We May Be In A Crash, And Here’s Why

All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident. – Arthur Schopenhauer

The last time I wrote an article on Seeking Alpha with this title was February 27, 2020 just before the bulk of the Covid stock market crash took place (We May Be In A Crash, And Here’s Why | Seeking Alpha). From that article, I defined what I considered to be a crash:

On X, I’ve been loud and consistent in arguing that the latter half of October was high risk prior to this sharp decline.

The media now is constantly making the 1987 comparisons after I repeatedly showed how close the correlation the NASDAQ 100 (QQQ) is to the Dow Jones Industrial Average in 1987 for months. The media is also now starting to come around to the idea I’ve brought up multiple times on social media and in writings here on Seeking Alpha – that it was never a new bull market but rather the greatest bear market rally in history (Unpopular Opinion: The Bear Market Is Not Over (SPY) | Seeking Alpha).

The truth is simple: the majority of stocks are badly underperforming. And the way that breadth looks now is consistent with how breadth looks in the midst of a stock market crash.

I am not some perma-bear. I argued in January we would see a melt-up but that later in the year there would be a credit event because of the lagged effects of the fastest rate hike cycle in history.

And guess what? It turns out that’s actually happening, though not in the way I initially envisioned. Here on Seeking Alpha on August 8 I wrote a piece arguing that Treasuries were due to have the “mother of all short squeezes” and addressed the TMF ETF (TMF: The Mother Of All Short Squeezes In Treasuries Is Coming (TMF) | Seeking Alpha). I ended the article with the following:

On August 25, I argued long duration Treasuries could have a super surge in price because of that belief on X. But it became clear to me days later that something else was happening. On September 1^st on X, it dawned on me based on changing conditions that Treasuries weren’t the beneficiary of the credit event – they are phase 1 of it.

Treasuries since collapsed in one of the most disturbing crashes one could imagine in the world’s most important asset. But to think that the Treasury crash doesn’t turn into a corporate credit risk crash is misguided.

Credit spreads ARE starting to widen, consistent with what you see in a traditional credit event and stock market crash.

Treasuries were the first crash, and the chronology of my analysis to changing dynamics has proven to be right in that. I believe Phase 2 – where credit spreads blow out and stocks collapse – is likely in the very short-term as multiple indicators align.

If I’m right, the mother of all short squeezes is still set to come in Treasuries, and people suddenly realize too late they were tricked into a narrative around AI and a “bull market” that in reality made them exit liquidity.

It seems entirely possible we are in a stock market crash now – just like February 27, 2020.