Panic Selling Continues; Trader Dumps Stocks Before Next 20% Drop | Chris Vermeulen

Invesco QQQ Trust (Nasdaq-100 ETF)

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Chris Vermeulen · The Technical TradersBearish

  Nasdaq trend has turned down; he exited QQQ and QLD and expects further tech downside.

  His Nasdaq strategy has turned to a downtrend, which he says means money is flowing out of technology. His stops triggered, so he sold QQQ and QLD and locked in profits. The trend change is the reason for the exit, not a change in the long-term view. He says QQQ is at a 50% retracement and a pivot low, and a close below about $660 could take it to about $555. The transcript reads $5.55, which is likely $555. He says the strategy signals avoiding technology stocks for now.

  “We're actually now have a negative trend, a trend down for the Nasdaq, meaning you don't wanna hold technology stocks at all right now.”at 11:43

iShares U.S. Real Estate ETF

• Chris Vermeulen · The Technical TradersBearish

  REITs are not bear proof and can drop 60-80% in a bear market, more than stocks.

  He warns that people who invest in REITs, naming IYR, would see drawdowns of 60-80% in a bear market. He says REITs are not bear proof and drop much more than the broader stock market. This is the reason he tells people to avoid assuming real estate will be safe during a housing correction.

  “But, I mean, if you're invested in REITs, like IYR or some of those, they drop, like, 60, 70, 80% during a bear market.”at 31:13

US stock market outlook

• Chris Vermeulen · The Technical Traders

  The S&P 500 remains on a buy signal even though the Nasdaq has turned down.

  He says his strategy still gives the S&P 500 a buy signal even after exiting the Nasdaq. The exit is about protecting profits in tech, not a broad market call. He is still long the S&P 500. He points to equal-weight S&P strength and money flowing into defensive sectors as the reason the broad market is moving up.

  “And so the S and P five hundred is still in a buy signal.”at 11:50

• Chris Vermeulen · The Technical Traders

  Utilities and staples rallies are temporary bounces inside downtrends; charts are unattractive.

  He says utilities are in a bear market: their long-term moving average is falling, price is below it, and they are making lower highs. Recent gains are a temporary bounce. Consumer staples are up strongly, but their chart is not attractive. He says buying into sectors in downtrends means being pulled down by the trend, so he is not buying the defensive rotation.

  “utilities are in a bear market. They have been dramatically out of favor. They're trending lower. This is, again, just a temporary bounce.”at 19:57

• Chris Vermeulen · The Technical Traders

  Health care is the one sector bucking the trend, with a bullish bull-flag breakout and rising averages.

  He says health care is the only sector that has been bucking the trend, helped by biotech and strong health stocks. Its chart shows a bull flag breaking out, with all moving averages sloping up and price above the long-term average. He says this is a strong uptrend where money is flowing, so it is the sector he prefers over utilities and staples.

  “You know, health care actually looks pretty good. It's got a bull flag. It's breaking out. All the moving averages are sloping up.”at 20:27

US housing

• Chris Vermeulen · The Technical Traders

  US home prices have large downside risk, as US real estate is more volatile than Canada's.

  He recalls Florida homes before the 2008 crisis selling for about $550k, with his parents later buying the same house for about $175k after the crash. He says the US market is much more volatile in real estate pricing than Canada, and that there is a lot of downside potential in US homes. He says Canadian weakness is being swept under the rug, and that US downside is larger. He also says the banking sector and mortgage access will be hit if the economy weakens.

  “There's a lot of downside potential for some of this in The States. The States is much more volatile when it comes to real estate pricing.”at 34:01

• Chris Vermeulen · The Technical Traders

  Housing prices will fall as banks tighten mortgage lending and job losses spread.

  Chris argues that banks are financially stressed after losing large sums in the market decline, so they tighten mortgage standards and demand strong income and credit. He ties this to job losses, saying most people are losing their jobs and the housing trends are all down. From this he concludes that prices are cheaper in the downturn and that tighter lending makes the housing market better for buyers. The argument is loosely reasoned and partly contradictory, and the mortgage advice that follows is personal-finance guidance rather than analysis.

  “Prices are cheaper, but banks are stressed financially... Problem is most people are losing their jobs. And so the trends are all down.”at 36:31

US Treasuries & yields

• Chris Vermeulen · The Technical Traders

  Ten-year yields have not peaked; the recent bond bounce is a countertrend rally within a downtrend.

  Asked whether bond yields have peaked, he says no. The ten-year pulled back to about a 38.2% Fibonacci retracement after a breakout and multi-year highs, which he reads as a measured-move pullback before higher yields. He says the bond bounce is only an oversold countertrend rally: moving averages slope down and the chart makes lower highs and lower lows. He expects bonds to be sold into and yields to head higher again. He notes the monthly ten-year chart still points to a multi-month rally in yields.

  “These are just short term pullbacks... I think yields are still gonna go a whole lot higher because the trend is still up. Bonds are in a clear downtrend.”at 4:19

Market sentiment, positioning & volatility

• Chris Vermeulen · The Technical Traders

  Leverage turns a 25% pullback into a 50-75% wipeout for aggressive traders using margin.

  He says most traders use margin at two to one or three to one, and some use leveraged ETFs. In that setup, a 25% pullback is effectively a 50-75% crash for them. Leverage amplifies stress and shakes traders out during drawdowns, so buying the dip with leverage is dangerous even when the market eventually recovers.

  “most people are using margin, usually two to one, three to one, and sometimes they're using leveraged ETF. So a 25% pullback is like a 50 to 75% crash for a lot of aggressive traders.”at 17:27

Gold & precious metals

• Chris Vermeulen · The Technical Traders

  Gold and silver are in a bear market; he expects gold to fall to $3,100 before buying.

  Gold's long-term moving average is sloping down and price is below all the moving averages, which he calls a stage-four decline, i.e. a bear market. Silver is in the same position. He says gold is not an asset to hold for wealth growth right now, though it still works as insurance against currency and government failure. The charts still point to $3,100 for gold and $39 for silver, so he plans to buy gold at $3,600 and more at $3,100, and silver as it drops to similar levels. He treats a fall to those levels as a measured-move buying opportunity.

  “Price in all of the moving averages are below it. That's the definition of a stage four decline, a bear market.”at 23:26

Oil & fuels

• Chris Vermeulen · The Technical Traders

  Oil is unfolding as expected, with targets of $107 then about $120 while Middle East tensions persist.

  His oil chart shows a first rally, a pullback, and a 100% measured move. He says this gives two new targets, the previous high near $107 and then another previous high near $119-120. He believes the Middle East problem is here to stay for a long time and oil will drift higher. Oil will not sell off until a recession or economic slowdown breaks demand. He also notes that higher oil tends to push the ten-year yield higher and bonds lower.

  “So we're looking for oil to move up to one zero seven and then potentially up to about one one twenty to the upside.”at 25:13

Canada, Australia & other developed economies

• Chris Vermeulen · The Technical Traders

  Canadian housing faces a big correction, with at least a 20% price drop from current levels.

  He has argued for about a year that real estate will see a very big downturn. Canadian rates are lower than US rates, but he expects mortgage rates to keep rising. If the economy weakens and layoffs follow, the housing momentum will end. Sellers are holding out because they are not under enough financial pressure, while offers come in 10-20% lower. Once pressure builds, sellers will capitulate and the decline will cascade. He sees the correction as a buying opportunity for those with cash, but says it is still early.

  “I believe the real estate market is going to have a very big downturn. I think we're gonna see at least a 20% drop in real estate from where we are for the current pricing.”at 30:34

Banks

• Chris Vermeulen · The Technical Traders

  Banks will be hit hard if the housing market and economy collapse.

  He argues that if the market and economy collapse, banks are the ones holding the bag on mortgages and property losses. He expects the financial and banking sector to be annihilated again. He says banks will try to push losses onto investors or the public, and that mortgage access will get harder in a downturn.

  “if everything starts to collapse, the banks are the ones holding all, like, the bag. And so we're gonna see the financial and the banking sector get absolutely annihilated again.”at 35:49