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Technically Speaking: On The Cusp Of A Bear Market


  • Over the last couple of years, we have discussed the ongoing litany of issues that plagued the underbelly of the financial markets.
  • Over the last few weeks, the market was hit with not one but two "black swans" as the "coronavirus" shutdown the global supply chain, and Saudi Arabia pulled the plug on oil price support.
  • With the markets previously more than 20% of their long-term mean, the correction was inevitable, it just lacked the right catalyst.
  • The market may be telling you something important, if you will only listen.

"Tops are a process, and bottoms are an event"

Over the last couple of years, we have discussed the ongoing litany of issues that plagued the underbelly of the financial markets.

  1. The "corporate credit" markets are at risk of a wave of defaults.

  2. Earnings estimates for 2019 fell sharply, and 2020 estimates are now on the decline.

  3. Stock market targets for 2020 are still too high, along with 2021.

  4. Rising geopolitical tensions between Russia, Saudi Arabia, China, Iran, etc.

  5. The effect of the tax cut legislation has disappeared as year-over-year comparisons are reverting back to normalized growth rates.

  6. Economic growth is slowing.

  7. Chinese economic data has weakened further.

  8. The impact of the "coronavirus," and the shutdown of the global supply chain, will impact exports (which make up 40-50% of corporate profits) and economic growth.

  9. The collapse in oil prices is deflationary and can spark a wave of credit defaults in the energy complex.

  10. European growth, already weak, continues to weaken, and most of the EU will likely be in recession in the next 2 quarters.

  11. Valuations remain at expensive levels.

  12. Long-term technical signals have become negative.

  13. The collapse in equity prices, and coronavirus fears, will weigh on consumer confidence.

  14. Rising loan delinquency rates.

  15. Auto sales are signaling economic stress.

  16. The yield curve is sending a clear message that something is wrong with the economy.

  17. Rising stress on the consumption side of the equation from retail sales and personal consumption.

I could go on, but you get the idea.

In that time, these issues have gone unaddressed, and worse dismissed, because of the ongoing interventions of central banks.

However, as we have stated many times in the past, there would eventually be an unexpected, exogenous event, or rather a "Black Swan," which would "light the fuse" of a bear

This article was written by

Lance Roberts profile picture
Unique, unbiased and contrarian real investment advice

After having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; I have pretty much "been there and done that" at one point or another. I am currently a partner at RIA Advisors in Houston, Texas.

The majority of my time is spent analyzing, researching and writing commentary about investing, investor psychology and macro-views of the markets and the economy. My thoughts are not generally mainstream and are often contrarian in nature but I try an use a common sense approach, clear explanations and my “real world” experience in the process.

I am a managing partner of RIA Pro, a weekly subscriber based-newsletter that is distributed to individual and professional investors nationwide. The newsletter covers economic, political and market topics as they relate to your money and life.

I also write a daily blog which is read by thousands nationwide from individuals to professionals at www.realinvestmentadvice.com.

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