(Kitco News, Mon. Jan. 30th, 2023) – The S&P 500, which recently rallied 6.6 percent over the past three months, is due for a significant crash, 37 percent down from current levels. That is according to Chris Vermeulen, Founder and CIO of The Technical Traders.
“I honestly think that the S&P 500 could fall another potential 37 percent, roughly, from current levels,” he predicted. “That is enough to create a lot of damage, a lot of stress, lots of bankruptcies, you name it.”
However, he added that gold and silver are set to “take off” amid this otherwise bearish market.
“This is when precious metals and miners take off,” he claimed. “We’ve seen this happen over and over again in past bull-bear market cycles.”
Vermeulen, who has over two decades of experience in financial markets and trading, spoke with David Lin, Anchor and Producer at Kitco News.
Market Cycles
Vermeulen is a disciple of Stan Weinstein, who popularized so-called “stage analysis,” a method of analyzing financial markets.
Explaining Weinstein’s theory, Vermeulen said that markets have four phases. Stage 1, the “basing phase,” occurs when a security reaches its bottom, preparing for its next bull run. Stage 2, the “advancing phase,” is when a bull run occurs, leading to profitable trading. At Stage 3 there is “topping,” when markets have reached their peak and there is a lot of volatility. Finally, Stage 4 is a bear market “Decline Phase” when markets reach another bottom, back to Stage 1.
Vermeulen said that “people are thinking we’re starting a new bull market phase [Stage 2], but if we actually look at the emotions of market participants… we’re really in this complacency stage [around Stage 3], where people are thinking that the next rally is about to start… The bigger the move in precious metals and miners at this stage, the more likely we are to have a Stage 4 Decline, where we go into a real, full-fledged bear market.”
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Investing Strategy
In this “Topping Phase” of volatility, Vermeulen said that he is not trying to execute swing trades, preferring to take a more conservative approach.
“We don’t really know the future,” he observed. “We just have to manage our risk and our positions as the market moves… I’m not huge into forecasting or trying to predict where things are going. I don’t try to sell tops and buy bottoms. I wait for a top to happen, and I get out when it starts to roll over… It’s not about playing the maximum extremes. It’s about playing the safe middle sections of these trends and taking advantage of them.”
He added, “I’m all about trying to get the best returns with the least amount of trading, which is the opposite of what traders want.”
Posted by:
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com