(Written by Bert Dohmen and Dion Dohmen, contains excerpts from our latest March 9, 2025 Wellington Letter)
With the heavy selling the markets are experiencing, now is not the time to go bargain hunting.
We explained to our valued members in Sunday's (March 9, 2025) Wellington Letter that the recent selloff is likely the beginning of a bear market. We also said:
"there is a chance that the recent selling turns into a “liquidation avalanche.” That means forced selling for reasons, such as margin calls, or by money managers trying to avoid career-ending losses.
We think that avalanche is just a question of when. Of course, our view is the very minority view. We like to be in the minority."
In the same issue, we showed the longer-term chart of the S&P 500 that is currently signaling there is more selling ahead in the coming weeks. See the chart below:
We said this chart,
“suggests that the longer term trend is still down and would confirm our economic forecasts that liquidity and credit will be contracting. That would pull stocks down in a bear market, which will probably be a sharp one."
We are now starting to see that chart support levels don’t even generate a bounce in many stocks as they plunge through support on high volume selling.
That is the first sign of a “liquidation bear market.”
Here are just a few high profile stocks that broke support like a hot knife through butter last week. First, everyone’s favorite, Applovin. It was one of the best performing stocks in 2024, soaring 712% for the year.
It had a big rise since November ending in a blow-off top in mid-February. Now it is down 50% in about 3 weeks. The bulls were trapped at the top. They will eventually sell at the bottom.
MongoDB (MDB) is another big software stock owned by many. It plunged nearly 27% last Thursday (3/6/2025) after it announced good results the prior day.
The excuse was that the firm’s expected adjusted earnings for the fiscal year came in lower than what analysts estimated. That is ridiculous. We never hear who these mysterious analysts are.
And then we have the crowd favorite Costco (COST). It plunged 83 points at its low on Friday 3/7/2025, closing with a 62-point loss (-6.1%). The technicals are negative. It closed at the 38.2% Fibonacci retracement of the big rise since last August (not shown). The MACD (bottom) is on a “sell.”
RECESSION: We wrote weeks ago in our research services about all the fake positive economic numbers of 2024 that helped Biden’s presidency look better, stating that the numbers would be revised now to get back to reality.
The current recession has been hidden by false statistics for well over a year. Now it will be revealed with plenty of “revisions” to the false data reported by the Biden regime.
That would mean once an “official” recession is finally be revealed, all the consequences thereof in the markets will also take place.
The “official” recession will shock everyone except our loyal readers. That will produce giant allocation shifts by all the big institutions and smart money out of stocks and into bonds and fixed income.
At record overvaluation levels for stocks, that will produce big selling of equities in a highly leveraged environment where there is little to no liquidity for buying. We will elaborate further on the recession in an upcoming article.
CONCLUSION: In a bear market, forget bargain hunting. If there is evidence of a bounce or rally, just ignore it and wait for it to top.
In our last January 29 article on Zerohedge (“Is The AI Massacre Over?”) we warned "beware of going bargain hunting prematurely. The first rally is often a trap."
Turns out, there was a mild rally in early February. But that didn't last long and was indeed a bull trap as the market soon rolled over and stocks were heavily sold.
In fact, since its February peak, the popular NASDAQ Comp has plunged over 13% and is now in correction territory.
This is why it is so important for investors to stay up-to-date with analysis on the latest market developments and access to unbiased research.
Our award-winning research, analysis, insights, and forecasts have helped our members avoid suffering huge losses during the recent market plunge. Could it have helped you navigate the volatility?
Now is not the time to hesitate. It's time to act and learn how you can safeguard your hard-earned wealth and even profit from this bear market.
Gain instant access to our analysis in our latest award-winning Wellington Letter (published March 9, 2025) titled, “Signs of a Liquidation Bear Market” (21 page issue).
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Wishing you successful investing,
Bert Dohmen, Founder
Dohmen Capital Research
Editor, The Wellington Letter
