"There Are Lots Of Good Reasons The Market Should Crash" | New Harbor Financial

John Llodra (0:00)

There are lots of good reasons why the market should crash and crash in a big way. I think there's a very material likelihood. We get a very disruptive, very volatile, very downward biased stock market next year for a lot of reasons. Valuations are just one.

The tender has been set. The spark just needs to happen.

Adam Taggart (0:31)

Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart.

Very excited to be sitting down here with the team at New Harbor, one of the endorsed financial advisors by Thoughtful Money. These gentlemen are on the show with me pretty much weekly, but every month we like to sit down and do a deep dive in terms of their outlook and what they see ahead for both macro and the markets. I'm joined as usual by Mike Preston and John Llodra, the two senior partners at New Harbor Financial. Gentlemen, thanks so much for joining me.

John Llodra (1:00)

Great to be with you, Adam. Thanks for having us once again.

Mike Preston (1:04)

Thanks, Adam. Good to see you.

Adam Taggart (1:05)

Good. Guys, I really enjoy these monthly deep dives and the audience really seems to too based upon feedback. So let's just roll up our sleeves and dive right in here. So last week, John, you were on the road.

Mike was here flying solo and we were recording the day, was it last Thursday, when the markets had their biggest one-day drop, I think in like six years or something like that. It was a really big downdraft.

We were trying to make sense of it in real time. Now, Mike, we've got a little bit of benefit of hindsight here to see that it really largely was a one-day bloodletting. Markets have recovered a little bit since then. So I guess the big question is, was this just kind of like a rogue wave in the markets, or is this a harbinger of perhaps more selling to come? Was enough technical damage done to start pulling the market in a downward direction, or are you guys getting a green light from your signals that the worst is behind us and we should likely rally into the end of the year?

Mike Preston (2:08)

Here's the thing about managing money, whether you're a professional, Adam or an individual investor, nobody knows for sure.

The market is an emotional beast because it's made up of people, and the market last Thursday was super, super emotional. I can say with the benefit of hindsight that so far, it looks like it might have been a road wave. I'd like to share a couple charts, tell you a little bit about what we did, what we're doing now, and then we can go from there. But last Thursday, I'll pull up a chart of the S&P first, then I'll go to the NASDAQ. It was a big down day. I mean, take a look at the bar that's about to come up on your screen as I'm sharing. Here's a daily chart of the S&P 500

That day, last Thursday, I guess it was 11.5. Yeah, we're down about 77, what, 400, several hundred S&P points. And the NASDAQ was even worse. Here's the NASDAQ. So since I went over the NASDAQ, take a look. We went back here in October 6, I guess the NASDAQ hit a high. The NASDAQ was leading up to that point. And then it got weak, particularly AI stocks, things like, if you take a look at, I think it's AIQ. There's an ETF that tracks AI. You can see that that's down hard. But NASDAQ, NASDAQ sliced right through the 200-day moving average, which is the green line. It was well below the red line, which is the 50-day moving average. Now we've had a monster bounce on the NASDAQ. We're coming back to the 21-day moving average, which is something that short-term traders use. So I guess I might want to say, take some caution with the NASDAQ here. It's only come back to the 21 But what really has me thinking that it's more bullish than not is the fact that the S&P is coming back, almost recovering the entire bar with today's move. We're up about 86 S&P points right now, 1.14%.

And in the meantime, our system is starting to generate positive signals. The main indices, the Dow, the NYSE, have given us some good breath signals. We follow breath, we follow things called bullish percent signals, which is essentially a breath measure, measures the number of stocks within an index that are on a buy signal using a point figure methodology.

All the indices have strengthened and are giving buy signals or green light signals except for the NASDAQ. And I think with the NASDAQ movement today, go back to the NDX, NDX is up 2.36 percent. That is almost certainly going to reverse up. So we're going to have all of our main indicators reversing up. At the same time, we're seeing a lot of improvement. NASDAQ above the 200, we'll see if it can get above the 50 in the coming days. Back to the S&P, essentially back well above the 200, nice bounce above there. And if we improve in the next couple of days, we are almost certainly going to go above the 50 If today has good volume and closes up at these levels, I think that we are going to be quite constructive, and we're probably going to be adding back a little bit of equity. I should tell you, we came into this kind of meltdown at about 42.5 percent equity.