Rocket Fuel for Big Gains
It’s like a slow-motion crash. What is going on?!
Well, first, let’s zoom out.
You should see these seven charts. It will paint a better picture of what’s happening in the market.
Should you sell your growth stocks? No way. You can see signs of a bounce coming.
This is not unusual. And it’s a buy moment for America 2.0 stocks or a hold moment if you’re already invested.
This bearish-ness is going to act like rocket fuel for big gains.
It will shake out the weak hands, balance will tilt back to demand, big buyers will line up … and your Strong Hands win!
We’ve got an IanCast market update. We’ve got bitcoin $100K by Christmas. We’ve got a cannabis forecast. Don’t miss a beat:
Paul Mampilly: Good afternoon, Ian.
Ian Dyer: Hey Paul. How are you?
Paul: I’m well. How are you?
Ian: Doing great.
Paul: How is life on the farm?
Ian: Life on the farm is good as always. It’s cold, but you have to deal with that in Maryland.
Paul: I do have to ask — I know this is not IanCast material and this is not the quiz I promised you we would have later on, but do you have your own turkeys on the farm?
Ian: We didn’t this year. I think this was the first year we haven’t had our own turkey for Thanksgiving in three or four years. We usually do, but this year was an exception. Next year we will definitely.
Paul: Well I have to ask: What happened to the turkeys?
Ian: They didn’t make it until Thanksgiving. Next year.
Paul: That’s unfortunate to hear. Just a question because I know you have a whole setup up there. All distractions aside about farms, this is the IanCast. Ian, it went from everything looking so good a few weeks ago to, phew, what is going on?
Did Growth Stocks Have A Mini Crash?
We’ve been looking at a lot of charts. We’ve been talking a lot. We were on the Rebound Profit Trader update yesterday and I said we would cover some of this. So let’s cover it. Growth stocks — I called it on Twitter a secret mini crash. Essentially it’s not that secret, it’s just a slow motion crash.
Ian: And like you said, it was looking really good late October, early November. Now everything is in an end-of-year selloff. It’s similar to what we saw in 2018 when ARKK went down 14% in a matter of three weeks. It was crazy to see. This looks like the same thing. Everything is definitely starting to bottom out.
It’s a bigger drop than we’ve seen in a while. Overall, this is a buying opportunity.
Paul: I agree. We have a number of charts that are signaling contrarian signs that things are at an extreme point. I have been tweeting over the last several days seeing one more haircut, followed by a second haircut, followed by a third haircut, then a fourth and fifth.
We are at washed-out levels on so many America 2.0, Fourth Industrial Revolution signature stocks like Zillow, Teladoc, Zoom, EXACT Sciences. What are some of the others?
Ian: Coinbase is one.
Paul: Robinhood, Palantir. Some of these stocks have been destroyed.
Ian: A lot of them are down 60-70%. Some of them even more than that. It’s the mirror opposite of what happened this time last year when things were looking really good and people were just piling in. This chart we are going to get to in a second shows how that’s happening right now in the opposite way.
Just like things topped out in February, it’s looking like they are bottoming out right now.
Is Inflation Happening Now?
Paul: Let’s go one step earlier. We were having a discussion about interest rates. I want to put up this chart. Inflation continues to be a thing that people talk about as if it’s real. Don’t troll me, folks. I personally see the cost of eggs and chicken is rising and is high.
However, when you look at this chart it has a few commodities.
You have oil, which is being phased out, but in terms of the current moment it matters. Then you have corn, wheat, gasoline, soybeans, natural gas — which you know it’s winter. You can see these all peaked out.
In October and November they are all in decline. I made a video on Tuesday that’s on our channel saying that this isn’t inflation. If you saw inflation that was significant, you would see these not doing a waterfall decline. You would see these continue to get bid up.
Then, we went through the one year, two year, 10 year and 30 year. You’re not seeing a massive pickup in yields. What you are seeing is the yield curve — the one year through the 30 year is called the yield curve — is essentially just flattening out.
In the past, a flatter yield curve means slightly slower growth. An inverted yield curve is what most people think means a recession by the old standards, but there are plenty of inverted yield curves that never ended up in a recession. However, there are no signs that growth is slowing down.
Everything you look at suggests growth is going gangbusters. Everything from employment to consumer demand. These commodities suggest the actual raw commodity supply is cranked up for demand and is fulfilled. What is continuing to be an issue is shipping.
It’s the components that go into various parts. They are very much still affected by COVID and lockdowns or slowdowns of various kinds that have continued to go on.
Ian: That’s the real thing that’s affecting this inflation right now. It’s shipping. There’s been a shortage in the availability of ships because the shipping industry went through a huge bear market starting in the mid- to late-2000s. The 2008 financial crisis ruined the shipping industry for a while.
Not only was there a total global lockdown and people weren’t making things, but the number of ships to get up and running once everybody went back to work was so low that it’s really dragged things out. Now we are starting to see that demand getting filled.
November was a month where crude oil, natural gas, iron, steel, copper and aluminum were all way down. I think that’s definitely going to show up in the November inflation number. I think it’s going to be way lower than people expect. It’s going to calm some nerves.
I don’t think inflation is going to be some longstanding thing. I think it was a bottleneck in the shipping industry essentially.
Paul: In my video I said you can also — as you like to say and I like to borrow — zoom out a little bit. What are people doing? IN their homes they are stocking up on a ton of things. What is every store doing? They are building up their inventory. What is every supplier doing? The same.
Then there’s also longer-term reactions to it which is the reshoring of production to the United States. Then also some number of companies which are now doing vertical integration. They say, “Forget using external suppliers, we will just make this ourselves.”
In other words, there is nothing about this that feels long term. That is being confirmed by bond yields. The one year is about where it was right before the extremeness of the crash last year. It’s sort of halfway between when it started to crash and where it was.
That’s true for the five year. Then go out to the 10 year and 30 year. They are showing zero signs. The 10-year bond, that yield should be shooting up. It’s not happening. In fact, it’s declining. The 30-year bond, that yield looks like it’s about to go through a waterfall decline.
Ian: The 30 year is actually almost at a low for 2021, which is surprising given the whole inflation narrative we are seeing thrown at us by the news. Two very conflicting things. Just looking at the data that’s in the actual inflation calculation, a lot of the things that are heavy components of that number went way down in November.
I don’t see how it could be that high for November. Obviously oil was at $80 or $90 a barrel recently. That’s not a sign of how things are going in the world. That’s purely based on shortage of supply and shortage of ships to deliver it. Next year, I think oil is going to go into freefall as more is starting to be delivered.
That goes for a lot of commodities. I think it’s going to be the total opposite next year.
Paul: We’re going to be overstocked on a lot of things that America 1.0 companies make. They have been lifting prices and benefitting from inflation. It sets up for their death knell in my opinion. I was mentioning reshoring. As it happens America 1.0 companies are not expanding.
They can see there’s no long-term change in the growth trajectory of what people are asking from them. There’s just a temporary spike in demand and their response is to raise prices rather than increase production. The folks who are increasing production are Fourth Industrial Revolution companies.
They are saying, “Hey, that old way? Forget it.” They aren’t doing that. They’re going to implement AI and blockchain and photonics and robotics and 3D printing. It’s going to collapse the prices of things they make.
Quickly you are going to see a big price differential between what is produced by America 2.0 companies and America 1.0 companies. That’s going to crush these companies.
Ian: It is. And it’s going to result in what we have called a deflationary boon. It’s when the economy thrives as prices go down because everything is more efficient. I think that’s what we’re looking at within the next year we could see that start to be implemented.
These companies were all suddenly noticed after the lockdowns. They are so much more efficient. We can actually get through a global lockdown scenario with these technologies. I think these companies have unlimited demand at this point. Ironically, they are the ones that have been going down during this slide.
Like I said before, I think this is a huge buying opportunity for America 2.0.
Let The Charts Tell Us What’s Been Happening In The Stock Market?
Paul: I think it’s going to be a moment where people look back and say, “It was so obvious. It was so clear.” Some number of big players actually did look forward one, three, five, seven years and they did buy in.
Partly through ARKK and them putting money in Cathie Wood’s various funds and then some base buying into these stocks is what caused that huge rise through the end of 2020 and into 2021. Then they sat back. Nobody has come through. Instead, everyone went back and bought the same stocks that pay dividends.
Or things you won’t get fired for showing come yearend at the end of a difficult year. I think that’s the scenario. Go out one year or 18 months and I think people will look back and say, “I shoulda, coulda, woulda.”
We have some charts to show people what has happened over the last month or so.
This I the first chart. It compares ARKK to the S&P 500 equal weighted, S&P 500 cap weighted, the Nasdaq Composite and the Russell 2000 ETF. This is from the previous growth bottom in May.
ARKK made a new low for this move. It did not hold that. At some point at the beginning of November was up nearly 26%. It’s given all of that back in about four weeks.
Ian: It’s been crazy to see. It’s an absolute gift for people who are buying long term. It’s something we haven’t seen since the end of 2018. I think December 2018 was one of the worst months ever for ARKK. I think this past November is around that same level.
I don’t think this is going to be something that goes on for much longer.
Paul: The other thing that we keep an eye on is the equal-weighted S&P 500 versus the cap-weighted S&P 500 because, at this point, I think it’s up to now where six companies represent nearly 30% of the S&P 500.
Ian: Now we’re starting to see in those companies that people are taking profits. I think eventually a lot of that money is going to roll into growth stocks. Those stocks have been down the past few days and they have dragged the indices with them. When the indices are down it can create some fear overall in the market.
There’s also a ton of panic selling in growth stocks. When there’s fear and the indices are down it usually takes its toll on growth stocks in the short term. Like I’ve been saying, when this is all said and done growth stocks are going to outperform the markets just like they did in 2020.
Paul: Chart number two is ARKK against all those same indices.
Year-to-date now ARKK is down more than 20%. S&P 500 is now up 24% thanks to a huge rally in Apple that has driven a lot of it. There’s been other strong stocks like Nvidia and Tesla that have provided a boost.
You can see the stocks we focus on, which are smaller or midsize or the lower end of some of the bigger Fourth Industrial Revolution stocks is that blue line in ARKK. It’s been crushed. The orange line is the Russell 2000, which are smaller stocks. You can see that was up as muich as 22%.
It’s given back about half of that. The S&P 500 has done well, as has the Nasdaq, which is Facebook, Amazon, Apple, Netflix, Microsoft, Alphabet and now joined by Nvidia, Tesla and AMD.
One last chart of this as we move on to some contrarian indicators.
This is actually from the COVID crash of 2020. Since then you will see the blue line, which is ARKK, is up 160%. The S&P is up 110%. Here you can begin to see what we were talking about.
I do believe some big players have anticipated what we are talking about. I mean beyond Cathie Wood. Someone with a decent slug of money is seeing the world the way we see the word and Cathie sees the world. They have come in. Going back to 2020, ARKK is still outperforming.
The Russell 2000 is still outperforming. The equal-weighted is outperforming the S&P 500 cap weighted.
Ian: As bad as it’s been recently, zooming out we can still see it’s done better than the other indices, Apple, Microsoft and stuff like that. The majority of this year seemed like it was a reopening trade, which is why commodity stocks got bid up along with the price of the actual commodities.
You had retail stores that are brick and mortar and dying unquestionably. Those got bid up because they crashed 90% during COVID. I think a lot of this was a dead cat bounce in America 1.0 stocks. We are going to see that trend in ARKK and growth stocks resume.
Two or three years out, these stocks are way up higher than they were. It’s been painful recently, but they are going to be volatile on the way down just like they are on the way up.
Paul: I agree. This chart, which we have been discussing a great deal, compares the Nasdaq’s highs and lows.
The highs are in green, the lows in red. What you will see is that in February 2021 the lows got to an extreme point where there were no lows.
I recall this moment where it seemed like every stock — I remember one day looking at a news story that said Blockbuster, which trades in the pink sheets market, was up 30%. People were just going and bidding up everything. There was nothing going on.
You can see that green line is at a high. More importantly, the red line spiked down and there were almost no new lows. Then look where we are today. It’s now the reverse. The new highs are where the lows used to be. We are at an extreme point.
Ian: This is what I was referencing earlier. This is the mirror opposite of where we were earlier this year. It shows that there’s total fear in the market. This is the new way to look at fear gauge. We used to use the VIX. That hasn’t been as useful recently.
Looking at the 52-week highs versus lows is a good way to gauge sentiment. I think it’s a good contrarian indicator.
Paul: The VIX is no longer that useful because if you have six companies representing 30% of the index and 10 companies representing 40%, it’s no longer a reflection of anything other than what is going on for 10 companies out of thousands in the stock market. Even on the basis of the S&P 500 it’s 10 out of 500.
Ian: It’s crazy to see. The Nasdaq, I don’t even think it’s down 10% from the high but you can see no companies are making new highs. It’s just not representative at all of the overall stock market.
Paul: People say the S&P 500 is still at a high level, but this will tell you that it’s untrue. The next chart here is all in green.
It essentially divides one over the other. You will see that minus the 2018 crash you referenced when ARKK got hit bad or the 2020 COVID crash, this is the lowest point when you divide the number of highs by the lows.
We are at an extreme point here that is not being reflected in the S&P 500 or the Nasdaq because of that concentration in companies. There is another volatility indicator we track which is the VXN. It compares the Nasdaq 100.
This one maps the Nasdaq 100 relative to the volatility for the Nasdaq 100. It is showing some signs of distress.
Ian: It has spiked recently. Usually that means there is a bottom forming overall. Even if it bounces and goes lower later on, it’s not going to make that same spike. That’s what we saw happen over and over in the VIX.
When the VIX or VXN makes lower highs while the index itself is making lower lows, that’s a sign a bounce is coming. When you see that initial spike, that’s usually the peak fear. Then if there’s a selloff after that it’s not going to be as severe.
With each one that happens you are getting close to a bounce. Then there’s going to be huge conviction buys. I think that’s where we’re at with growth. Maybe not the overall Nasdaq, but I think growth stocks are definitely bottoming out.
Paul: One last thing on a macro basis. Powell, who is the Federal Reserve Chairman, talked about tightening money supply by not buying as many bonds in the market. Normally that would cause interest rates to go up. That’s just not being seen on the 10 year or 30 year.
Ian: Right. I think they are going to have to change their narrative a lot next year. I’ll just say that. I don’t think this is inflation. They seem to think it’s going to go on for a while, but the data and the scenario we are in just doesn’t seem like it’s going to happen.
Paul: From our perspective, if people are selling because of the idea of rising interest rates, the data does not fit once you get past — I think the five year is too high, but if you zoom out even three years these rates are pretty low.
Bottom line, you know what our motto is: strong hands. Hang tough. This is not unusual. What would you say? We’ve gone through this how many times?
Ian: Since the 2018 one, at least three or four times.
Paul: We have gone through this quiet a few times. I can say each time we have it has been a gift to anybody who has hung tough. The new highs have been 4x, 5x in some cases. I had somebody who said we would need to go up 300%. Yeah, but these things can flip quickly and zoom up incredibly fast.
Ian: Just like last year after the crash. Same situation could apply here. This is why buying over time is important if you are buying for the long term. With growth you are going to get big ups and big downs. You want to make sure you even out what you are buying over time so you don’t buy all at the top.
That’s easy to do. Earlier this year it was easier to buy. Now, it’s not that easy unless you are looking farther out. Keep that in mind.
Paul: I tweeted talking about how people talk about buying when there is blood in the streets. I can tell you, just hold on when there’s blood in the streets. There’s no need to buy. If you own the stock, be bullish, be optimistic, be positive. Be in that mindset.
If you wrap your brains around pessimism and gloom and doom and you will find every excuse to be negative. I can tell you I am still BOP. I believe our stocks are going to go back to their highs and then make new highs. I feel very BOP. I will end with that on the stock market.
Let’s go to crypto where, again, I feel like something is brewing here.
What’s Going On In The Crypto Market?
Ian: One of the big things to look at is Bitcoin (BTC) because it’s still the bellwether of the market. It still makes up 42% of the overall market cap. What BTC does, the market is going to do. I think BTC has been boring recently, but during this time since April when it topped out the first time it made an incremental new high in October.
Since that first one in April, big buyers and long-term holders have been buying significantly. At this point, 76% of BTC has not been touched in more than six months. That’s right near an all-time high.
When you get to those high levels of long-term holders holding the supply, you are getting closer and closer to a huge rally scenario. I think that’s where we’re getting in BTC. I think that’s going to come sooner rather than later. It’s looking good. The alt coin market has been looking strong.
I think there’s a ways to go for the crypto market overall. I think next year is going to be very good.
Paul: I know you follow the stock-to-flow model. I don’t know his Twitter handle.
Paul: PlanB’s price prediction come yearend is $100,000. What do you think?
Ian: It’s possible. Momentum can come really suddenly. When it does, especially now because so much of the supply is held long term, when it comes in it’s not going to take long to get to $100,000.
Paul: I am in agreement. It feels like that demand is getting coiled up. It’s that demand at higher prices that rockets prices up. We haven’t had a moment like that yet. It always feels like there’s this churning of people who want 5% or 10%.
Ian: That’s what it’s been recently. Meanwhile, the whales have been accumulating. That’s what we want to see. We don’t’ want to see quick spikes like November and December 2017. That’s not good, that’s when you want to take profits.
Right now is when you want to be buying when you can see long-term holders are accumulating. It feels like the period last fall when BTC was bouncing between $8,000 and $11,000 for months. That’s what it feels like to me. It feels like a coiled spring that’s about to go off at some point.
Who knows when it will happen but I still feel like it’s going to be sooner rather than later.
Paul: I have seen a few explanations, but what is your view on why Ethereum (ETH) continues to stick very close to its all-time high while BTC goes up and down. What is the reasoning for that?
Ian: I think a lot of people who buy ETH are either staking it or using it in DeFi somehow and locking it up. They don’t just trade it. I don’t think many people trade ETH, I think way more trade BTC. That could be one reason.
The ETH long-term holders is at an all-time high. It’s sitting around 80%. It’s even more of a supply crunch than BTC. A lot of ETH has been put in the ETH2.0 contracts which people can’t even touch until the huge network merge that’s scheduled for June.
That’s six months out that people won’t have that ETH. Then with the upgrade we had in August, when you’re using the ETH network and you make any transaction part of the fee you pay is burned and wiped out of the supply.
There are a lot of different supply and demand things going on in ETH beneath the surface. I think that might be one of the contributors to why it’s held up. Overall, people are bullish on ETH. People are still using the exchanges and lending platforms on ETH even though transaction fees are high.
That tells me this is going to be the winner for at least the foreseeable future.
Paul: Crypto Flash Trader, which is the crypto trading service that you run, if you are interested in it, watch Ian’s presentation. It will be an education, trades and coins that there’s no chance people will learn about that you have already taken profits on.
It’s been the right thing to do with this market, which has been rolling, rather than just sticking in them. Where is Crypto Flash Trader today? How many trades do you have outstanding right now?
Ian: We have six outstanding at the moment. We sold a few recently because BTC has been stagnant so if alt coins are making new highs it’s probably good to take profits for the time being. I think things are shaping up for a lot of good opportunities.
We’ve taken some profits on coins recently. We’ve added a couple. There’s been some activity recently in that service. With the closed trades we are at a 68-70% win rate. We’ve been doing well considering the market has been sideways. Very happy with that.
Paul: It’s been choppy. Today before we got on everything other than BTC was showing losses of 5% and 20%. Crypto is crazy volatile. There’s incredible potential. It’s very complicated. There is so much going on. I can tell you, if you want an education, you want trades, you want to know about incredible things going on in crypto, click on this presentation.
Ian will tell you all about it. It’s an insanely good service. Check it out. Do we need to repeat our predictions? Well, have a prediction program airing next week. We can just leave it for that. We will let that be. We are very BOP on crypto in the long term. We have big targets.
We think this is a place you should be. Ian’s service is a place where, again, you can get an education, trades and find out about coins you are never going to hear about anywhere else.
The last couple things quickly. Cannabis. MJ has gotten crushed with that growth move down. What do you think?
Is Cannabis Something You Should Invest In?
Ian: I still think it’s going to go up way more than people think in the next year. I think a 67% drop heading into an election year where people are running on legalization is a gift. I am super bullish on that. The stocks don’t reflect the companies are seeing.
These stocks have gotten crushed for years. Other than the rally we saw late last year, it’s been crazy. I think the time is coming for these stocks. I think next year is going to be huge for them.
Paul: No question about it there’s a demand and supply imbalance. Once there’s even a tiny bit of demand for these stocks it’s completely in favor of demand. I own two out-of-the-money options which are now underwater. Even into the early parts of the selloff they didn’t get hit much.
Ian: I track a lot of sectors for options. Marijuana stocks were the strongest demand for call options for the last half of October and the first week of November. There was big demand for options. Heading into the new year and then earnings season is right after that, I think there could be another wave for these stocks.
Anything New With Tesla?
Paul: We know it’s been ugly. We have held through a bear market in cannabis stocks and we are staying. We are BOP. Anything on Tesla before we close it out?
Ian: Not too much with Tesla. It’s held up pretty well compared with other growth stocks. That’s about it.
Paul: Especially when you consider Elon dumped — how much did he sell? I think it was in the billions.
Ian: I think it was $8 billion or something.
Paul: The market just absorbed that. The stock barely budged. On a business basis, everything is booming for Tesla.
Ian: It’s all coming together. There’s still a long way to go for that stock and their business too.
Paul: We have covered everything we normally cover on the IanCast. Given our sense of what’s going on with stocks, which is what we know you are concerned with today, I want to say I think this is an amazing opportunity that people are going to look back and say, ‘I should have held on.”
Just hold on. Stay bullish, stay optimistic, stay positive. Ian, the fastest goodbye you can give us.
Ian: Everybody, thank you so much for watching. Happy Friday, have a great weekend and we will see you next week.
Paul: The message from me is hang tough. Strong hands. Be BOP. This is Paul saying bye
Editor, Crypto Flash Trader
Bitcoin $100K for Christmas 🎄?
Paul says yes! And that means there’s an opportunity for you:
You see, when there’s a huge bid under bitcoin’s price, smaller, little-known altcoins can rip higher.
And on a percentage basis — much, much higher than bitcoin.
Paul said it in today’s IanCast. If you want to learn how to profit from these moves, Ian is your man.
He will guide you through this market and tell you exactly when he recommends you take profits, where to put your money, everything.
Don’t wait until Christmas. See how to get started today.