Panic Selling Continues; Trader Dumps Stocks Before Next 20% Drop | Chris Vermeulen

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Chris Vermeulen (0:54)

Real estate is going to have a big correction, and it's going to be a huge opportunity for those who have dry gunpowder to invest. But I mean, if you're invested in REITs, they drop like 60, 70, 80 percent during a bear market. REITs are not bear proof. I will be looking to buy gold at 3,600, I'll be looking to buy more at 3,100, and silver I'll be looking to buy as it drops to those levels. If on the QQQ, around 660 gets broken, it could come all the way back down to about 555

David Lin (1:25)

It's Friday, October 16th. We're back with Chris Vermeulen, Chief Market Strategist at The Technical Traders.

Now, on the agenda today, are investors rotating to defensive assets? The 10-year yield has apparently hit a peak, according to some analysts. We'll find out if Chris agrees. And also, defensive sectors have been catching a bit. Chris, welcome back to the show, good to see you.

Chris Vermeulen (1:48)

Hey, thanks for having me, David. Always a pleasure.

David Lin (1:50)

Tech stocks are selling off.

The Korean KOSPI has been selling off. We're not seeing July levels of sell-offs yet, although chip stocks are leaving the charts down. Where Micron here in North America is down about 20-25% since its peak. Now, the big question is whether or not bonds are back on the menu, so to speak. The 10-year yield now sits below where it was a couple of days ago. In fact, all week, bonds have been catching a bit, and the 10-year is now sliding down to 30 years at 5.43. It was much higher previously. Do you think that, well, we're going to talk about the bigger picture, but bonds in particular, people have been telling me, were asking me even in the comments, have bond yields peaked? How would you answer that?

Chris Vermeulen (2:37)

I would say no. I would think on the short-term charts they have, which is something that we've been following, and we can take a look at the charts. If we take a look at the 10-year, it's really clear where we're at. So let's pull up the 10-year note.

If we look at the 10-year, we had a big breakout level right across this level through here. Now, using Fibonacci extension, which is something you and I have talked about many times, the start of this run up here, this breakout to some multi-year highs for the 10-year, and this little bull flag, this pullback gives us this measured move. And so I talked about this about two weeks ago. I said, listen, 10-year note is about to hit a resistance level. Expect it to pause and pull back. If that happens, we're probably going to see bonds put in a sharp bounce in bottom. We'll probably see the US dollar pull back.

Stocks should move higher, and gold might end up finding a bit of a bid because the dollar will pull back as well. And it's interesting because when we look at all of those, I actually have these five assets overlaid on a chart here, David. The top here is RSP. This is the stock market, the equal-weighted S&P 500, 10-year note below it, then the bond price, then the dollar, and gold. And so everything is unfolding as we expected. We expected yields to peak out and start to pull back. That would put the bottom in bonds, which were getting a very sharp bounce in bonds. And of course, usually when we have these reversals, this is when people start saying, oh, 10 years has peaked, it's done. People are saying the bond market is now a buying opportunity.

To be honest, these are just short-term pullbacks in the market, in the yields. I think yields are still going to go a whole lot higher because the trend is still up. Bonds are in a clear downtrend. This is nothing more than an oversold bounce, and we can look at that chart. But we're starting to see the dollars pulling back a little bit. And gold is really just treading water. Now, gold is in a bear market, so you can't expect it to have a strong bounce. But we are seeing everything kind of unfold, as you said, equal weighted stock, the stock market, the defensive plays are moving up. Well, money is flowing out of technology. So, you know, when we look at the 10-year, it's pulling back, and we go and look at the bond chart. And the bond chart looks really favorable. It's had a very strong bounce. But again, this is just a counter-trend rally. This is just a bounce within the downtrend. All the moving averages more or less are sloping down, and it's a series of lower highs, lower lows. So these are just reactionary moves. And I do feel like bonds will get sold into, I think yields are going to go higher again.