Financial Stress Like in 2020 and 2008

I covered BXMT a few times last year. It was one of my "crash" targets. It is rolling into crash territory now. Some resistance around, conservatively, $16.50 per share. Below that it can free fall. If that happens, we'll be in a full-blown financial crisis of some degree.

The other side of the market is the Nasdaq. The NQ continues holding up. It needs to break 12000 and not look back for a full-blown bear move to get underway.

The Nasdaq's reslience, really the whole market's, speaks to the still extremely bullish sentiment within the market and the trillions of inflated liquidity sloshing around. The behavior of banks, commodities and so on are now hinting that this money will be deflated and sent to money heaven. Investors can hedge risk of bailouts and supercharged inflation with assets such as gold. Until there is some major pain however, I do not expect the Federal Reserve will go into full bailout mode because it will risk, with signficant probabiity, even higher readings the inflation indexes. If inflation goes up and rates with it, more banks fail. If inflation goes up and the Fed does what they did for SVB Financial, inflation goes higher still and takes down the whole economy. They're trapped and so are all the bulls that aren't hedged.

Trendlines Breaking or Soon Will Be

BXMT is giving me financial crisis vibes. It is one of many commercial lending and mortgage REITs out there, all getting blasted today.

Boring areas of the market start breaking in bear markets.

Financially-engineered (read leveraged) makes of spices. Many of these types of companies are out there. They lived by QE and now will die by higher rates.

BOeing and FedEx are sitting above very long-term support. If they break, there is no support until far lower.

I'm adding some energy shorts here with it outperforming today. I expect this will all reverse quickly barring something unexpected in geopolitics over the next few weeks.

Liquidity Event Trade

I suggest finding stocks such as this one if you think a liquidity event is possible in the next month.

Free-Falling Commercial Real Estate Finance

I'm going to do a post after this on where the market is here. I think we're on the precipice of a big move. So don't take this as a "sell it now" signal, but I do think if or when the market goes, this type of stock is going to crater, and OTM options will pay off well.

Out of More Calls, Stopped Out of Long, Added XLC, TLT

If this rally will survive, it will have to turn around here. Nasdaq has retraced the entirety of its breakout from the inverted H&S pattern.

Here is the ES and SPY. The former has formed a nice base and retest around 3820. The latter still has that gap down at $378.83, but also still has that island reversal below.

I did add to the XLC trade today when it filled the gap.

Here is TLT. My sense is that bonds can rally on stock weakness or strength. It's a trade though, not sticking around for a flush to new lows should the bond and stock markets crash together.

If the market has peaked ahead of another sell-off, this could be the carnage wave that takes SPY down to the 3400 area. Stocks that are "off the beatean path" may be good for options. Real estate and a commercial mortgage fund such as this one could prove profitable.

Capitulation Day 1 or Economic Collapse Incoming

There's not much to say because in these situations, the selling stops when it stops. Anytime is a good time for a low. Since the market closed near the lows, the final low might be as soon as tomorrow, or tonight in the futures. The first resistance area is 3820, once that falls then a low may be in. If the market goes lower, it could go a little lower and bounce at 3700 support line or it could go way lower to 3400. The Fed meets on Wednesday and that might mean bears don't press and bulls don't pounce until later in the week. Having said that, the three black crows on the daily chart is indicative of exhaustion coming at the tail of a long down move.

Individually, many charts look ugly. Here's my favorite bank because it is loaded up with crypto risk:

New 52-week low for Facebook.

FedEx, an important, economically sensitive stock, put in a favorable candle for a bottom.

Who's up for a 2008 or 2020 style collapse before the Fed even seriously tightens? Imagine those crashes without any bailouts and you have some idea of what is coming. Or imagine if those bailouts caused oil to shoot to $200 per barrel and gasoline to $10 a gallon, and you have some idea of what could be coming if they try a bailout before consumer price inflation drops.

I watch boring, stable stocks that invest in things like commercial and residential real estate. BXMT is the commercial side. It plunged 7 percent today, a massive drop that speaks of an economic calamity.

High yield bond spreads are surging towards the point where financial markets give up the ghost and implode. I think it speaks to why the market will probably bottom out fairly soon even if it means a quick 10 percent plunge first. Things are getting out of whack so to speak, and my sense is the faster moving markets will bounce a bit while the economy deteriorates and sets up the next leg down. Otherwise, if markets are accurately signaling a depression, then stocks are headed below the March 2020 low fairly quickly and we'll be talking about my 1500 target on SPX before year-end.

I don't have a good read on public sentiment. The public is upset about gas and food prices, but it seems like the ruling class' Trump obsession, declaring guns and Trump voters the enemy, the Roe vs Wade decision etc., are all giving the media good excuses for not covering the economic devastation unfolding in the markets. One can only imagine the non-stop apocalyptic reporting if Trump had been re-elected and something similar was unfolding. To some extent, the media is beside the point, but psychology matters for markets and the media can massage it for long periods of time.

At some point, the public will realize the depth of the economic destruction, but not yet.  

Various Charts of Assets that Will Tell The Tale

Here are some charts that should see explosive moves from here. FedEx, mortgage bonds.