be over quickly. But the Fed can’t raise too hastily because Jay Powell realized he screwed up. The Fed must be the “adult in the room” and remain calm. But it doesn’t look like Powell is calm at all. He looks like a running back who just fumbled and then committed a personal foul to try to recover it. Silly, immature, and unbefitting of his office. I hope I’m wrong, and the Fed only goes 50 bps. Things are going bad enough without hitting the accelerator. Until tomorrow. All the best, Sean Ring Editor, Rude Awakening P.S. Remember to watch Jim’s video! He found a [chart pattern]( that’s preceded nearly every single market crash for over a century. And each time it begins the exact same way. It advances once, advances twice, then boom… It’s game over for the markets. Now, this pattern hits its third and final phase tomorrow. Jim went live with his final warning before this pattern completes. So watch [his informative and insightful video]( as soon as you can. Because when the pattern completes tomorrow, we may be looking at a four digit Dow. [Whitelist Us]( | [Archive]( | [Privacy Policy]( | [Unsubscribe]( Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. 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