Trend Reversal & Warning Signs and Potential Risks for next 3 months

 
Note: The screenshot of Tuesday’s warnings & predictions is at the end.

This Tuesday night, I mentioned the following warning signals and predicted that “around Thursday or after, the equity market trend will likely reverse lower”:

1. This Friday’s CPI prints will very likely remain high (very strong energy、food & housing prices，and high inflation expectations)；

2. For the Fed’s interest rate meeting ended on June 16^th，the FOMC dot plots will very likely show that, there will be a rate hike this September（most likely 50BP）which is quite different from what the market had expected since the market low on May 20^th；

3. Very likely some Q2 quarterly report pre-warnings；

4. Uncharted waters ahead during the historical big Fed’s balance sheet reduction era；

5. 10-year yield around 3% again；

6. Rising 5 and 10-year real interest rates, with more room to the upside for the next 3 months or so；

7. Widening high-yield credit spreads；

8. Cash deposited into the Fed’s overnight reverse repo facility is now again above $2 trillion, which is an indication of very strong risk aversion；

9. Relatively low VIX around 24 will be very hard to be sustainable；

10. Recently, the Chinese authorities have made the determination to maintain growth at all costs, thus resulting in the phenomena of short-term asset shortage, dominated by periodic risk appetite, but surely without matched improvements in fundamentals, thus leaving obvious hidden risks for the medium and longer term.

By far, some prudent measures taken can alleviate the short-term risks, such as taking at least some chips off the table for the long positions, and shorting the rallies to hedge. The overall trend of de-globalization will be very hard to reverse, in a world with all kinds of contradictions and being gradually torn apart in some weakest areas already. Again, a rock solid bottom is surely yet to come.

A paragraph from May 12^th:【With S&P 500 around 3865, very short distance away from the bear market mark at 3855, for short positions, as a prudent strategy, except the ones being hedged through options or the mini-futures, it's better take the chips off the table, and wait for better opportunities to short the rallies again】, with the screenshot can be seen in May 14^th article 《Tradable Bottom & Expected Placebos, Contemporary Nifty Fifty, Outlook & Reviews》https://marcohedge.blogspot.com/2022/05/tradable-bottom-expected-placebos.html and in which, the call in middle May for a Tradable Bottom & the relatively conservative attitude toward the magnitude of the oversold rebound have been proven so far so good, even though, S&P 500 around 3865 wasn't the absolute short-term market bottom then, but close enough.

A few short paragraphs from my January article 《End of a Currency Carnival Era，Rising Global Stagflation Risk & Investing Strategies》 https://marcohedge.blogspot.com/2022/01/end-of-currency-carnival-erarising.html：【Shorting long duration shall very likely be the key for most of the time in the near future】；【It's not that prudent to expect a very strong rebound, and when that happens, it will present a good opportunity to sell into or going short, as very likely we haven't seen the rock solid bottom yet，which could be around 4000 for S&P500 in the first half, after considering the Pendulum Effect – momentum to the downside】；【when quickly tightening financial conditions somewhere next year leads to widening corporate credit spreads, then things could get ugly, even with the risk of huge debt induced deflation coming onto the table】；【some parts of the world have already fallen into recessions, with the US may have the risk to follow within two years】, and some subtitles with great foresights, such as “II、Firm belief against hyper-speculative ARKK、MEME & SPAC, great hedge to value investing, and swing trading”；“III、Slowing growth and earnings multiple contraction”；“V、Noticeable China's growth slow down”.

All information, for educational purpose only, not deemed as investment advices.