Stock Market Update - More to Come

The following is for information purposes only and IS NOT financial advice.

If you listen to the mainstream media, then the markets are rebounding and the emergency in the markets is over.

Luckily, I know the MSM is full of shit. Absolute... festering... shit.

Now I'm going to break it down to you. But before I do, I'm not saying that I know what the markets are going to do. I just look at the facts and follow the probabilities.

Here are the facts:

While the DOW may have rebounded 50%, the same cannot be said of the S&P. Understand that the DOW is just a headline index. It consists of 30 stocks... not enough to be statistically significant and those stocks change over time as poor performers are given the boot and replaced with fresh meat. It's a loose gauge. That's it.

If you want to know what is really going on, you need to look at the S&P. The S&P has not retraced 50% and remains below the weekly 20 period moving average.

I occasionally look back at the bank position reports to get an idea of where the banksters are leveraged. According to these reports, the banks went significantly net short after Trump was elected and remained short ever since. Let me say that simply - Banksters are betting on a market downturn and have been since Trump was elected.

Next, we continue to monitor the bond markets closely. While the credit markets (HYG) have bounced a bit along with the stock market, corporate bonds (LQD) and treasuries (TLT) have not. This means there is a strong probability that the bond market will break down further.

In addition, as I scanned the charts after today's (Monday) close I am not seeing a lot of buillishness. On a 10 minute chart, I am seeing many stocks forming a rounding top below the 200 period moving average. On a short term basis, it looks like we have more downside.

Lastly, we are beginning to see more signs of contagion as different trading firms like Tradestation (confirmed) and E-Trade (rumored) have begun to change their margin requirements. This effectively creates a MARGIN CALL for investors who, up to yesterday, had positions on margin. This is going to create more volatility in the markets... guaranteed. For the record, we haven't seen this type of margin activity since 2015 and we know that was truly the beginning of the next financial collapse.

Now it looks like the market is ready to resume it's move lower. We are not yet seeing any major indications from central banks that they are willing to double down AGAIN and continue to inflate the global economy. This does not mean it won't happen.

When we consider these facts, it's hard to deny that there is more downside. The S&P is likely to revisit the weekly 200 moving average (around 2200). It's important to note that 2200 is also the approximate market level that the banksters took a large net short position after Trump got elected (see CFTC Bank Position reports above). If the DOW does the same, we're talking about a move down to around 20,000. That would be a 6000 point drop. It would be a bear market (greater than 20% correction).

If it gets that low, then there will be additional stresses along the way that will reveal the systemic risk in the markets that are more prevalent today than in 2008. I have said all along that the market cannot correct without crashing. The only thing that can stop it is the central banks via hyperinflation of their respective currencies.

Regarding Bitcoin, while it may be a good place to start scaling back in, it might be a wiser move to wait until BTC moves back above 10,000 and does a successful test of that level (retracement and move higher). This is also where the daily 20 period moving average is (20ma is currently around 9500). If it can move above both the 20 period moving average and 10,000 and form higher lows off that level, then this would be a good entry point for a cautious investor.

Act Accordingly,

The Market Vigilante