Technically Speaking: Tops Are Processes, Bottoms Are Events

In April of 2018, I posted an article laying out 10-reasons why the “bull market” had likely ended for a while. To wit:

“I highly suggest you use any substantial rally to reduce risk and rebalance portfolios accordingly. Why? Because I am going to out on a limb and making a call.’I think the 9-year old bull market may have ended in February.’”

As I stated then:

“In 2015, the market plunged as Fed Chair Janet Yellen brought QE3 to its conclusion and started hiking interest rates for the first time in 9-years. Again, this correction would likely have been substantially deeper as the Eurozone faced ‘Brexit’ which sent shocks through the market. The well-timed phone calls to the Bank of England and the European Central Bank by then Fed Chairman Yellen, to take over liquidity operations stemmed the decline. Also as opposed to 2000 and 2007, the Fed had only just started its rate-hiking campaign.”

“Today’s market correction is more aligned with the end of a market cycle versus the beginning of one. The market is facing numerous headwinds that did not exist in 2011 or 2015.”

Of course, the Fed leapt into action in December to reverse course on their direction of monetary policy which provided the boost stocks needed. However, while the two periods are much aligned, there is a substantial list of headwinds that exist currently:

  1. The “debt ceiling” will return with a vengeance given the deeply divided Congress as the 2019 Government budget ends. There is a risk of another Government shutdown looming.
  2. Earnings estimates for 2019 fell sharply as I previously stated and 2020 estimates are now on the decline.
  3. Stock market targets for 2019 are too high along with 2020.
  4. Rising geopolitical tensions between India, Pakistan, Russia, China, Iran, etc.
  5. The effect of the tax cut legislation has disappeared as year-over-year comparisons are reverting back to normalized growth rates.
  6. Economic growth is slowing.
  7. Chinese economic data has weakened further.
  8. European growth, already weak, continues to weaken and most of the EU will likely be in recession in the next 2-quarters.
  9. Valuations remain at expensive levels.
  10. Asset prices remain well deviated above long-term trend lines.
  11. Long-term technical signals remain negative.
  12. Trade wars with both China and Mexico are weighing on consumers, exports (which make up 40-50% of corporate profits,) and economic growth.
  13. Rising loan delinquency rates.
  14. Auto sales are signaling economic stress.
  15. Housing continues to weaken despite low interest rates.
  16. The yield curve is sending a clear message that something is wrong with the economy.
  17. Clear stress on the consumption side of the equation from a sharp slow down in retail sales and personal consumption.

I could go on, but you get the idea.