We are on the precipice of a major market selloff over the next several months. However, this is likely a few days a way here, and it’s time to be very careful.
Employment - the main driver of equities, is sick across the board. Every system I track, regarding all the various ways to “measure the elephant,” are short. Just look at YoY payroll tax receipts collected, a deep look under the surface of the labor market:
Bull markets do not run on sick employment markets.
Breadth has been pathetic, this is no surprise to anyone with a pulse. Again, these are hallmarks of the last gasp of a bull run, not a new, burgeoning, “Roaring Twenties!” type era. Even the daily A/D line is unable to make new highs:
The weekly advance / decline is even sicker, having built a huge head-and-shoulders here since the late 2021/earl y2020 highs at the head:
But the big clue selling us of the top is the other of the major drivers of equities, the “bug pillars” as I call them (there are six of them) which is sentiment. This one only matters when the readings are extreme but then you better sit up and pay attention.
And we’re there.
Consider my favorite measure of sentiment, the difference between the fourth month back and the seventh month back in VIX futures:
I like it because it is a true “money-in-the-market” measurement - not what people are saying, but what they are doing. It is un-arbitrageable, and therefore “pure” in that sense. The carry is once again over 10%, which is extreme, last seen last Spring.
The weekly NAIMM numbers, posted weekly on Thursdays, has yesterday’s reading as the highest since November 2021:
The weekly volume bars went off both for NYSE ad Nasdaq. We are waiting on the daily.
We are about to continue the bear market that began in early 2022. The entire run from the 2022 lows to the recent new highs has all been part of normal, major bear markets, a characteristic of the interim rally that fools everyone into believing a new bull market has begun.
Again, we must retain perspective. Do you really think the “Everything Bubble,” a run that began in early 2009, punctuated with smaller selloffs up to the violent covid one, then extended into the post-covid, helicopter money fueled top in everything from stocks to real estate to bonds to NFTs, sports wagering for the kids, etc., ended with a mere 20% decline, then rapidly went to new highs in some of those assets (stocks, bitcoin, residential [only] real estate [in some cities]?) Yes, even the “having then continued” “Everything Bubble,” was selective at the end.
No, everything gained since October 2022 will be taken out, and likely in this next Spring/Summer selloff. Once that one - the October 2022 low gets taken out, look out.
In the options market, the short side s where the big money can be made quickly. Unlike the upside, the downside sees not only price, but volatility work in favor of the long option holder on the right side of such a market.
We’ve even had weekly volume bars last week on both NYSE, and Nasdaq, a sign of the top.
For now, we sit tight.
Paying subscribers will get the notice when we have a daily sell signal.