Major Asset-Class Trends Are About To End
Chris Vermeulen | Jun 14, 2016 10:28AM ET
The distortion between risk and return has created a bubble effect in all global equity classes. I informed my subscribers to exit the S&P 500 on November 25, 2014 and to enter cash. Their equity risk exposure was reduced to zero. Momentum oscillators are now extremely overbought and are very clearly trending bearish. I wait for confirmation before entering any new long SDS and long VXX positions.
Tuesday starts another two-day FOMC meeting, the news of which is due on Wednesday. Expect choppier price going into the meeting and shortly thereafter.
h3 The Only Chart You Need to Read/h3The bond rally set a record high in the rush to a new safe haven. We're now experiencing a global rally in government bonds, which broke out last Friday as equities declined. We entered this long-term trade on bonds.
Nothing will stop this new bull market in gold and silver. We also entered this long-term trade on June 8. Now there's a stampede into this asset class. Take a look as the gold chart below.
In short, the major trends of all asset classes -- which have been in place for several years -- are coming to an end. The majority of investors has no idea what is starting to take place. As per the herd mentality, many traders will likely hold their positions, watch their portfolios lose between 30%-60% before they give up and exit equities near bear-market lows. As for a timeframe, I'm looking at a major move 6-18 months from now.
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