For those who follow my writings and always observe the difficult fluidity of entering the overvalued American market, perhaps now some opportunities have begun to appear to lose fear and dive into some shopping. I continue to say that we probably haven’t reached the bottom worthy of all-in, but, as we will never know exactly at this moment, the image below is used to ensure greater security in possible purchases of assets.
The image with history since 2018 shows us good times that the Nasdaq index has taken a dive in relation to the massive selling of investors. For bargain hunters out there, nothing better than those promotionally priced assets to keep your average price low, increase your profit prospects, and always stay in the wrong path of the crowd. It is considered that when corrections reached -10% of the index, it was a good time to purchase reputable historically “expensive” assets. On January 21st the Drawdown index approached -13%: keeping most investors selling their assets with some bad outlook on futures markets.
The individual who goes the opposite way of this buy/sell flow will always maintain better results than most.
FED vs S&P
The Federal Reserve also helps bring the indexes down at crucial moments, of course. Below demonstrates that the US Central Bank has started to taper, as reported in previous reports (RED LINE) and still intends to reduce further throughout 2022.
The S&P 500 index closely tracks this Fed asset process and could still fall by approximately 20%. The S&P reaching 3500 points would not scare me and would still go according to my recent studies. I believe this will not happen because the market, mostly dominated by the Artificial Intelligence of Big Investors, manages to capture events of this type to enter with a high purchase process in undervalued assets: making a rapid positive parabolic effect on the index main.
The next graph showing a history since 2001 demonstrates the relationship between the SPX composition (markets) and the manufacturing (production) index of companies. It clearly shows us an interesting faithful relationship of SPX corrections ( Light Blue Line) and already indicates that this index will probably enter a correction of the same 20%.
In the correlation between Land Logistics (Orange) and the S&P 500 (Purple), the S&P correction should reach approximately 3000 points. Remembering that currently it is at 4350 points.
As I don’t have a crystal ball to know about the future – nor do I want to -, there is a good opportunity to gradually acquire good assets that are already very cheap compared to to its Fair Value.
But this last chart keeps me a little more apprehensive about the healthy future of world markets. As much as emerging markets are still very cheap relative to the American, and the American is also in the process of deeper correction, the sustainable health of China’s bonds have collapsed worthy of huge financial bubbles. Historically, every time something worldwide has occurred of this proportion, there have been deep recessions over the next few years.
Emerging countries will suffer greatly from a Chinese recession.
The recession is coming! This I have already commented on many previous reports. Let’s get ready!