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S&P 500: The Next Stock Market Crash May Have Just Started


  • The S&P 500/SPX had run up by nearly 50% since its mid-March lows.
  • However, leadership became extremely thin in recent sessions as the "Big Five" and other large tech companies did much of the heavy lifting.
  • We also noticed massive underperformance in the Russell 2000/small-cap index yesterday, which alarmed us quite a bit.
  • I expect this "pullback" to continue.
  • Target correction range is from 12%-20% from recent highs, or about 2,850-2,550 in SPX.
  • This idea was discussed in more depth with members of my private investing community, Albright Investment Group . Get started today »

Stock market crash

Image Source - Is the next stock market crash just starting?

The S&P 500/SPX (SP500) is down by around 80 points this morning, now testing the key support level at 3,100. It looks like that the economic reality is not nearly as constructive as stock market optimism has been implying in recent weeks.

S&P 500Image Source

COVID-19 is not going away, and as mentioned in previous articles it's likely to continue to weigh on economic growth as well as on stock prices going forward.

The Second Wave

More than a dozen states are showing significant resurgences in Novel Coronavirus/CV cases. Naturally, this will likely weigh on consumer confidence, employment, other data, and overall economic growth.

CoronavirusImage Source

However, is this really the second wave of the CV? Not likely, as this is probably just the extension of the first wave due to premature "re-openings," relaxed attitudes, densely-populated protests, and other factors. When the second wave comes it will likely be in the fall, coupled with the cold and flu season.

Please keep in mind that this could lead to a certain level of pandemonium, as many people will not be aware whether they have the flu, a cold, or the Novel Coronavirus. There will also likely be uncertainty about the outcome of the election by then, another negative factor for markets overall.

Market Outlook

We've been cautious throughout this rally, as it was artificially induced by enormous Fed stimulus, and we saw an evident disconnect between the real economy and the stock market. Furthermore, I never believed, and still do not believe, that the economy will return to "normal" any time soon. In Q2 we chose to allocate a large portion of our portfolio to the gold, silver, mining/GSM sector, as well as to Bitcoin and other systemically important digital assets. The reasoning behind this

Want the whole picture? If you would like full articles that include technical analysis, trade triggers, portfolio strategies, options insight, and much more, consider joining Albright Investment Group!

This article was written by

Victor Dergunov profile picture

Victor Dergunov is an independent investor and author with 20 years experience. He preaches diversification and shares investment ideas across all market sectors. Victor aims to help readers build portfolios that perform well in all economic conditions.

He runs the investing group The Financial Prophet where he covers all market sectors and shares strategies for well-diversified investing. Features include: the All-Weather portfolio, trade alerts, technical analysis, daily reports with his latest updates, covered call strategies, and direct access in chat. Learn more.

Analyst’s Disclosure: I am/we are long A DIVERSIFIED PORTFOLIO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article expresses solely my opinions, is produced for informational purposes only and is not a recommendation to buy or sell any securities. Please always conduct your own research before making any investment decisions.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (451)

nope the crash didn't happen....
M Elan profile picture
no crash can happen when you're on a permanently high plateau
Has the crash started
WWS Swiss Financial Consulting SA profile picture
Good article. The markets are extremely volatile, and caution is needed to assess risk carefully. Overbought markets usually have a correction. @Victor Dergunov is right to think that there could be a severe pullback. Q2 results will be terrible,and that could trigger selling.
Victor Dergunov profile picture
@WWS Swiss Financial Consulting SA Thank you, yes a strong pullback into Q2 earnings would be favorable, and this is what we are banking on right now. What will occur after Q2 earnings should become more apparent within the next several weeks.

This is not a market you should stay long or short in for a prolonged period. It is better to be nimble, as volatility brings enormous opportunities, all be it with increased alpha and risk as well.
Lord100 profile picture
"GLAMOROUS" MEGA Caps are MASSIVELY overvalued. "Who" R they going to sell too 7 TRILLION? 25% OF US Mkt cap. These need to be sold for mkts to go down..

#MSFT 1.55T, Up 600B in 2M,140B 1Wk
#AAPL 1.55T, Up 700B in 2M, 160B 1Wk
#AMZN 1.35T, Up 700B IN 2M, 120B 1Wk
#GOOG/FB/V 2.5T, Up 900B IN 2M

Sell any index etfs like QQQ, XLC, XLK and SPY Index ETF hugely skewed to mega caps.
M Elan profile picture
pay for intact monopolies as long as governments are willing to leave them intact
daneedwards9 profile picture
@Victor Dergunov Thank you for the insightful article. When do you think the SPX will reach the levels you just mentioned in your article? How far up do you think the rally will go after? Thanks.
Victor Dergunov profile picture
I cannot disclose exact price targets, as more detailed variables are primariy available to our investment group members seekingalpha.com/...
But I can speculate and say that the SPX could be at 3,500 by year end, or it could be far lower...
M Elan profile picture
You seem less certain than some posters. Fun to smell all the animal spirits around here.
Victor Dergunov profile picture
I am quite confident in my calls.... Market looks like it is headed lower, short-term, possibly longer and deeper...
I would have a lot more respect for this article if it wasn’t your 4th or 5th bearish article since March 31st. Anyone who followed your advice and went short would have been absolutely smoked. I was really bearish too, then realized the market was overly bearish in the short term. Now, I think it’s finally set to head lower, 2nd half of the year should be pretty disappointing when numbers start coming out
Rafatali profile picture
Fully agree
Victor Dergunov profile picture
@CF42 I never said I went short, and we've been long the market for more than 10 years...
When numbers come out nobody will care. It's all going to be in forward looking statements. Such as business is picking up... projected future earnings. That's what will trigger a move higher. Markets are already expecting dismal numbers
Vandooman profile picture
Or it may not crash. We are only a few months from vaccines.
Michael Bryant profile picture
@Vandooman :

It only took one month to wipe out 30% on the S&P 500 ($SPY) a few months ago. It will only take 4 consecutive days like Thursday to bring the index back down to the March lows. If we fall, it won't take a few months. http://schrts.co/BBNkvAvd

As for vaccine, 40% of Americans say they won't take a vaccine if there is not sufficient safety data. Plus, $INO's and $MRNA's vaccine won't start Phase 3 trials till July or August. They may have one ready for emergency use by winter. But it takes time to mass produce after Phase 3 trials if successful and FDA approval.
@Michael Bryant

I think the plan is to start producing the most promising vaccine(s) before it's approved (Which may be what you are saying).

I finally found out how many additional deaths there are in the US from all causes YTD. 1% higher this year YTD than in 2019, which was 1% higher that in 2018, which was 1% higher than in 2017, which was 2% higher than in 2016. So for whatever reason American mortality rates are growing slowly. Regardless, the 2020 numbers show that whatever lives were saved from the covid by the lockdown, they were more than offset slightly by deaths from other causes, presumably due in part to the lockdown: suicides, drug overdoses, alcoholism, domestic abuse and other violence, and deaths due to fear of going to the hospital for other conditions or outright denial of treatment for "elective" procedures.
Illuminati Investments profile picture
"So for whatever reason American mortality rates are growing slowly."

Growing because Americans are growing...fatter, that is.
Vandooman profile picture
There have to be fewer traffic deaths.
Population grow
Mamadou Cherif Diallo profile picture
the solutions go fare a way with this dominant system. the capitalism is a failure. we must change
Tack profile picture
"Socialism is the philosophy of failure, the creed of ignorance, and the gospel of envy.”

“The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries.”

-- Winston Churchill
Illuminati Investments profile picture
@Tack Ha, I was just gonna post that second quote.

Great minds...yours and Winston's, I mean.
Vandooman profile picture
To paraphrase Churchill's comments on democracy, capitalism is the worst possible system, except for all the others. The vast majority of communist countries have dumped socialism. Capitalism creates wealth. In the USA the poor drive used cars. In a communist country no one has a car.
soleprop profile picture
First wave, second wave, continuation of wave -- what difference? Just so long as those carelessly abandoning social distancing are aware they are taking a chance on bending down very low between their legs and kissing their sweet ass goodbye. If I were a meat packing plant employee ordered to work by the orange prevaricator, I'd be pooling my money with all the other workers to kidnap it and send it as the last pig down the line. They are experiencing casualty rates higher than soldiers see in modern war.

Betcha give all those rioters a big hall pass when it comes to complying with CDC guidelines.
soleprop profile picture
@Seeking Alpha Junkie
Nope, they're just as stupid as those advocating removing social distancing and premature re-opening of dangerous and unnecessary businesses.
Vandooman profile picture
First, no one is being forced to work. Anyone is free to quit. Second, we have 320 million people to feed. Third, your TDS is utterly boring and demeans you.
Freigeist profile picture
Thanks for clarifying. I thought it was just a normal pullback within a new bull market.
starcorral profile picture
The legacy of morons, dipsticks, self proclaimed Nostradami, ANALysts, etc seems to have paved a road of poverty and terror through every aspect of American civilization. This nonsense comment is as valuable as wet corrugated boxes littering a divided highway.

Once - while driving from southwest Missouri to Memphis, TN.- I found myself listing to NPR (National Public Radio) as scientists - all PhD's in multiple fields - discussed the significance of a small fish which become endangered due to the management of waterways to prevent flooding, assure adequate annual water supplies for human consumption and irrigation, and power generation.

As it turns out - after three hours - the scientists agreed that nothing could be done today other than to monitor activity promoting water management and to take up positions to protect the little 4" fish from human encroachment.

As it turns out, the little fish is protected from predation by virtue of glands which excrete a bad tasting slime land animals and other fish find objectionable. In fact there are were many cases of large schools of the fish causing contamination of waterways under certain climatic anomalies.

When the program ended at 5:30 AM, the scientists agreed that the role of the little (nuisance) fish must be the center of future discussion as was the infamous "Snail Darter" fish which postponed an east Tennessee Dam project for a quarter century preventing what was estimated at $15 billion in delayed benefit of a largely impoverished area.

Garbage out yields garbage in. This NPR radio show presented such a laughable worthless waste of human thought I figure it was "as bad as it can possibly be". Now - after 10 years of investing, I realize that talking and typing nonsense is a disease for which there is no cure.

My expert opinion of the future is as follows: "Things in the future will not be the same as today; they will be different." See if you can modify your behavior based on this comment and better yourself down the road. GOOD LUCK.
Or more simply put most talking heads are wrong.
Vandooman profile picture
If one thing has been learned in these time it is how often "experts" are totally wrong. My favorite examples are Paul Krugman saying the internet would have no more impact than fax machines and later that we would be in a depression by the end of 2017. Shows what a great country we are that people still read this guy.
Illuminati Investments profile picture
Paul Krugman is so clueless that he accidentally invented MMT but didn't realize it.

M Elan profile picture
Some real animal spirits here. Consensus seems to be that June 11 was a rinse job.
nochance profile picture
My opinion is you are wrong. Amazing how the doom and gloom that people like you wish to speak about only comes out after a bad day. So funny. We already bounced today 50 points on futures today.
Rafatali profile picture
Today the same author will write about optimisim and market bouncing
daneedwards9 profile picture
Victor, thank you very much for the helpful insight. I look forward to buying the nice dip here.
"The Next Stock Market Crash May Have Just Started". Or not.

That about covers the possibilities.
nochance profile picture
Amazing article. The market will either go up or down. Such insite Lol
Rafatali profile picture
I liked this comment more than the article
A lot of big managers missed the boat in March so it is to their advantage to pump up a scare tactics so they can point to their clients and say look at us we were right even if we were off by months and months and missed a huge rally and I can scoop up the shares have plus retailers abandon in their panic after they made the initial right decision.
Or maybe it hasn't.
Cousinspizza profile picture
The market Tell was when Druckenmiller said he might have been too pessimistic on the market 3 days before the drop.
Sometimes I wonder I why bother to read SA's market strategy. Stating the obvious facts based on anecdotal data and dime-a-dozen trivia should be censored.
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