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hello and welcome back to game of trades

your number one channel for videos on

the stock market and cryptocurrencies i

am very excited about this episode today

we have a lot to cover a lot of things

going on in the market

lots of panic here huge amount of

concern amongst investors and there’s so

much going on underneath the surface

it’s going to be tough to cover in just

one video but i’m going to try my best

to now just as a quick

background anybody who’s been following

this channel for some time knows that we

are very well aware of the long-term

risk in the equity markets just this

chart represents that very well this is

the real earnings yield of the s p 500

so real means inflation adjusted so when

you adjust earnings for inflation it

basically tells you how attractive it is

to buy the s p 500 current levels and

when you see the real earnings yield dip

below zero right this is the zero line

so it goes into negative territory it

creates a recession it creates a bear

market even in the s p 500 right all of

these red circles have corresponded to

lots of volatility in the financial

markets the 1907 panic world war one

then we get into the great depression

this is 1937 right here big 50 bear

market that’s pretty much the same bear

market as world war ii then you’ve got

the bear markets of the 70s this was the

1974 top then the 80s volatility with

volcker that was tightening into

recessions back here in this zone

inflation numbers were extremely high

and the market was going down the market

got absolutely destroyed in real terms

then you’ve got the top of the dot-com

bubble the top of the

great financial crisis before the great

financial crisis and then you’ve got

2022 100 of the time

this signal

triggers bear markets on the s p 500 so

we know that we are heading for a major

repricing of the stock market somewhere

in the next year or two a lot of the red

flags that we’ve been looking at to tell

us

what long-term stock market returns are

going to be a lot of these indicators

have been

showing some red flags so the question

is have we already started that bear

market was that the top of the bull run

that we’re not going to see again for

years to come or are there still

fundamental driving factors that could

drive the stock market rally a lot

higher before we get that top that’s

what we try and do in these videos we

bring you guys all the data all the

research that we make and put it out for

free for you guys to enjoy if you’re

interested in following these crazy

markets with us make sure to smash that

subscribe button of course don’t forget

to click on that like button as well if

you enjoyed this video and now without

further ado

let’s get right into it

[Music]

all right so i want to start off by

quickly talking about this

line here that was broken on the daily

time frame right we’ll we’ll see what

happens towards the end of the week but

when i look at these multi-year trend

lines i’m really looking at that weekly

close weekly close under it that’s bad

news from a short-term technical

standpoint but that’s not what i want to

do here what i want to do is take a look

at the rsi on this chart and we’re going

to take a look at the four hour try

because we’ve had a pretty violent

downtrend here and nothing goes straight

down nothing goes straight down online

you can think you’re in a bear market

you can disagree with us that’s

absolutely fine but there is such thing

as an oversold short-term reading and

what we had here right first of all

jerome powell spoke here market went on

an absolute tank here and it triggered

this signal on the rsi this oversold

technical signal here and you can see

just quickly looking back it’s only

happened a handful of times obviously

during this uptrend it corresponds to

big bottoms on the s p 500 you can see

that systematically right here but what

we’ve had since that reading you can see

let me zoom in a little bit more and

this is short-term stuff right i don’t

like putting out too much short-term

trading content but i feel like that’s

needed in the context of the size and

the volatility of the move that we saw

throughout the past few days so we’re

going to move on in just a second but i

want to quickly show you this here this

lower low on the price following this

rsi reading that’s extremely oversold

and this higher low on the rsi here

right so divergence between the momentum

and the price in the short term i look

at that and i say all right we’re

getting close to the bottom here unless

there’s some big black swan event this

is going to lead to a short-term rally

and i’m going to show you a few examples

of that first of all this is an example

where we had a lower low on the price

and a higher low on the rsi led to a

nice rally if we zoom out a little bit

more we don’t have any divergence here

until we get to october right here huge

huge move down you can see it in fact it

looks a little bit similar to what we

had here a type of bullish flag here a

lot of people were looking at that for a

breakout and it actually broke down and

accelerated to the downside before

triggering this oversold rsi reading and

then continuing to diverge in the days

to come eventually leading to a big

bottom at support that’s another point

just seeing this type of development

with no support under it you know that’s

not the same as when you see this type

of short-term development when getting

near a very important level of support

and let me

get back to 2022 what are we doing here

we’re seeing this rsi divergence build

while getting to pretty much the

ultimate level of support which is this

low march low so this is constructive

for the short term now let me get back

to one of the most concerning charts

that we’ve covered over the past few

months and that is the defensive sector

divided by the s p 500 we’ve had

consumer staples which are generally

seen to be very defensive we saw them

break out of this pattern here this head

and shoulder pattern and this is

something that we talked about in one of

our articles back here towards the end

of march we were looking at this and we

said that if we break out that’s a bad

signal if we break out above this line

of resistance it begins to look bad in

the short term for the s p 500 now we

did have that breakout and it’s a head

and shoulder pattern so that’s pretty

concerning because we talked about it

last time the measured target of the

head and shoulder is the height of the

head and you take that same measurement

and you take it out from the break of

the trend line that is how they work and

they are very very high probability

trades once they break so we’ve had that

break nothing’s a guarantee but it’s

very likely we’ll be heading to here now

why is that concerning let me actually

put this into

context i’m going to put the correlation

coefficient

between

this ratio and the s p 500 and it shows

you that the correlation is negative

it’s below that zero line so as a

general rule of thumb it’s not perfect

but as a general rule you can say that

when this is going up when this ratio is

going up the s p 500 is going down so

that is concerning if you’re expecting

this ratio to go all the way up to

this zone here but i do want to remind

you

that this can happen a number of ways it

doesn’t mean that the ratio is going to

go straight up into this zone and the

market is just going to crash

immediately right if we have if we have

this type

of price action right let’s say for

example we have this type of price

action we have a little bit more

volatility in the coming days and then

we have this move back down here to

retest

that neckline before we ultimately get

into that big volatile move towards the

end of the year so i’m not this is not a

prediction this is just to keep your

mind open to different scenarios and in

that case that would mean we could see a

recovery

for 175 days in my opinion based on the

research that we’ve made

we think it’s going to take us at the

very least back to the all-time high i

wanted to show you something that we

talked about in the article that we

posted at the beginning of the week we

took a look at the vix here uh the vix

that had bounced off this trend line

here i’m going to talk about that in

just a second but most importantly we

have this trend line here that goes from

the top of the covet spike right this is

the volatility index of the s p 500 so

when you have this big spike in

volatility that’s when the market is

crashing and that’s the coveted low and

so this is the volatility here these

spikes are the volatility that we saw

towards the beginning of the year and

you can see we have this nice downtrend

line that could potentially act as an

area of resistance and i’m going to show

you why

that works it worked between 2018

and

2020 you have this nice trend line that

captures all the big volatility spikes

now this was towards the beginning of

the week and you can see we weren’t

quite there yet we weren’t quite at that

vix trendline resistance if we press the

play button on this chart and let me

zoom in a little bit you can see we tag

that trend line perfectly and so the

risk reward on the s p 500 is really

starting to shift dramatically here very

very different to what we had

right here at the

towards the end of march and by the way

this is why we have the website we made

this service so that we could give you

guys frequent market overviews on

everything that we’re looking at all the

indicators all the developments that are

important to us and most importantly how

to find the proper risk reward in the

market because you can be bullish on the

market have a macro bullish thesis

that’s great but if you can’t use tools

to time it properly you’re going to get

left behind the vix is now at very

elevated levels meaning we have wild

moves on the s p 500 and that often

leads to the biggest trading opportunity

so we look at these types of charts to

evaluate that risk reward and we’re

going to be doing that very frequently

and doing that very very meticulously

over the next few weeks as we see that

volatility play out and we try and

identify those levels and those

opportunities in the market right that’s

why on the 31st of march as we had that

massive rally on the s p 500 we took a

look at the vix and it was at support

right so you don’t buy at support you

buy when the vix is at resistance here

this chart was really telling you that

volatility was at a higher probability

of expanding again and seeing a pullback

on the s p 500 and that’s why since

the end of march

our rating on the s p 500 our short term

rating on the s p 500 has been a whole

now the pullback was definitely a lot

more aggressive than what we were

anticipating there was definitely a lot

more volatility that’s why we use these

kinds of tools like the vix like

sentiment like put call ratios inter

market analysis all of the things that

we look at to give ourselves the best

odds so that’s what i mean when i say

that the risk reward here is changing

it’s shifting very rapidly on the s p

500 we’re going to be changing our short

term rating on the s p 500 and in fact

all the sectors and assets that we look

at we’re going to be changing them this

week if you want to have access to this

kind of research that really gives you

an edge

over other traders in the market and

gives you that additional insight to

navigate the market make sure to go to

gameoftrades.net so i hope you guys

enjoyed this episode if you did make

sure to smash that like button it really

does help

push our videos out to a wider audience

and post the effort and time uh that we

put into putting out this research

it helps push it out so it is really

appreciated in the meantime i wish you

good luck on your trading and see you

next time