Retesting Explosion
Conditions are coalescing for a repeat of the August global market crash. This time I predict it won't be forgotten so quickly...
But first let's set the table for this impending event:
September 3rd, 2024:
"Americans have rarely been this giddy about the stock market"
U.S. households’ stock allocations have steadily inched up this year, according to JPMorgan estimates, and recently accounted for around 42% of their total financial assets. That is the most on record in data going back to 1952"
Ok, now back to the show:
Step back to recall the conditions that led to the now long forgotten August implosion: First off, it occurred near the end of the Q2 earnings season. It coincided with Fed and BOJ meetings and the monthly jobs report. One of the primary drivers of the global RISK OFF event was the chasmic policy divergence between the Fed and the BOJ which has grown even larger in the meantime. The biggest losses were in Tech/AI stocks which subsequently have staged only partial recovery off the lows. Stocks making new highs in the meantime were solely the defensive recession stocks.
Fast forward to this week for comparison. On Tuesday in Japan, BOJ Governor Ueda reaffirmed the BOJ policy to continue raising interest rates as the Japanese economy strengthens. Right when that news came out, the U.S. overnight stock futures tanked. Tuesday was the worst down day since the August 5th implosion. Writing on Wednesday, the market is attempting to stabilize ahead of the Friday jobs report. During the pre-crash week in August, Wednesday was the high of the week. On that Thursday Amazon and Apple both reported earnings. Amazon in particular was weak due to increased AI spending amid slowing cloud (AWS) demand growth. That news came out the night before the weaker than expected jobs report imploded the market on Friday. In an ominous repeat, today we got news of much lower than expected job openings. I don't normally try to predict single data points, but needless to say that does not bode well for Friday's jobs report. Similar to August we will get another key earnings report this Thursday evening from Broadcom which is another semiconductor bellwether stock.
In addition to all of these eerily similar data points that led up to the August 5th Monday explosion is the fact that all of the major global markets are currently rolling over and heading for a retest of the August low. Nvidia in particular has been bidless since their earnings report last week. In addition, we got news last night that the company is now in the crosshairs of the DOJ for Anti-Trust violations.
Which gets us to the charts.
This Nasdaq chart shows that the Tech sector is at the same key support that broke in August after the weak jobs report. In other words, the market is weaker now than it was by the middle of that pre-crash week.
Bitcoin holds just above the low from August and the downtrend is clear:
Recall my last post demolished the "bullish commodity" thesis. Commodities are now at 2024 lows.
Arguably the weakest of all global markets.
That bullish prediction didn't last :15 minutes.
Nvidia got clubbed yesterday for the largest one day market cap loss in stock market history. Pundits still haven't figured out that the AI hype cycle is OVER.
Yesterday was the worst day for semiconductor stocks since March 2020.
Last but not least as I write the $USDJPY carry trade pair is now at the August lows while the Global Dow is coming off a new all time high that was made after the August crash.
Now I predict this impending crash will demolish the bullish rate cut hypothesis ahead of the September FOMC.
