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Due to financial market conditions I am doing less frequent posts for now.

My last post was last Monday before the open and in it I warned that the US stock market was now in a stage four bear trend, because it was trading below it’s 200-day moving average, as I go over in my book Strategic Stock Trading.

And US bond ETF’s are doing the same thing, which is a toxic brew we saw last happen in 2022, that made for a bad year for Americans who only invest in US stocks and US bonds.

Stage four bear trends are typified by failed rallies and an increase in stock market volatility that does bring with it wonder rallies from time to time, that fool people into thinking that they are just in a short-lived correction.

During such times I simply want to step back and focus on the primary trends and not the day to day market action and noise - hence fewer updates.

I want to be patient to see signs that the decline is over to buy.

I also want to use the weekly declines to see what sectors, global markets, and even asset classes are holding up the best - as they tend to lead to the upside once the broad selling is over.

Weekly market action gives information, while hourly moves don’t mean much, and can confuse, so I’m watching the action less.

On Friday, the S&P 500 finished the week down further below it’s 200-day moving average, headed towards its lower 200-day Bollinger Band as its next support level.

The VIX finished up over 31.

Almost everyone has been thinking that this market decline would be like the one of April of last year - in the sense that it would be very short lived, because it would be linked to news impacting the market that would come and go.

Last year it was Trump tariff announcements and this time it was war action, so the thinking went.

But the war is not looking to be as short-lived as people expected when it started and so this time is different from what happened last year in April and has all the appearances of being a much more durable bear trend, like what happened in 2022.

Just like in 2022, it is bonds that are falling in value with the US stock market, as you can see from the LQD corporate bond ETF.

Inflation makes bonds lose value and so do growing debt worries.

Precious metals in past market declines have fallen AT FIRST with the US stock market and then decoupled from stocks as the stock market continue lower. What happens is that the increase in volatility causes some to pair back, to reduce risk, by selling everything to raise cash reserves, and trends that they are up the most on become attractive to sell at least some of.

I have no doubt that this is what has caused gold, silver, and mining stocks to pull back with global stocks and bonds since the start of this war, but now they are starting to hold up with the market.

On Friday, they even went green.

Gold finished that day up $121 to close over $4500, while the DOW fell 793 points and the Nasdaq gave up 2.15%.

The GDX mining stock index finished the day up over 3% too.

The GDX never fell below it’s 200-day moving average and neither has gold or silver on this drop, so their stage two bull trends all remain intact.

It looks like they are stabilizing.

In fact, they may now be starting to break away from the stock market to reassert themselves as safe havens in this time of geopolitical, economic, and financial turmoil.

It will be interesting to see how they do this coming week.

Wars are bad for business, unless you are a defense contractor. People in the markets have done their best to ignore the fallout from this war, by blindly buying stocks, after the war began, but that strategy is now failing and even they will start to doubt and then sell.

That’s what this sell-off is about - people who had no real understanding of the situation, basing their information solely on the statements coming from government officials or political partisan TV shows, now coming to realize that this war is not the easy fun event they thought it was.

If history proves anything it is that wars never go the way people think they will when they begin.

I am looking for a big spike in the VIX to signal a stock market bottom or to see the percentage of stocks trading above their 200-day moving average on the NYSE to fall to at least below 20% to signal an extreme selling washout in the stock market.

As you can see, that level got to 15 last year in April and twice during market drops during the bear market of 2022.

It’s just below 43 now, so it’s either going to take time, possibly weeks or months, or a sharp crash like acceleration of this current downtrend, to get there.

I’m being patient to let this play out.

I am ignoring all news and Trump statements to make my decisions and focusing only on the charts and trends at this point. No one can predict when or how this war will end, including the leaders of Iran, Israel, and the Trump administration.

One final thought - right now stocks and bonds are falling. The dollar has been ticking up so far during this war. If before the end of the year we see stocks, bonds, and the US dollar all fall together that is what you get at the start of a debt crisis.

If that starts they will NEVER tell you about it on Fox News, Fox Business, CNBC, and the other network channels, just like they never told you this war was going to start ahead of time or that the banks were in trouble in 2008 before that October, even though it wasn’t hard to know about either event ahead of time, before the masses saw the news.

You need to understand what a debt crisis is and how it would play out to be aware and prepared if this happens. You need to be ready ahead of time.

This is why you need to buy and read the Ray Dalio book Big Debt Crisis if you haven’t already.

I’m not saying a debt crisis is going to start right now, but it is something we have to understand and beware of - to know what it looks like when it starts, and in financial market terms it consists of a bear market in the US dollar index, stocks, and bonds all at the same time. That isn’t happening right now, but stocks and bonds are both below their 200-day moving averages at this time, like they were in 2022. In that year the US dollar index went up and so far it is up this year too, but that trend could change.

I’ll be doing at least one update a week, and if I see signs of a bottom, or something else important, will let you know, but if this is like last week I may not do another one until next Sunday or Monday.

-Mike

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