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FULL VIDEO TRANSCRIPT
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
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