Bombshell Report: Economy Shrinks In Q1 (Uncut) 05-01-2025

Bombshell Report: Economy Shrinks In Q1, Markets Tank; ‘Worse Things Are Coming’ | Chris Vermeulen

Another huge down day for the markets as the Dow Jones declined more than 200 points. The S&P was off almost 1% on the first contraction in the GDP since 2022. The first quarter GDP declined at a 0.3% rate.

Is this the beginning of a recession? Will the second quarter also be negative? We’ll find out what’s next for the markets and the economy with Christopher Mullen, Chief Market Strategist at thetechnicaltraders.com. Chris, welcome back to the show. Another very volatile day today. Thanks for having me, David.

Another wild session and data coming out for sure. Let’s take a look at what happened. Inflation-adjusted GDP decreased at an annualized 0.3% in the first quarter, well below average growth of about 3% in the prior two years, according to the government’s initial estimate published Wednesday.

Net exports subtracted nearly 5 percentage points from GDP. Consumer spending, which accounts for two-thirds of GDP, advanced at a 1.8% pace, the weakest since mid-2023. Business outlays for equipment, a bright spot in the report, increased at an annualized 22.5%. The estimate was negative, but it was worse than the expectation.

Personal consumption was up 1.8%. PCE, price index, 3.5%, beating the estimate at 3.1%. Your initial reaction to today’s data and the market movement thereafter? Obviously, I think I’ve been expecting poor economic data for a while. Generally, we see the stock market rollover before economic data. There’s been a few things that have been pointing to that.

When we look at different scenarios in the stock market, different types of cycles, which I can share here, we can see how the data comes out in terms of what we should be focusing on. When we look at the overall stock market here, we can see, we tend to see precious metals do really good. We tend to see everything rally into the stock market top.

This yellow cycle behind here, David, is the economic cycle. The stock market puts in a top first, and then we see the economic data. After the stock markets already started to fall, which we’ve seen, economic data starts to get pretty poor.

We start to see job earnings weaken as well. Today alone, there’s 50 stocks, companies on the SP500 that are reporting earnings today. When we look at the charts, we have a bear market signal that happened about a month and a half ago in the markets telling us a steer clear of equities right now.

When we look at one level further, as you and I talked about this a while ago, this was the chart of crude oil and how if crude oil was to break this very significant support level on the chart of $65 per barrel and get a clean break below that, that’s most likely going to be a leading indicator that poor economic data is about to come. The economy is going to slow. We’ve seen that.

We’re already seeing airline companies struggling. Louis Vuitton came out with terrible earnings. We’re finally hitting the point where people who have quite a bit of wealth are starting to slow down on their spending.

I think we’re seeing that now in the GDP. We’re seeing that across the board. Of course, there’s a big delay when it comes to quarterly data.

The markets have rolled over first. We got all these warning signs that I think worse things are coming in terms of the economy and equity prices. Are worse things coming? Since we already have one quarter of negative growth, I’m wondering whether or not the markets have now priced in this negative growth, thereby making the statement that things have troughed.

Can we say that? Yeah. I would say the first bout of selling in the stock market when we look at the S&P 500, I think we’ve seen that first bout of data somewhat be digested. I think a lot of it was a tipping point.

The tariffs helped make the markets roll over, but I do think a lot of people similar to me who look into the future and see the data weakening on the economic side also is a reason why we saw a lot of selling. I think a lot of this has already been worked into the move. As they say, you buy the rumor, sell the news.

People sold into expecting a weaker economy. The stock market has fallen. Now we actually have data showing that the GDP is weakening.

That move is done. Now people are trying to figure out what to do next. People are buying into this trough.

In fact, this trough, as you just said, David, is a big concern because I think it’s going to hurt a lot of people. In fact, if we take a look at the long ETFs, traders plowed $6.6 billion into the leveraged long ETFs in one week. If you look over the last month and a half, people are just piling in left, right, and center, saying that, hey, the downside is done.

This is a trough. Buy the dip mentality. I mentioned this, I think, with you a while ago.

When everybody’s picking a bottom, the bottom is generally not in. Bottom pickers usually get hit really hard. This is telling us people not only think the market’s bottom, but they’re buying leverage and expecting a huge move up.

You’ve got to be very cautious when people have this complacency move. They don’t realize what’s shifting. The sand is shifting below everyone.

You and I have shared this before, this complacency move in the market. This is just a pause before we go off a cliff and do a financial recession. There’s a lot of things in the sentiment and charts right now that are warning that this market may rally a little bit longer and have a dead cat bounce.

I do believe we’re going to be going a lot lower going forward. I’m going to read a paragraph from your book here, Asset Revesting. People should check out the book.

This is from page 66. Asset investors take losses in stride. No one likes to lose, but losing is a fact of life for investors.

The key is to limit your losses and maximize your successes. A losing trade is not a failure. It isn’t a reflection of you or your overall skill.

After all, it was possible to be right every time. We’d all be rich. Okay, let’s stop there.

What do you mean by that? How do we limit our losses is the key words from this paragraph. Yeah, I think limiting your losses, it’s about managing positions, managing risk, and just being able to identify. That’s what I like about technical analysis and following prices.

We can identify when something is no longer going up. We don’t want to hold an asset that is going up. How do we limit those? Well, we can take a look at our ACS strategy here.

You can see we got into the market anticipating it was going to go higher. It started to strengthen up. This is back in January.

The market continued to drag out sideways. Our strategy, based on multiple different assets and cycles and technical analysis, along with position management, said, you know what? This is showing signs of weakness. You’ve got to get out.

The market is turning. We exited, and then the market has plummeted. Now, it’s in a downtrend.

No one likes to take a loss, but we ended up taking about a two and a third percent loss on that trade. At the time, people were like, why did we get in and why did we get out so quick? The reason is because we don’t want to hold things falling. The market tells us when it’s getting stronger or weaker.

Sometimes it can flip and flop quickly like this, but the key is to protect your capital. You can always make more money, but when you lose a lot of money, it’s hard to gain it back. That’s what we do.

We rotate in and out of the market based on its signals. You have to take a loss. Taking losses is what I always tell subscribers.

When we close out a trade or a stop gets hit, I’m like, if you got out of this trade with me, I’m like, congratulations, because you’re protecting your wealth. You’re protecting your lifestyle. You’re protecting your money.

People don’t want to take a loss. What if we’re wrong? It’s our pocketbook that we’re protecting here. What’s the stop loss you would put in at this point from today? What’s the stop loss for today? If I were to place a trade, let’s say I believe this is the bottom.

I’m going along the market. I’m putting in a stop loss. What should that stop loss level be? I think for the S&P 500 and the Nasdaq, roughly about 5%.

You need to give it about a 5% wiggle room for where you get in. That’s general. Now, we’re in a higher volatility market right now, so that can happen a little quicker than normal, but generally with the stock indices, it’s about a 5% hard stop.

It doesn’t move up. It’s not a trailing stop right off the bat. It’s a hard stop, meaning price could rally 5% and then come all the way back down and drop minus 5%.

Our stop won’t move up. You do need to give quite a bit of room to this market, and that’s the one thing the market is good at. If it doesn’t wait you out and make you get bored to move on to something else, it will shake you out.

You do need to give quite a bit of wiggle room to a position. When we’re looking at equities markets in particular, a lot of volatility in the couple of weeks, this bounce up, when you see a pattern like this bounce up that you talked about, how do we know that it’s either a complacency move or the beginning of a renewed bull market? What are the indicators that can point to you that it’s one or the other? Our long-term weekly chart that I showed you here where we moved into a bear market phase, this is the weekly chart of the S&P 500. This more or less tells us after the COVID crash, are we bullish or bearish or bullish? Now that we’re in a bearish environment, we have to expect rallies will stall out and get sold into just like over here.

I believe we’re going to have one of these complacency types of rallies. Basically, we’re looking at the long-term trend saying any rally that moves up and runs into resistance, it’s most likely going to get sold into. That’s the long-term trend saying, okay, this is just a complacency type of move.

From the shorter-term charts when we look at them, we are able to analyze strength on a daily basis. That’s what this is. We’ll be able to see when we get a buy signal how strong the market is.

We use cycles, technical analysis, volatility, multiple different asset classes that we track. We track the cycles and the money flows between them. It’s called intermarket analysis.

Everything in the stock market and the financial system is connected in some way. If one asset is plummeting, well, the money is coming out of that asset and it’s going somewhere else. That’s what we track is the money flows between a pocket of them.

The technicals both on the short-term chart here and our long-term trend, especially this long-term trend, have turned very negative saying money really isn’t flowing into risk on assets. The majority of high volume big players are going very defensive. They’re moving to cash.

They’re moving to gold. We’re seeing utilities hold their value. People are moving to safety.

That’s telling us that the big money, they’re not actually buying into this. They’re actually selling into this rally. You and I actually showed this on an intraday chart on our last talk where we were showing how institutions were unloading intraday into the traders with price gaps and creating a FOMO squeeze where everybody felt like they were missing out.

There’s all these tricks going on. You put all this together and you come up with a scenario of this is most likely a complacency rally. It will stall out and then we’re going to go a whole lot lower.

A whole lot lower. How much lower? Last time you’re calling for lower equity prices, that’s happened. Now that we have negative GDP data, do we have basically a new floor? Yeah.

It’s done its first leg just based off the low from 2022. I like to use a Fibonacci retracement for those levels. We have seen the SP500 come right down to 318 and 50% correction.

That is a signature controlled pullback. Now it’s getting a bounce. If we were to go to the longer term, which is where the next major cycle is, that is the COVID low.

That’s going to show you where this next support level is going to be in price, which is roughly 460 on the SPY to about 417. Percentage wise, if you want to just take a look at that, we’re looking at potentially a 15% to another 23%, 24% drop to the downside from where we are right now. Now, mind you, I do think this market might bounce up for another few weeks before it rolls over.

From that high, obviously it would be a bigger percentage drop, but we’re still looking for a pretty strong correction in the market from where we are. We can project even lower pricing going back from the last major stock market low, which brings it way, way down into this range over here, 275, which is half of where we are right now. There’s a lot of downside potential.

Obviously, there’s going to be a lot of things that are going to probably fall into place from an economic standpoint that could create that landslide, but people need to know, I think there’s at least 20% down from here, if not 30%, 40% easily could actually happen. This is going to be huge, and it will take years to recover. This is what I’m trying to protect people from is if you can avoid a bear market, you can save yourself five or 10 years, and you can also enjoy those five or 10 years by profiting from falling pricing and reinvesting in things that you want after a financial reset.

Everything’s a steal. It’s just about keeping your gunpowder dry, avoiding this, or benefiting from falling pricing. What is money going to rotate into during this next bear market, do you think? That is a good question.

I think the big question here is going to be, are we going to see bonds come to life? If we look at TLT, it has been trying to carve out a bottom for a long time. If we go way back on this chart, you can see it has a bottoming type of formation. It does have high volume, meaning it’s usually getting closer to a bottom.

I do think we could see bonds potentially have a very significant rally, kind of need to wait for this bottom to finish. Right now, it is still in a bearish environment or a stage one base, and it’s dead money. We don’t really want to touch it just yet.

I think bonds could come to life. There is a very interesting scenario where the US dollar could actually do very well, which goes against almost what everybody is thinking. That is these two charts that I mentioned to you off the screen before here.

If people take a look at these two charts, they look fairly similar. The red line is SP500. We have had this recent pullback, this three-wave correction.

The yellow line is the price of gold. Now, the one on the left here is the 2006 to 2008 market top. The one on the right is the 2023 to today, the same type of price action, a three-wave correction in the SP500.

Gold has taken the lead. It has been moving up, as I just showed earlier on that cycle chart. Gold becomes the most favored asset just before a financial and global crisis.

We have this almost identical setup as we had in 2008. Now, I know people will be like, well, this is nothing like 2008, but it doesn’t really matter what the news is. Price action is the same.

It’s going up or down. People are either greedy or they’re fearful. It doesn’t matter what the cause is.

The 2000 tech bubble was a bear market. It was similar in terms of it rolls over. People sell stocks.

2008 is the same. It doesn’t matter the reason, but when people get nervous, they sell. We’re in a similar scenario.

What happens after this, because gold, I believe, is slamming up against major resistance, I feel like it’s pretty much done to the upside. Eventually, gold will start to correct. The stock market, this red line, as you notice, we sold off about 57% in the S&P 500.

Gold will get pulled down with it. Gold pulled back about 34%. I believe if we were to drag this forward, I think we’re going to eventually see this S&P 500 eventually start to have these huge precipitous falls.

We’re going to have this massive correction in price. Gold will most likely struggle and work itself down. Nice squiggly lines there.

That’s where I think we are. Gold, to me, is the ultimate global barometer of fear. The whole world is accumulating gold.

People are piling into it. Everyone is talking about gold to the moon. The crazy part is, David, if I was to just go back to the price action we have right now in the markets for both of these charts, and I apply the dollar, look at the dollar in 2008.

Nobody wanted the dollar. The dollar index crashed. Everybody said it’s going to zero.

Fiat currency is gone. Gold is the place to go. Well, look at the dollar here now with what we have.

We have the dollar way down at the bottom of the chart again. Nobody wants it. If I say I’m bullish on the dollar, all I get is pushback.

If I say I’m bearish on gold, all I get is pushback. These are the extreme sentiments to me that are saying, wow, this is very similar to 2008. Everybody is on the extreme sides of what the charts and the patterns and statistics are showing.

I know this is a really messy looking chart for everybody to get. The green line is obviously the dollar. This is the scenario that’s getting painted right now is this major market top turning, which you and I have been talking about for a while, or I have been anyway.

I’ve been getting mixed messages on gold. On the one hand, people like you have been telling me on the other hand, the fundamentals tell me that gold is going much higher, people say. Now, how do you discern, I guess, which is more of a reasonable expectation for something that’s already gone up more than 60 percent in the last year? What kind of fundamental and technical criteria do you look at to make the conclusion that you’ve just made, which is that gold’s already gone up a lot and it’s probably going to try to trail a bit lower? Yeah, there’s a lot that goes into play.

You and I have shared this chart before. A good example is, from a technical standpoint, gold from the 2015 low to this high and this low, it’s hit its measured move at this 2750 target, and we had a big pause. If we were to go way back in time, the full super cycle move as well is also in that same range.

We’ve hit that level, and now we’re in this parabolic move with gold shooting higher. I keep calling it kind of like a blow off top or icing on the cake. If you were long gold, physical gold, you’re getting this huge move of everyone in the whole world piling in, getting nervous about the financial system.

People are trying to sell their stocks. They’re trying to move their money into something outside of the financial system. People don’t trust banks.

They don’t trust the stock market, and so they’re going into gold. Well, this blow off phase that we have right here is very similar to what we had over here just before we went into a correction. We had another blow off phase right over here.

It’s hard to see on these charts because they’re so condensed from the big rallies, but we’ve got into multiple of these little blow off phases where gold hit its target, and then boom, they just blast past it, and everyone piles in, and we get the extreme sentiment that we have right now. Yeah, I see a lot of interviews, and people are talking about $7,500 gold, $12,000 gold, and yes, the fundamentals support it. The fundamentals have supported, I think, that price for gold for a long time, but the reality is price tells us what to do and what to follow.

I wouldn’t bet against gold here. It is in a screaming bull market. All I can say is based on sentiment, based on technicals and risk management statistics, we are in a bubble phase in gold.

Everybody wants it, and it has piled in, and I think it is about to deflate and pull back with the overall stock market. Gold could continue to go higher. It’s not about picking the right direction and being right or wrong.

I think it’s about following price. I still hold gold and silver long term. I love physical metals, but I’m not looking to buy up here.

I’m waiting for a 2008 type of correction or something where it pulls back 15% to 35%, and then I’ll be able to rebuy it at the start of a new major cycle where it does go up to that $7,000 and $12,000 on the next move. The fact that we’ve just gone parabolic on these charts are a real warning sign. The sentiment is a very powerful tool in terms of understanding that we’re getting close to the end of this move for gold, I think.

Do you have an upside level for us, Chris, for gold before we move on to another asset class? We need to see how this chart is going to shake out. We can take it small steps at a time because it keeps hitting all of our targets. There’s a couple different targets that we had back over here where gold had this high momentum move along with the stock market.

We had a $3,500 target. It’s hit that level. Right now, it has the verse.

It has actually a bearish pattern. It looks like gold wants to crack down to about $3,145, which is about a 5% drop from here. If it does this little three-wave correction, once it starts to turn up, we’ll be able to draw a new upside target, which technically I could draw right here.

If it pulls back to this 100% measured move level over the next few trading sessions, it does point to $3,687 an ounce as the higher. Because gold has blown past all of our major targets, all we can do now is measure these small little steps and just play each one or just know those are the next levels and thresholds where it’s going to pause, rally to and pause. Let’s move on to Bitcoin.

I like to talk about Bitcoin. A major development that some people have pointed out to me is the decoupling of Bitcoin from stocks. Now, I know this is a bit random because on some days, it’s coupled with stocks.

On other days, it’s completely decoupled. The correlation is not consistent. However, people have pointed out that over a multi-month rolling period, the correlation coefficient is now much lower than it was a couple of years ago.

That is true. Let’s take a look at whether or not Bitcoin is now a standalone asset and no longer tracking the S&P or NASDAQ, or maybe it’s still kind of a leverage play on tech stocks. What do you think? Yeah, it’s really mixed.

It’s a lot like the precious metals space. You never know, for example, if gold miners are going to sell off with the stock market or if they’re going to rally as a defensive play. And I find Bitcoin seems to do the same thing.

It has been tracking a lot with the NASDAQ, but it also decouples and can go its own direction. I think that’s one of the risks, the added risks with trading Bitcoin and miners is that it has this other option. It might move against it, what you expect it to do.

So it has been holding up very nicely. It has a high momentum move here. I am actually fairly bullish on Bitcoin.

When we look at the monthly chart of Bitcoin, it is pointing to $135 an ounce to the upside. We have a very strong bull flag pattern that formed over here. We ended up putting in a trade that you and I have talked about it here and we got in up here for a quick 40% move.

Well, now it’s building another bull flag. And if it can firm up and kind of build some strength up here, just like it did before it broke out over here, I think we’re going to see a big move. This is a fairly strong chart pattern that Bitcoin might actually end up as a defensive play and completely buck the stock market trend.

But we need to see how that’s going to unfold because the reality is when we look at the daily chart, it’s pretty clear that we’re stuck kind of under resistance or at resistance on the daily chart. When we zoom back, we got a major topping pattern here. It’s trying to eat through this resistance area on the chart.

And we’re going to need to see if it’s going to have another leg up. This is a nice little bull flag pattern. It might push up to this $104, $108.

And if it holds strong up there and starts to run even higher, I think it’s going to $135. So there is a potential for a very explosive trade. And I like Bitcoin for trading reasons.

I’ve only traded it once in the last decade, more or less. But we could get one of these green bars. If it starts to break out, everyone piles in, it’s going to send it higher.

It’s a very emotional driven move, especially when it’s running into new all time highs. So if it starts to break out, I kind of want to take part of it and catch that move to $135. It’ll be probably a swift big green bar.

You get in, you get out, and then you just kind of sit back and wait for another setup. So that’s the big question. I am bullish.

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And I was going to say the 135K target that you have, that sounds a bit divorced from your bearish outlook for the S&P 500. My gut is if the stock market sells off and has a leg down, Bitcoin’s going down with it. But if it proves that it can hold up and buck the trend and money is actually flowing into that asset class, well, it might be a new defensive play.

If the stock market crashes, people pile in to Bitcoin. So you really just have to wait. You have to wait for something to prove itself, prove it’s in an uptrend, prove it’s bucking the trend of what it normally does, and then you can take part of it.

Okay. Chris, great. Let’s end it here.

Where can we learn from you and your work? I mentioned you have a book, Asset Revesting. I have it here. Pretty interesting read.

Lots of material, lots of personal anecdotes and good experience that you’ve shared. Where else can we go? Yeah, I think the best spot to get a feel for what I do is our YouTube channel, The Technical Traders. I share usually a daily video there.

And then you go to my website and join a free newsletter and get up to speed analysis and updates there. It’s free. And yeah, those are the two best spots to follow along.

Thanks, Chris. We’ll speak again next time. Big day today and a lot of volatility in the next couple of weeks for sure.

So stay tuned to Chris’s next interview with me in a couple of weeks. And bye for now. Thanks, David.

Always a pleasure. Thank you for watching. Don’t forget to like and subscribe.