Friday, 14 January, 2022
Published irregularly, as conditions dictate.
I’ve been very bearish for a long time, since May/June of last year. At a future point, I will re-publish past client letters to help bolster my credibility with the readership (e.g., “It’s Still a Bull Market,” put out Christmas Day, 2018, or the letters pre-Wuhan virus calling for an imminent recession). As such, I understand if readers have a little reservation regarding my current, protracted, extremely bearish views.
But there are indications we may be days, if not hours, from a major market meltdown now. Just this morning, JP Morgan getting clobbered despite booking estimate-topping earnings, ARKK suffering a third of a billion in outflows as it hits new lows for the last year.
Retails sales, which we consider on an inflation-adjusted basis (again, with the muted [compared to pre-1980] YoY full CPI reading, as a percentage off it’s top, is signaling a major market drop in the coming months, evident by simply looking at its historical record back to the year 1919:
(This series recreated by Index of Department Store Sales for United States (M06F2AUSM343SNBR) 19190101 through 19461231, Real Retail Sales (DISCONTINUED) (RSALES) 19470101 through 19912131, and Advance Retail Sales: Retail Trade (RSXFS) 19920101- present).
Drops in this indicator almost always coincide with severe market drops.
Industrial Production and Capacity Utilization both clocked in this morning at values less than last month’s. The System we use based on these indicators, which has a stellar record back to 1919, hangs by a thread for going flat-out short here (and possibly with revisions next month, it will show as having gone short this month).
Here is the big one to focus on today. The proprietary “FloorBanger” signals sounds the alarm at almost all major market tops. When it goes off, it has been proven to be worth heeding. In effect, as its name implies, it is a set of conditions that corresponds to major market tops, and seems to attempt to “break through the floor,” by repeated days, often, of FloorBanger signal attempts.
As the chart below reveals, most major top-turning points have been signaled by this (though, not all signals have resulted in tops). Whether the top of early Feb,2018, the October, 2018 top, the Feb 2020 top, the tops in 2008 and 2000, even the 1987 crash saw FloorBanger signals going off starting a week before the crash, on October 12, 1987.
And here, since about 2013:
Floorbanger signals are popping off now for the past 2 months, with a little lull in between. Based on history, we may be very close to the top, and given the character of the investing public, I believe, very close to a very swift market meltdown, The only ingredient necessary for today to give us a Floorbanger signal is if we have roughly more than about 185 new lows on the day - something worth taking a peek at late this afternoon if you are so inclined.
With the long weekend, and the conditions which abound, I don’t believe that when this market goes it will give most any chance at all to get out or get short - I expect it to be swift and blindsiding, and the moment is ripe for it, especially if we have a big selloff day with a few hundred new lows.