Market Crash?

What looked like a great run from October ‘22, and more recently from Dec ‘23 appears to be the end of the bull market. I had always thought we run for 7-10 years through a business/economic cycle, but here we are short of two years. I have never thought measuring market events based on time was a good idea, as I think future movements are due to react faster than ever before.

Regardless, very key ratios were looking to reach their Dot Com level highs:

  • QQQ/DJI

  • SPY/DJI

  • XLK/SPY

  • SMH/XLK

  • XLK/IWM

  • SMH/SPY (1.618 fib level)

Other levels were stagnant or sideways:

  • High Beta : Low Vol

  • Junk : Investment Grade

  • Inflation : Treasuries

  • Crude

  • USD

Some may say the signs were there, but on the positive side:

  • Russell 2000 broke the 38% retracement after several attempts (may have been an exhaustion rally)

  • Homebuilders (XHB) had a false topping pattern and a strong rally from there

  • QQQ and SPY had not been oversold since the ‘22 highs

My thoughts were that the bull market could not end with XLY and XLU below previous ‘22 highs, XLC/XLB/XLF/XLE/XLP all at ‘22 highs. No way we could end when we’re about to have the tailwind of rate cuts coming. The rally in staples and utilities had to be broadening breadth.

To see market leaders sell off so hard, despite dip buying and being stopped out of all trades from the Thursday sell off was hard. I felt like i was reacting emotionally and closing the trades on Friday, expecting it to rip in my face after seeing my portfolio drop more than 30% from my personal highs back in March.

Turns out, selling was the best thing I could have done. Panic carried over the weekend. Bitcoin fell from a pivot high of $70,016 to a low of $49,557 in less than a week. This was the fear I was expecting to see in Bitcoin (not the easy dip back in July). This was the shake out of the paper hands that has always been talked about. Despite the VIX opening on Monday triple where it closed on Friday, over fears of Kamala, Japan’s crash, higher-than-expected unemployment, etc.), I bought a 2x levered Bitcoin ETF with the expectation that it will be first to rebound. This may be a revenge trade, as I have consistently been bullish with high values and sold into low values.

At this point, I want to see some stability. It may take months or until the end of this year, but I would rather be late, I would rather protect against the downside carefully. From this, there will be a face ripper and I want to be a part of it.