Get Ready for the Coming 'Aftershock'
Our colleague Greg Diamond called the 'top'... Get ready for the coming 'aftershock'... A brand-new interview with Greg... Panic mode... A day in the life of a trader... Sign up for Greg's special briefing right now...
From the man who called the 'top'...
Over the past few months in the Digest, astute readers will notice I (Corey McLaughlin) have frequently cited the work of our colleague and Ten Stock Trader editor Greg Diamond.
And for good reason...
Simply put, Greg's work has been must-read content.
Back in November, he used his brand of technical analysis – based on price action, key dates, and proven patterns of human behavior – to make a bold call... Greg said that the market would "top" by February or March 2022.
That's exactly what happened.
On January 24, Greg wrote to his subscribers, "The top is in." I shared this call in the Digest later that night. It was just three weeks after the benchmark S&P 500 Index's all-time high of 4,796 on January 3.
Since then, the major indexes have tumbled into or close to bear market territory. And Greg has been nailing every leg down through the first four-plus months of 2022, too.
Most importantly, he has guided Ten Stock Trader subscribers into ways to make a lot of money...
For example, using Greg's recommendations, you could've doubled your money twice in five days while most other people were panicking earlier this year. And in a year where "everything is down," Greg's win rate is nearly 80%.
Now, Greg has another forecast – an 'aftershock' is coming...
In short, Greg anticipates another sharp market move within the next two weeks.
It's an "aftershock" to the market selling so far this year. And it will likely surprise a lot of people – especially if the markets rally between now and then. That's entirely possible, according to Greg.
For that reason, as Greg will explain in his own words momentarily, the market could then fall deeper into another level of "panic."
Now, that sounds ominous. And perhaps you think we're suggesting that you go "all out" of the market today. That's not the case at all – although Greg says you do want to prepare.
Here's the good news...
You don't have to be one of those people who gets swept up in the chaos.
We've shared a variety of ideas on how to grow and protect your portfolio in today's volatile market environment throughout the past several months. And tomorrow, you can hear another big idea from Greg...
He's going live with a special new briefing to talk about his "aftershock" call. And importantly, he'll describe exactly how his Ten Stock Trader subscribers can profit from it...
Like his work, this briefing is something you won't want to miss. You can save a FREE VIP spot right here.
You'll find a ton of value in Greg's perspective. After all, we're talking about someone who worked on Wall Street and managed as much as $900 million per day.
In fact, we believe it's so valuable that we put together a bit of a sneak peek for you...
Given Greg's recent track record and the volatility he's expecting in the weeks ahead (and frankly, for the rest of the year), I wanted to give all Digest readers the opportunity to hear directly from him...
I caught up with Greg last week to talk about it all...
The rest of today's Digest is a transcript of our Q&A.
I hope you'll enjoy Greg's take on the markets. And I hope it helps you with your investing strategy in the days, weeks, and months ahead.
Don't hesitate to let us know what you think by e-mailing us at feedback@stansberryresearch.com. (Be sure to read until the end, too. I'll also share more details on Greg's briefing tomorrow.)
Away we go...
Corey McLaughlin: First off, Greg, happy to catch up with you. And I believe our readers should enjoy this conversation.
Greg Diamond: Always great to catch up with you, Corey.
CM: Let's get into it...
As we've mentioned the past few months in the Digest, you've nailed basically every move in the U.S. stock markets this year. Last November, you called for a market "top" by February or March... You warned of the volatility that would come in 2022... And you were early in identifying the bear market we've seen so far...
Not only that but – and this is important – even with the markets down big-time, your Ten Stock Trader subscribers have made a lot of money on your trade recommendations – tens of thousands of dollars in just a few weeks, in some cases. I've seen the feedback.
So first question... What are your feelings about 2022 in the markets so far?
GD: The stock market has largely played out how I thought it would. And I feel like this will continue for quite some time.
Many folks may not realize it, but the markets have a way of hurting the most people – whether that means the bears in a bull market or the bulls in a bear market. And we're seeing the latter now...
This means we haven't seen "peak pain" yet.
Some folks are still clinging to the mindset that the rally from March 2020 until late last year and early this year is the same market environment. And it isn't.
So we'll see more volatility. I'm very confident of that.
CM: It sounds like you think this is a bear market that has a ways to go...
GD: We're still in the early stages of this bear market.
Again, we have not reached peak pain yet... This is a deleveraging event similar to 2008 and 2009 and after the dot-com crash from 2000 to 2002. And we haven't seen "capitulation" yet.
So people might not want to hear this, but I think this bear market will last the rest of 2022 – if not into 2023.
Here's why I say that...
Bear markets tend to share the same characteristics, even if they happen during different eras, in different countries, or in different markets.
You can see patterns repeated over and over. Like a lot of things in the market, that repetition reflects human nature more than anything. And it's important context to know... That's because things that "don't make sense" at first might start to make a little bit more.
Here's what I mean, and I wrote about this recently in Stansberry's Financial Survival Program...
A bear market has four "phases."
The first is the "initial decline." This sets in after a big run higher in stocks. It catches most investors off guard. I would argue that this initial decline happened at the start of the year.
Then, there's the "relief rally." This phase sets in motion a psychological state for most investors that the initial decline was just a correction – and the worst is behind us. That isn't true, but it's what most people think.
The third phase brings in the "panic." This is the worst phase of the bear market. Every sector of the stock market suffers large declines – and it seems like it will never end. You'll hear stories about overleveraged funds taking massive losses or similar stories of woe.
And after all that, the market hits "bottom." This phase is marked with capitulation – surrender – from most investors. You'll see extreme pessimism and a general consensus that the future is bleak. All optimism seems gone from the market.
I believe the second phase – or the "relief rally" – ended in late March. And we're now in the early stages of the panic cycle (the third phase). The price action of the markets confirms this idea...
Take a look at the Nasdaq 100, which includes the biggest large-cap growth stocks in the market – like Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL). This index's price behavior shows a perfect example of the first three phases of a bear market...
You can see the initial decline starting at the end of last year and into March, followed by the relief rally throughout that month. And now, the index is in panic mode.
CM: As I mentioned at the start of our Q&A, you've been spot-on with your calls over the past several months. Anyone who has followed your work could say that.
So I think all of our readers want to know... What do you think could happen next?
GD: It's quite simple, really.
Within the third phase I mentioned – panic – another strong relief rally will likely occur.
Now, to be clear, this would be different than the "relief rally" back in March. This one could be a little shorter or smaller in scale... and I think it may end around May 25, or possibly last into the first week of June.
If I'm wrong and stocks just keep going down, I have a plan for that, too. But the point is...
I'm planning and expecting to use this next relief rally to aggressively short the market.
In other words, I think stocks will suffer a severe decline once the coming relief rally ends.
CM: What makes you so confident in that approach? Even with all the chaos in the world today – inflation, war, supply-chain breakdowns, and more – I sense that a lot of folks might think the worst of the selling is already behind us.
"We're down 20% or so, it can't get worse," they might be thinking.
I personally don't agree with that sentiment. But someone in my family asked me just last weekend, "Stocks can't go lower, right?" They weren't panicked yet.
GD: It's the price action...
I use various technical-analysis methods that help determine when a move will happen and what it will look like. I could get into a lot of detail. But basically, everyone should first understand that what I do is not conventional fundamental analysis of a company's balance sheet or anything like that.
[RELATED: Simple Analysis Is Sometimes Best]
My brand of technical analysis looks at price action, time, and historical patterns of human behavior. And the great thing is, the methods can be applied to basically anything that trades in the market – a specific stock like Microsoft, a sector like semiconductors, or even the big indexes like the "Dow Jones Transports" or the Nasdaq 100.
No matter what it is, when price patterns and key dates converge, it sets up a trading opportunity. I think my subscribers can attest to that...
To be clear, I don't recommend buying and holding stocks in Ten Stock Trader. That's not what the service is about. It's more oriented to short-term trades.
Another great thing about technical analysis is that you can also get indicators about the market in general that might help you make decisions in other parts of your portfolio...
For example, if you think we're entering the panic stage of a bear market – like I do – would you want to be buying a lot of stocks right now? That's up to you, of course... But the risk-reward right now isn't worth it to me.
Now, before we go on, it's important for Digest readers to understand that I do NOT predict events...
That might sound strange considering I'm saying a relief rally and a big move down is likely coming next. But we do not deal in certainties... We deal in probabilities.
I had no idea what was going to happen last year, as you mentioned when I said the bull market is likely to end in February or March. I didn't know Russia would invade Ukraine or that inflation would get out of control.
But based on the methods I utilize, I knew that no matter what, the start of this year would be an important time period and inflection point. That has proven correct.
So I'll reiterate that the methods I use help us improve our probabilities of success. There are no guarantees in this business.
But so far, our options trades have yielded a win rate of nearly 80% in 2022... So I'd say we are on the right track.
CM: I know you don't necessarily care about the "why" – meaning, why something happens. Or maybe a better way to say it is you care more about price and time. But you've mentioned the "why" about this bear market in our Financial Survival Program, for example. I'm wondering if you could talk about that here...
GD: Historians will look back at this period as a time when government and central-bank incompetence knew no bounds. I'm talking about everything from shutting down the global economy... to cutting off oil and gas production... to out-of-control stimulus and spending.
These decisions have all contributed in their own ways to what's happening in the world now.
The chickens have come home to roost, as the saying goes... And stock markets are now starting to price in everything.
A simpler way to look at this bear market – or "why" this is happening – is that the Federal Reserve is no longer a friend to investors with the "easy money" policies of the past two years... and largely since the financial crisis, quite frankly.
Now, the Fed has to attempt to try to control inflation and pull back the reins of flushing the economy with money. And that means a repricing of stocks.
CM: How much risk do you think is still in the market today versus upside? And beyond that, how will folks know if the "bottom" is here and it's time for long-term investors to back up the truck and buy stocks?
GD: It may come as a shock to some readers, but I wouldn't be surprised if the S&P 500 falls another 30% to 40% before the bottom is in. Just as bull markets go up farther than most folks think they will... bear markets can also go down farther than most people think.
In terms of upside, I'll only become bullish if stocks rally above their March 29 highs (roughly 4,630 in the S&P 500). That was the top of the last relief rally I talked about before. It's as simple as that.
In terms of the bottom, it'll likely be a situation where inflation is somewhat under control or the Fed reverses its "hawkish" policies and does what it has always done when stocks crash – flood the economy with money.
At the bottom, we'll also see peak pessimism and positioning of investors that reflect a continuation of stocks declining. That always happens right before they bottom.
CM: Is there anything that we should be watching for over the next few weeks that could change your game plan?
GD: Yes, it's possible that stocks will just continue lower without a relief rally. As I briefly mentioned earlier, that's something I'll be considering. And I have a game plan for that. But for now, my focus is on trading this relief rally around May 25.
CM: I want to talk about one more thing before we wrap up today...
I often see you posting analysis for Ten Stock Trader subscribers early in the morning or late at night. And as I go through our feedback mailbox every day, I see subscribers' comments appreciating your dedication to your work.
So I'm wondering, what is a typical trading day like for you, from start to finish?
GD: Trading and investing takes an incredible amount of time, dedication, and hard work. I don't know how to NOT go 100% all the time. It's just who I am.
I've seen too many traders fail because they try to cruise by. That's not me.
My high school basketball coach always said if you aren't working hard, someone else out there is – and they're getting better while you aren't. That comment has stuck with me throughout my life. And it has helped me in my career as a trader.
It takes hard work, no matter what anyone says.
I'm very fortunate to be in this position as the editor of Ten Stock Trader – and I don't take it for granted. I always strive to work as hard as possible, as well as help educate my subscribers on the methods I use. So I share a lot of information. It's not just "buy this" or "sell that."
Depending on what's happening in the market, I usually get up between 4:30 a.m. and 5 a.m. to see what happened in Europe and the U.S. futures markets. I review the price action, see what economic events are on deck for the day, and then try to get some exercise and spend some time with my two kids.
By 8 a.m., I'm reviewing various stock charts that I feel are the most important for any trade setup I'm watching. Once the market opens at 9:30 a.m., it's game time. Then, I'm focused on watching my screens for trade setups and keeping my subscribers up to date on what I'm seeing and what my game plan is going to be.
Sometimes, I will end my day late as I take in all the price action from the trading session and see what has transpired once everything is closed. That helps me visualize what can happen without the markets going up and down every second... I can focus more in the evenings, which is why you'll see me post at night.
I like to do a lot of research at night as well – mainly on the "when," or the time and inflection points I see coming.
And finally, I've also been working on a model over the past few years that takes a lot of time. I'm not quite finished with it, but it's something I'll share with subscribers when it's complete.
So I don't get much sleep... But that's the life of a trader.
CM: That's great. Thanks for sharing. Do you want to mention anything else?
GD: I'll just say for anyone who is interested in Ten Stock Trader but may be on the fence about it... just know that I'm dedicated to doing things the right way.
This means I focus on risk management on every single trade... You'll know exactly what to risk in case things go wrong. Also know that you don't need any prior trading experience to become a subscriber. I'll lay out everything you need to know for every trade... And we've had plenty of complete beginners enjoy success with my service.
It's a volatile environment in stocks right now. We haven't seen anything like this in years. But as I've said today, I think it will continue... And I look forward to navigating this rocky environment successfully – and helping my subscribers do the same thing, too.
CM: Thanks, Greg. Best of luck with the briefing tomorrow.
If you want to learn more, be sure to tune in to Greg's presentation tomorrow...
Greg will dive deeper into his thinking about the markets... what the next stage of "panic" could look like... and much more. There's really no reason not to sign up...
Just for registering, you'll get sent a free report that includes three stock tickers. It's the perfect tool for anyone who wants to learn more about what's coming. And during the briefing, you'll get a free recommendation – plus five more stocks Greg tracks regularly.
Click here to sign up right now and get access to your free report.
One more thing...
A lot of people liken technical analysis to voodoo or some other "too good to be true" idea – how can one predict the future, after all?
But as Greg said today, his analysis is a way to gauge probabilities and manage risk. You can read more about that in a two-part interview I did with Greg last year (here and here).
And for this reason, as far as I'm concerned, there is a place for technical analysis – or "chart art," if you will – in everyone's portfolio, even long-term investors. Take what Stansberry Alliance member Steve J. wrote to us recently...
I am an Alliance member and I would like to say that I have finally (after 50 years) begun making money in down markets as well as [a] bull market, thanks to the education and research that I received from Greg Diamond.
I have been with Ten Stock Trader since the beta launch and I can't believe how much peace of mind I get and money I make with this service! I have done well with the other Stansberry publications, but I don't put money to work until I see Greg's commentary. Thank you.
I couldn't imagine a better way for a long-term investor to use technical analysis while managing their own portfolio.
For example, when we started to see more bear market "warning signs" flash earlier this year, Greg's research was already confirming a downtrend in U.S. stocks.
Put two and two together... and it makes you think.
So even if you aren't interested in what happens in the next few days or weeks, it's worth hearing what Greg says tomorrow...
You just might learn something new. Sign up here.
(Alliance members and existing Ten Stock Trader subscribers, you're welcome to tune in and listen. But please know that you can already access all of Greg's research here.)
When It's Time, Say Goodbye
"We're almost seeing a repeat of the first quarter in 2020, but the catalyst is different," Chris Versace, the chief investment officer of Tematica Research, says of the sell-off in stocks to start 2022.
In an exclusive interview with our editor-at-large Daniela Cambone, Versace details what he means, shares his thoughts on the Fed, and discusses how to know when it's time to say goodbye to some stocks in your portfolio...
Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.
New 52-week highs (as of 5/13/22): None.
In today's mailbag, more thoughts on politicians "fighting" inflation... and feedback on Dan Ferris' Friday Digest. What's on your mind? Send us your notes – praise, rage, or other – to feedback@stansberryresearch.com.
"Corey, I believe in cutting taxes. I recognize that the politicians have no logic in this but... it would be nice especially if they cut expenses, then when this panic is finished the politicians will have to raise taxes. Maybe then we can throw the bums out." – Paid-up subscriber Pat L.
"The Gods of the Copybook Headings has been one of my favorite poems for years because of exactly what Dan Ferris pointed out in Friday's Digest. Thank you Dan for your excellent analysis and astute commentary! Keep trying to remind us of what we need to learn." – Paid-up subscriber John M.
All the best,
Corey McLaughlin
Baltimore, Maryland
May 16, 2022