Recent Commentary on the Down Economy
The Technicals
2022’s first half was the worst half to a stock market year in the last 52 years. This saw the S&P 500 move down from 4,818.62 to 3,636.87. This is a range of 1,181.75. Of this range, an ideal fibonacci retracement (bear market short-term rally) would be 61.8% back up in this range. That takes us 730.32 up from 3,636.87 which gives 4,367.19. Yesterday’s high was 4,325.28. This high was within 1% error of the ideal 61.8% Fibonacci retracement.
Thus, the 50 Week Simple Moving Average of the S&P500, as a further catalyst for resistance, will reject the S&P500 down, thereby allowing for the horrible stock market downturn to continue.
That said, the first half of 2022 was the worst in 52 years, the third quarter was one of the best, and the fourth quarter may end up being the worst stock market quarter on record. Here is a visual:
Weekly Chart: Both the 50 Week Simple Moving Average and the completed 61.8% Fibonacci Retracement are now serving as the catalyst to resist/reject the S&P500, thereby allowing for the continuation of 2022’s worst market downturn of all time
The Daily chart is just as bad: In this case, the price is rejected by the 200 Day SMA
1929-crash-like Margin Deleveraging
FINRA Margin Statistics has been updated to include July. As expected, we got a slight reprieve in debit balances in customers’ margin accounts. Nevertheless, graphing the data and adjusting for the near-record inflation for each data point, we can see that we are still in the worst bubble by value in the history of the stock market.
Fibonacci of this graph shows that Margin has to collapse up to $370 Billion more from August’s expected margin value), depending on the strength and speed of the deleveraging.
FINRA Margin Totals, Adjusted for Month-by-Month Inflation. Dotcom crash (left bubble), 2008-2009 crash and great recession (middle bubble) and the current bubble (right). Fibonacci retracement values are listed for 61.8% and 78.6% of each deleveraging period. One can observe that the bottom of margin deleveraging bottoms within that range, depending on the strength and speed of the unwinding. (61.8% seems to correspond to slow and weak, and 78.6% seems to correspond to fast and strong). The data shows that the market will continue to deleverage and crash
TLDR:
Unfortunately, summer is ending. The short-term rally has expired, as technicals show three problems for the stock market: 1: A perfect rejection off the S&P500’s 50 week Simple Moving Average, 2. The 61.8% retracement already happened, and 3. A perfect rejection off the S&P500’s 200 day Simple Moving Average. In a 1929-like scenario, total margin (and adjusted for inflation) shows that we are still in the largest margin bubble of all time. Fibonacci levels on the inflation-adjusted FINRA margin data show that the market has to still undergo up to $370 Billion of deleveraging. Therefore, I am hereby predicting that the fall and winter months of 2022 will be some of the worst months in stock market history. Leading market strategists such as Dimon, Zuckerberg, Musk, Novogratz, and even Warren Buffett concur, and some say that 2023 will be a Depression. Will 2022’s crash lead us into ‘the greatest depression,’ and do you think Warren Buffett will die [either because of or] during this crash/depression? Please provide your thoughts and comments below.
