‘Calm Before The Storm’: Violent Break Ahead, Here's What Moves First | Chris Vermeulen

It's Friday, August 31st, and markets are continuing to slide. The S&P and the NASDAQ are both down about half a percent each. Gold is continuing to go down 1%. Bitcoin is down more than 1% on the day. Treasury yields are up, especially the 10 year and 30 year. The 30-year up 1%. What's happening? Christopher Mulan, chief market strategist at the technical traders.com, is here to break down what is happening now and what's going to happen next. Importantly, gold and Bitcoin have been selling off since their highs last week, ever since Kevin Worshet here. Kevin Worsh made a speech at Jackson Hole indicating that a September rate hike may be on the table. Is gold going to outperform Bitcoin or the other way around by the end of the year? Well, that's a trade actually on Koshi. You can actually place a trade on this exact scenario. Will Bitcoin outperform gold this year? Traders are predicting a 27% chance that Bitcoin will outperform gold by the end of the year. If you agree with markets, a $50 trade can yield a payoff of $169 if you're right and Bitcoin does top gold in year-to- date performance by the end of the year. This video is sponsored by Koshi. It's the largest prediction market in the United States. Unlike a sports book, you're trading peer-to-peer on real world events from economic data to political outcomes. And the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here to get started. New users who use my code lin can get $25 when you trade $25. Koshi is CFTC approved and available in all 50 states including California and Texas. More on that later. Welcome back, Chris. Good to see you again. >> Yeah, thanks for having me, David. And yeah, it's been it's been a pretty wild few days with with the news that came out last week. So, should be interesting. >> Talk about this news. Let's talk about um your current sentiment. This uh CNBC article roughly supports what you told me offline, which is that we're in this suspense mode. So, this is Mike Santo of CNBC. It markets us in movies. He said suspense builds through the slow, quiet scenes of the second act. Um, given all this, I'd argue the reason to be alert now is not purely the turn of the month, but the fact that much like the S&P and the semis in August, various key metrics, market metrics are colliding or coiling rather near consequent consequential thresholds, which if they're crossed could imply a ch a change in market character. uh the VIX index has slipped below 15 appropriately so given the plus of recent range in the clockwork mechanics of sector rotation and low correlation restraining index level volatility. You told me offline that we're kind of in this limbo suspense mode. He called it suspense mode but you called it limbo mode. But markets are watching for uh key metrics to collide which is roughly what he said. um what are you watching for that's going to move the markets one way or another? >> Yeah. Well, we we'll pull up the charts and I'll I'll kind of show you a visual of of kind of what's going on. So, when we take a look as as the market has been going in limbo, we had obviously a very strong explosive move about a month ago and since then the market really has just traded sideways. This is the S&P 500. If we look at the the NASDAQ, it's pretty much the same thing. We had a very explosive move and it really is just trading sideways. Now, there's been a bunch of news out there and this is the market just digesting that big move and it's coiling. The longer something trades sideways, it's building up pressure. It's building up kind of momentum or not momentum, but pressure to go. It's kind of like the calm before the storm. Now, the trend for the equities market is still to the upside. We're definitely climbing this wall of worry. We're seeing investors get nervous. semiconductors have been pulling back and and they actually still have a fairly bullish chart pattern. Most of the equities do here. So overall, we're just kind of waiting to see where this the equities market is going to pop. And people are, you know, there's been some negative sentiment and that's why we've been seeing money move away. I think from the market participants on average, the the kind of the masses have been moving out, which is why it's been dragging sideways. And the excitement's really been in the precious metal space. So people have just really focused with the whole thing going on with the yields and and and really starting to spike and break out. It's really focused people on the precious metals pocket. So I think we're seeing precious metals start to like kind run into resistance. I think we're going to start to see the equities market pick up and start another leg higher here uh over the next potentially even this week. Why do you say there's going to be a divergence? Right now as we speak on Monday, it seems like most things are selling off. So, the S&P and the NASDAQ are selling off amidst renewed tensions in the Middle East, new uh strikes on Iran. Uh gold, like you said, has been continuing it sell off since last Friday after uh the Jackson Hole speech that chair uh Worsh made. Um precious metals, Bitcoin, and stock sold off on Friday. They're continuing their selloff today. Gold is down 1%. It was down 3 and a half%. Bitcoin is down 5%. Anyway, the point is um why yeah, why do you think there's going to be a divergence between stocks and gold? >> Well, I I don't know if there's going to be divergence for sure. We still may see gold and silver and miners hold up, but I think money might actually move over to equities and start to go back into the riskon mode. Potentially, the AI space starts to pick up speed again. But there's no doubt it's Monday. We ended the note, when you look at the charts, we ended the note with a red bar for equities. We look at precious metals like gold. It was a huge drop. gold, silver, miners, they all sold off. Uh we had so it went into the weekend with a lot of making a lot of people nervous. It was selling into the weekend. It makes people nervous and then we have like renewed kind of, you know, um strikes going on in the Middle East again. So now we've got this added fear. And so what happens is when you have negative news and and negative price action on a Friday, it just percolates in people's minds and it starts to build into like a scary story. And so that fear usually carries over into Monday. And then add on to that, we've got kind of Middle East kind of flaring, you know, itself back up again and oil spiking. So, it's just kind of carrying over today. Now, surprisingly, the markets are are aren't down that much today. I think it's really just a small wave of of nervous investors. I think we're still going to see the overall equities market pick up and take off. And the big question really comes to like, you know, where's the next where's the next money going to flow? Is it going to flow back into the AI and tech stocks and take kind of leadership or are we going to see like gold, silver, and miners start to move higher and come back to life and and start another rally? So, we're just waiting to see where this market is going to go. And uh right now, you know, precious metals and that whole space kind of ran into resistance and now it just it's got to take a breather. >> Let me show you something interesting here. This is from Koshi Prediction Markets. Will gold outperform Bitcoin this year? the uh probabilities have been um moving up and down throughout the year, but the trend is relatively down and so people have been a little bit more bullish on Bitcoin and crypto in the last two weeks. Chris, what's your take? >> Yeah, well, there's definitely been a big move uh in Bitcoin. When when uh we look at the charts of Bitcoin, it's been a hu huge explosive move. And again, a lot of this is coming back to we've got uh interest rates. We've got people not trusting worrying about the US dollar, worrying about interest rates. So, they're moving to safety. They're trying to get away from the dollar, which means precious metals and miners are taking off. Crypto is another way to get out of it. So, it's really just come to life pretty much around all of the I think the interest rate and the fear of, you know, people with the bond market like how it might it could implode or something like that. So, there's no doubt tons of energy and huge momentum in here. I mean, most of the gain happened in 3 days. And this is typically what happens when you have like some big news event where the whole world catches on. It's the exact same thing that happened more or less with SpaceX. You have 3 days for the world to catch up and for everybody to chase it. And then you got to see what it's going to do after that. Cuz day one is just short-term traders. Day two are kind of people who are still working. They saw the move and they chase it the second day. And international traders. And then you've got the third day is just people are like, "Oh my god, this thing is still rocketing. I got to get in." And so now we've seen Bitcoin go right up into a previous high. It's running into some resistance. And that news driven move has kind of fizzled out. And so this is a lot what precious metals have done with its last leg higher as well. We're just waiting to see now. Is this just a a news-driven pop within a downtrend and it's going to get sold back into or are we going to see uh crypto and precious metals stabilize, hold their value versus dropping and then actually give us an opportunity or a new major trend to the upside for Bitcoin and precious metals. You know, it could be starting, right? We just need to wait and see. To me, it hasn't fully changed direction yet. We've got both of those kind of sectors, you know, at resistance and trying to figure out what they want to do. So, if you had to argue over uh or argue which would do better over the course of the year until the end of the year, Bitcoin or gold at this point since they've both broken out uh since the beginning of August, what would you argue is your more preferable trade right now? Um well, Bitcoin's much more volatile. If we do have a break and a run to the upside, Bitcoin's definitely going to outperform gold. Gold's a pretty slow slug. It doesn't move nearly the same. Although gold that had a nice explosive move recently, but Bitcoin percentage- wise will probably outperform and and do better if we get that. But again, they're to me, they're not in an uptrend yet based on the long-term views, how I invest in precious metals. Yes, short-term wise, we've seen both of them turn up and they are in short-term uptrends, but as a long-term investor, to me, they're still building a base. They got to prove themselves before I want to dump in big capital and invest uh for long term in in these two areas. >> Okay, let's talk about gold in more detail. You said it may be reaching a resistance level or hitting a resistance level or current levels. What are the key levels you're looking at going forward? >> Yeah, so overall, I mean, we've got gold, it's peaked up kind of right up coming into these this previous major significant high. So, when we look at gold from a long-term perspective, obviously we have a series of lower highs, very significant ones, and we're really pushing up into this very big standout significant high. And so, it's it's running into resistance and it's starting to get rejected. Uh, what I would like to see for gold is I' I'd like to see it hold its ground here and build some type of bull flag or launch pad and then eventually if it starts to break out and run, it could have a very decent move and come right back up into these highs. But to me, gold needs more time. It It really does need to build a strong chart pattern over the next couple of weeks that looks bullish and then potentially could get long and play that next leg higher because we'll be able to use uh Fibonacci extensions to to get a gauge. We've got this first move up and then depending on how far gold pulls back, it tells us where the next targets are. So, I I want to see price action turn around, but right now it's stuck under resistance. Really, between 4,800 and 5,000 is actually going to be a pretty big resistance area simply because it's previous highs on this chart. And 5,000 is a whole number where a lot of people will will say, "If it ever gets back to 5,000, I got to I got to get out and cut my losses." There's always just a group of people that are on the wrong side and they can't handle that, right? So, uh really it comes down to the next several weeks. How does gold and the whole precious metal space start to paint bars on the chart? Are they bullish? Are they holding up? And so there's not a whole lot of insight we have right now other than we need time. We need to let the chart give us some more insight of what type of price action it has. What's the sentiment going on here? Um, if we were to extend the same analysis to the S&P and NASDAQ, uh, key levels to watch for and maybe drill into a little bit deeper as to why you think, uh, stocks can continue to break out in rotation into AI can happen once more. >> Yeah. So, if we if we zoom in on the S&P 500 here, uh, using Fibonacci extension, we've had this this explosive run to the upside. We've got this pullback, and of course, if we squish this chart down, you can see the upside targets, right? So just based on this overall run, we could see the S&P 500 run about 3 and a half to, you know, about 6 or so% for that next leg higher. So that's kind of the short-term bias. If we look at it from a longer term standpoint, this is the same for the NASDAQ. The NASDAQ actually has has more volatility, more potential, but we've had this initial runup and this pullback, and it gives us these further upside targets of where we could see the S&P 500 run. it could run all the way up to about 8,500 and change, right? So, based on that chart pattern, let's just draw that out. So, you've got the run up, you've got the pullback, and then it's going to work itself all the way up potentially up into this 8,500 mark. So, this is a very strong chart pattern, and the NASDAQ, you know, to me is actually has almost more of a a stronger one. It has about a 20% upside move, but what I like about the NASDAQ is it's had this very big kind of wash out, panic low. It's it's it spooked the market. It's flushed a lot of people out. And that's actually what gives you energy for the next big run cuz a lot of those people who just got shaken out couldn't take that selloff. They're going to eventually pile back in and help drive the price higher. But if they panicked out there, they're usually going to buy later in the next rally when they they have too much FOMO and they're like, I got to get back in, right? And uh so the NASDAQ has about a 20% upside move from where it is. So I really like both of these charts. And of course, we're climbing a wall of worry. I mean, I think a lot of people are worried. The market's topping here. It's, you know, it's really only traded sideways more or less for the past two weeks, which is actually still a healthy price action. >> Take a look at what the NASDAQ has done in April and May. So, it's rebounded from the correction uh starting in midFebruary and retraced its all-time high. uh earlier in the year. It only took about a month to do that. Now, let's fast forward to today, which is that the NASDAQ has uh again once again started to rebound in a V-shaped kind of pattern towards his all-time high that uh the chart sees here is uh the chart shows is was in June. And so, the point is the fact that it didn't rebound to all-time highs yet in a span of a month, >> is that a bullish or not so bullish signal to you? In other words, does it does it indicate to you that there may be more room to climb because it's historically retraced to new all-time highs or the fact that momentum has not been this strong this time may be an indicator for you or somebody else watching this chart that maybe this particular bull move isn't as strong as prior bull moves. >> Yeah. Yeah. I mean, obviously it's not a Vshape. We had a a small Vshape, but it's paused. So, it's definitely lost momentum. You can you can or I can tell and I can sense and see it in the charts and the sentiment that a lot of people have gotten very nervous with AI recently. There's been a lot of talk about a bubble, a lot of stuff about data centers and uh you know, a whole bunch of things going on that people got really bearish. We saw a pretty big pullback in the semiconductors and the memory stocks and it's really, you know, slowed things down. It this doesn't mean that it's weaker. It just means it's building a larger platform. it, you know, I think I think if it just screamed higher and and if like instead of trading sideways the last two weeks, if it just kept taking off just like it did back over here in April, I would think and feel like we're much more into like a euphoric feeding frenzy. But that recent pullback in the tech space, I think really really kind of slowed things down. Uh so I do think if we start to break to all-time highs, I think we're going to start to see it pick up speed at a very fast rate. I think people are going to pile on and really drive it higher. But right now, it's lost some of that momentum. It's trying to figure out what it wants to do. But the technicals are actually still fairly strong. The the trends are up. We've got money flowing into risk and risk on assets. Like the markets aren't breaking down. If you lift the hood to the markets, it's still fairly strong. It's just sentiment right now is weak enough that there's enough general public kind of selling into this. And I think big money institutions, I mean, I don't think they're getting out of this market. It doesn't I don't see any signs of distribution selling. So, they're sucking up the volume and eventually once the selling pressure stops, the market I think is going to start to run higher and it's going to take off. So, it's not it's just it's just a sign that the market is taking a breather. It's pausing before it goes up, which I think is actually a good thing. I wouldn't say it's more bullish than just a vertical line. It's just a different way of climbing uh up the right hand side of the chart. Whenever something doesn't matter if it's gold or bitcoin or stocks moves sideways and consolidates there's a usually a bullish signal because that has happened several times this year to gold to stocks to bitcoin as well. Bitcoin has been consolidating all year before finally breaking out violently in a couple of days. Gold consolidated for the better half of the summer until um Treasury intervention in the yan market and then the treasury market in the US in early August made a move up. Uh stocks as well right now it's it's going through a consolidation pattern. So my my question is whenever you see flatlining over several months um how would you evaluate whether or not that flatlining is a precursor to a breakout to the upside or downside? >> Right. So in general when you look at the long-term moving average like the this green moving average which is the 150day and you can look at the 50 and 20-day typically if if those are sloping down any pause eventually should resolve to the downside. Now eventually there's going to be a trend reversal. It's so the odds are the the pause will continue in the previous direction. So for Bitcoin we had a pause and it broke down. We had a pause and eventually it broke down. We had another pause, but it actually found a bid and actually broke the other way. So, you have to expect it's going to continue with the underlying trend, which is to the downside until proven wrong. And of course, this obviously was a 3-day huge pop and and money's flowing into there. When we go and look at the equities market like the S&P 500, typically we see we see a huge rally. We've had a big pause. Now, we got a rally. We've got a pause. I'm expecting to see the equities market go higher because the underlying trends and moving averages are all sloping up. We have a series of higher highs and higher lows. So, you have to you kind of have to expect it's going to continue to do what it's already doing. You don't want to try picking a top or bottom. And so, you never know exactly which way it's going to break, but the odds are it's going to continue in the trend that is the underlying trend that it's in. So, that's how I look at it. What has been the asset that's surprised you the most in just the last month? It's the beginning of September now at the end of August. Let's do a monthly recap here. >> Yeah, I would I would say well let's I haven't even pulled up the monthly charts yet. I was going to do that this afternoon, but if we take a look at the the monthly charts and let's just kind of look at the S&P 500. Nothing too exciting. I mean, it's had a very strong pop over the past couple of months. It's traded sideways. is actually starting to break out again, which is for a long-term investor still a very bullish sign. If we go and take a look at Bitcoin, uh the Bitcoin chart has got lots of volatility. It's come right back up. It's getting up to a previous high and significant lows. So, Bitcoin's actually slamming into resistance, which we already saw on the daily chart. So, you know, it's been a big pop, but overall in in this trend, it it doesn't look too significant in terms of the underlying trend. If we go and we take a look at gold, uh, when we look at gold, it's had a big drop and a big pop. And let me just clear this chart up here and you can see it's had a it's had a big push up into a couple wicks, monthly wicks here, and then it's getting pushed back down. This is kind of the same as Bitcoin, right? We have seen a rotation. I think the biggest thing was like the 30-year yield on the verge of breaking out and and then we saw the Treasury Department come out. I think it's that's caused the biggest move in precious metals and crypto. To me, that's the biggest shock. And of course, the charts are showing that with with a big pop. I mean, gold miners, they have had a tremendous run. They're probably, you know, the biggest strongest run uh to the upside and now they're trying to figure out what they're going to do. They're running into the same kind of previous two-month highs and selling some selling pressure. But that's the biggest excitement or the biggest surprise to me are actually the gold miners getting right back up to you could argue like near previous highs right based on this news. And so that's I think the most sensitive thing for some reason everybody got very very sensitive over what's going on with the the yield long-term yields and the Treasury action. And of course that's really I think taken a lot of focus off equities and people have moved to other type of currency plays which is the precious metal and and crypto space. >> I've been hearing people talk about oil less as a mover or a driver for equities markets. Um let's take a look at oil markets here. Um just because people talk about it less doesn't make it less relevant is my experience. But what's your take? Yeah, I mean oil is going to, I think, continue to to be somewhat choppy, but overall the trend is still up. We've got the long-term moving average sloping up. Uh, based on price action, I think you and I talked about this a few weeks ago. The chart of of oil is still pointing to about $100 per barrel. So, just looking at Fibonacci and in the momentum, we had a rally up. It's pulled back and now it's going to try to work its way up, I think, to this $100 mark, which is a whole number. It's also right through all of these peaks. So, it's going to naturally run into some resistance. And I don't think, you know, the problem in the Middle East is going anywhere. And we're seeing oil continue to move higher today. And energy stocks are a good leading leading indicator. We're seeing energy stocks really kind of lead the way and break some of the previous highs. So, I think we're going to continue to see the energy sector hold up very well. There's big profits and earnings in those companies, and oil is going to hold up and and move up and to the right. Okay, I'd like to show you something else here. This is the uh TIP ETF. It's supposed to be uh tracking the Treasury Inflation Protection Security, which is a measure of inflation expectations. I'm just really curious to why this has basically fallen off a cliff despite the fact that um even Kevin Wars came out and said on Friday that CPI and PCE have been hotter than expected in the last couple of months. Uh which prompted people to think that he may raise rates in September which caused a sell-off on Friday. Uh but um anyway, what's what's your take on inflation and this chart overall? Yeah, I mean I I think I think rates are are going to stay up for a while and I think they could drift higher a little bit out of control and that's going to keep pressure I think on the bond market. I think it's got a lot of people nervous and um you know yeah I I just think a lot of people don't know what's going on right now which is why we're seeing a big pause in equities. people when people are uncertain and nervous they don't know what to do and a lot of times they just they just kind of freeze up and so people just aren't piling into the stock market right now and I think the bond market is very nervous that rates could keep going higher and then we're going to see you know tips we're going to see uh like TLT long-term bonds continue to be under pressure and move down >> okay uh here in Canada there were new tariffs placed on uh Canadian trade $2 billion worth of Canadian trade uh by the US and Canada retaliated in kind, $20 billion, rather, not $2 billion. Um, and meanwhile, the Fed is looking at raising rates. I wonder if the Bank of Canada will follow, and if so, what's going to happen to Canadian real estate? We're both in Canada. What's your take? >> Yeah, well, I mean, real estate is there's been a little uptick recently there. Things are moving. That being said, I know some a couple people that have sold homes and they did have to take quite a big haircut. uh lost about 150k which is about 10% on the home uh from where they bought it. So I think if rates keep drifting higher I think and inflation continues to to keep going I think we're going to end up seeing rates continue to hold up. Mortgage rates are for them to can continue to go higher. I still feel and think we're going to see softening in the housing market overall. There's always going to be pockets of of strength and weakness, but overall I I still think we're going to see lower real estate pricing, very soft, very more of a buyer market because you can literally throw in a low bid and see what you can get. So, I'm pretty pretty bearish when it comes to the real estate market at this point. And I think the Canadian market will probably follow suit. I it generally follows the US, but we've definitely decoupled a little bit and I think it could lag. I don't think it'll be quite as sensitive. won't move around I think as much as the US. >> Generally speaking, uh are housing markets more sensitive to rates or population demographics? >> That's a good question. I mean rates rates are it's tough. Canada well I think a lot of countries have huge influx of of people moving in which creates huge demand. uh interest rates, you know, also if rates go up, it's going to definitely crunch and put pressure on homes simply because people can't afford the monthly mortgage payments. So, it's a combination of both. There's there's no doubt. I I think in Canada we've got a lot of people piling in and it's keeping, you know, somewhat of Fed the market being fed with buyers. But if rates keep going up and and and say um we start to see a slowing in immigration and I think we're going to see the housing market get soft very quickly. There's a lot of subdivisions around that aren't able to sell. They're and some of them are going under here. A whole bunch have already gone under. So, it's going to be interesting to see what happens. But they're they're both very powerful. They both play, I think, a big role in what's going on. And you put them together, they can they can create powerful movements, which is what we've seen, right? We we see we saw low interest rates. We saw a lot of um immigration, a lot of homes being bought, and it drove the markets up over the past few years. But I do feel like things are starting to to stall out. >> Okay. Okay. Bottom line is right now, what are you doing with uh your trades given that a lot of things are in limbo? Like you said, you're waiting for events or things to cause a breakout. Are you mostly in cash or are you all in? >> We're we're long the equities market. We're long the S&P 500. We're long the NASDAQ. Uh we have hit a target on our S&P 500. We've trimmed off some of that, but overall we're we're riding the stock market up. It still has a bullish chart pattern. Trend is up. We're just letting time do its thing. You got to let the market work itself out and let those those cycles come into play. So, we're long equities at this point. >> When you say you're you've hit your target on the S&P, what does that mean? Has it hit a key level or? >> Yeah, it hit a short-term key level to trim off some of our profits, reduce our exposure a bit. >> Yeah. >> All right. Excellent. Thanks. Thanks so much, Chris. We'll catch up next time. Where can they follow you in the meantime? >> Yeah, they can catch me at my website at thetechnicaltraders.com or at my YouTube channel, the technical traders, and I share daily market insight there to stay caught up on the markets. >> All right, we'll put the links down below. So, make sure to follow Chris there. Take care, Chris. We'll see you next time. >> Thanks, David. >> Chris, thanks so much. Make sure to follow Chris in the links down below and please do subscribe and like this video. Please also use my code lin l i n when you sign up to cash. Remember, new users who use my code lynn can get $25 when you trade $25. Link down below or scan the QR code here.