January 10, 2022
Dear reader,
The market is flashing warning signs…
Amateur investors have been pouring into stocks for more than a year, and it’s clear that this extreme positive sentiment can’t last forever.
And Ten Stock Trader editor Greg Diamond says many bulls are still missing the bigger picture…
According to Greg, the market’s behavior today means trouble is coming… much sooner than most people realize.
By analyzing past trends and human behavior, Greg is able to predict what the market might do next.
And he believes we could be headed for a repeat of the 2001 and 2008 crashes…
Greg is an expert on technical analysis, and he utilizes a market strategy that’s pointed to every major crash since 1869. And it’s helped him call some of our biggest market moves, including the COVID crash of 2020 – to the very week – as well as the turnaround after the Omicron scare last month.
Greg is holding a free special event this week on Thursday, January 13 at 8 p.m. about his next big market call… He’s so confident in his analysis that he’s calling the exact day stocks will crash in the near future. You can’t afford to miss what Greg is going to say. Sign up for free here.
Today, Greg provides more proof that all is not well in the markets…
More Evidence a Crash Is Coming
Fear and greed are important aspects of market analysis…
These factors can be hard to quantify. But sometimes, they can also be so obvious that you just can’t ignore them.
Take this recent exchange I had with a friend, for example…
Friend: Hey Greg, do you have any fun stocks you’d recommend to me?
Me: What are “fun stocks”?
Friend: I normally just buy exchange-traded funds, but I also like to throw a few thousand bucks on a stock just for kicks… Random stocks are just fun to see if they take off.
Me: We need to talk. Let me call you back next week.
I haven’t called him back yet. But when I do, I’ll explain to him how dangerous this can be.
Thinking that stocks are “fun” or that “stocks only go up” is greedy, yes… But also, whenever someone is choosing random stocks – well, that’s worse than greed. That’s complacency.
On Friday, I outlined the similarities between the market right now and the crash back in 2000. The conversation I had with my friend instantly reminded me of another story one of my former bosses told me… I’ll never forget it because it makes me laugh every time I think about it.
In early 2000, my boss came home after work and found his wife on the computer. He asked her what she was doing…
“Charting,” she said.
“Charting what?” he asked.
“Stocks. One of my colleagues at work told me how to do it.”
“You just called the top, honey!” he replied.
She was charting stocks… She had never traded stocks ever before that time. He wasn’t trying to be a jerk. But when someone who’s hardly looked at the stock market before suddenly learns how to “chart” stocks from a friend, that environment is sure to turn ugly.
He knew the top of the market was in… and obviously, he was right.
When we look at this type of behavior, it’s not to poke fun at inexperienced investors. We all have to start somewhere… It should be a learning experience. We all have a learning curve and our share of failures when it comes to the market.
For our purposes right now, though, this is about understanding human emotion – and understanding the popular mindset at different levels of the stock market.
We’ll likely see more examples like the ones above as stocks continue their march higher… These mindsets usually signal the end of a bull market. History is full of them.
Today, I want to continue from where I left off in Friday’s story with two more stocks I’m watching in the long term.
These stocks don’t indicate that all is well for the markets in 2022…
One of the stocks we looked at Friday was Caterpillar (CAT). Historically, this stock is a leading indicator of the strength or weakness of the economy. When it diverges from the major indexes (like it’s doing now), it’s a bad sign.
What’s even more concerning is that Congress passed the trillion-dollar infrastructure deal in November, and Caterpillar still can’t keep up with the major indexes. Money should be pouring into building projects… And the fact that a stock like Caterpillar can’t keep up is concerning.
Another stock I like to watch is FedEx (FDX). While it’s in a different sector than Caterpillar, it also tends to show strength or weakness in the economy. Take a look…
Now, perhaps you’re thinking that the recent supply-chain issues and lack of workers could explain why the stock is down. Those are fair points, but I don’t care about why a stock is down. I only care that it is down relative to all the major indexes, which is usually a bad sign.
Now, let’s turn to the tech sector. These stocks are soaring, so all must be well, right? Not so fast…
One of the biggest semiconductor companies on the planet is really struggling. I’m talking about Taiwan Semiconductor Manufacturing (TSM), which makes most of the chips for phones, computers, and cars. Take a look…
As you can see, Taiwan Semiconductor rallied with everything else and actually led the way in 2020 – it skyrocketed off the March lows, rallying a whopping 230%, but then topped out in February 2021. It hasn’t had bullish price action since and has fallen behind currently.
Again, similar to FedEx, I know the chip shortage and possible tensions with China are most likely affecting the stock. But that doesn’t matter to me…
A major stock that rallied with the tech sector throughout 2020 topped out early last year, and still can’t keep up with the rest of the sector when it should be leading.
That’s a big warning sign, not a sign of confidence.
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The bottom line is, I’m seeing these stocks that should be rallying with the major indexes (which are at new all-time highs), but they aren’t. And history tells us this is usually a bad sign.
P.S. Have you signed up for Greg’s special free presentation this Thursday? He’s going to explain his winning strategy and share the exact day stocks will plummet in 2022. Click here to reserve your spot for this can’t-miss event.
Regards,
Laura Greaver
Managing Editor, American Consequences
With Editorial Staff
January 10, 2022
