The Market Hasn't Yet Arrived at 'Peak Pain'

The Weekend Edition is pulled from the daily Stansberry Digest.

Over the past few months, I've been citing the man who called the "top"...

And for good reason. My colleague and Ten Stock Trader editor Greg Diamond's work is a must-read.

Back in November, he used his brand of technical analysis – based on price action, key dates, and proven patterns of human behavior – to make a bold call... Greg said that the market would top by February or March 2022.

That's exactly what happened...

On January 24, Greg wrote to his subscribers, "The top is in." I shared this call in the Digest later that night. It was just three weeks after the benchmark S&P 500 Index's all-time high of 4,796 on January 3.

Since then, the major indexes have tumbled into or close to bear market territory. And Greg has been nailing every leg down through the first four-plus months of 2022, too.

Most important, he has guided Ten Stock Trader subscribers on how to make a lot of money when almost everyone else was scrambling.

For example, using Greg's recommendations, you could've doubled your money twice in five days while most other people were panicking earlier this year. And in a year where "everything is down," Greg's win rate is nearly 80%.

Now, Greg has another forecast...

In short, he anticipates another sharp market move as early as Wednesday...

It's an "aftershock" to the market selling so far this year. And it will likely surprise a lot of people – especially if the markets rally between now and then. That's entirely possible, according to Greg... And it's why the market could then fall deeper into another level of panic.

That sounds ominous. And perhaps you think we're suggesting that you go "all out" of the market today. But that's not the case at all. Instead, Greg says you need to prepare... to make money.

Because here's the good news...

You don't have to be one of those people who gets swept up in the chaos.

Just recently, Greg went on air to further explain his aftershock call... and how his subscribers can make a killing off it.

I caught up with Greg last week to talk about it all...

And I'm sharing some of the highlights from our Q&A with you today. I hope you'll enjoy Greg's take on the markets. And I hope it helps you with your investing strategy in the days, weeks, and months ahead.

Away we go...

CM: Let's get into it... What are your feelings about the markets in 2022 so far?

GD: The stock market has largely played out how I thought it would. And I feel like this will continue for quite some time.

Many folks may not realize it, but the markets have a way of hurting the most people – whether that means the bears in a bull market or the bulls in a bear market. And we're seeing the latter now...

This means we haven't seen "peak pain" yet.

Some folks are still clinging to the mindset that the rally from March 2020 until late last year and early this year is the same market environment. And it isn't.

So we'll see more volatility. I'm very confident of that.

CM: It sounds like you think this is a bear market that has a ways to go...

GD: We're still in the early stages of this bear market.

Again, we have not reached peak pain yet... This is a deleveraging event similar to 2008 and 2009 and after the dot-com crash from 2000 to 2002. And we haven't seen "capitulation" yet.

So people might not want to hear this, but I think this bear market will last the rest of 2022 – if not into 2023.

Bear markets tend to share the same characteristics, even if they happen during different eras, in different countries, or in different markets.

You can see patterns repeated over and over. Like a lot of things in the market, that repetition reflects human nature more than anything. And it's important context to know... That's because things that "don't make sense" at first might start to make a little bit more.

Here's what I mean – and I wrote about this recently in Stansberry's Financial Survival Program...

A bear market has four "phases."

The first is the "initial decline." This sets in after a big run higher in stocks. It catches most investors off guard. I would argue that this initial decline happened at the start of the year.

Then, there's the "relief rally." This phase sets in motion a psychological state for most investors that the initial decline was just a correction – and the worst is behind us. That isn't true, but it's what most people think.

The third phase brings in the "panic." This is the worst phase of the bear market. Every sector of the stock market suffers large declines – and it seems like it will never end. You'll hear stories about overleveraged funds taking massive losses or similar stories of woe.

And after all that, the market hits "bottom." This phase is marked with capitulation, or surrender, from most investors. You'll see extreme pessimism and a general consensus that the future is bleak. All optimism seems gone from the market.

I believe the second phase – or the "relief rally" – ended in late March. And we're now in the early stages of the panic cycle.

CM: You've been spot-on with your calls over the past several months. Anyone who has followed your work could say that.

So I think all of our readers want to know... What do you think could happen next?

GD: It's quite simple, really.

Within the third phase I mentioned – panic – another strong relief rally will likely occur.

Now, to be clear, this would be different than the relief rally back in March. This one could be a little shorter or smaller in scale... And I think it may end around May 25, or possibly last into the first week of June.

If I'm wrong and stocks just keep going down, I have a plan for that, too. But the point is... I'm planning and expecting to use this next relief rally to aggressively short the market.

In other words, I think stocks will suffer a severe decline once the coming relief rally ends.

CM: What makes you so confident in that approach? Even with all the chaos in the world today – inflation, war, supply-chain breakdowns, and more – I sense that a lot of folks might think the worst of the selling is already behind us.

GD: It's the price action...

I use various technical-analysis methods that help determine when a move will happen and what it will look like. My brand of technical analysis looks at price action, time, and historical patterns of human behavior.

And the great thing is, the methods can be applied to basically anything that trades in the market – a specific stock like Microsoft, a sector like semiconductors, or even the big indexes like the "Dow Jones Transports" or the Nasdaq 100.

No matter what it is, when price patterns and key dates converge, it sets up a trading opportunity. I think my subscribers can attest to that...

To be clear, I don't recommend buying and holding stocks in Ten Stock Trader. It's more suited for short-term trades.

Another great thing about technical analysis is that you can also get indicators about the market in general that might help you make decisions in other parts of your portfolio...

For example, if you think we're entering the panic stage of a bear market – like I do – would you want to be buying a lot of stocks right now? That's up to you, of course... But the risk-to-reward setup right now isn't worth it to me.

Now, before we go on, it's important for readers to understand that I do not predict events. That might sound strange, considering I'm saying a relief rally and a big move down is likely coming next. But we do not deal in certainties... We deal in probabilities.

Late last year, I had no idea what was going to happen when I said the bull market was likely to end in February or March. I didn't know Russia would invade Ukraine, or that inflation would get out of control. But based on the methods I use, I knew that no matter what, the start of this year would be an important time period and inflection point.

So I'll reiterate that the methods I use help us improve our chances of success. There are no guarantees in this business. But so far, Ten Stock Trader has yielded a win rate of nearly 80% in 2022... So I'd say we are on the right track.

CM: How much risk do you think is still in the market today versus upside? And beyond that, how will folks know if the bottom is here and it's time for long-term investors to back up the truck and buy stocks?

GD: It may come as a shock to some readers, but I wouldn't be surprised if the S&P 500 falls another 30% to 40% before the bottom is in. Just as bull markets go up farther than most folks think they will... bear markets can also go down farther than most people think.

In terms of upside, I'll only become bullish if stocks rally above their March 29 highs. That was the top of the last relief rally I talked about before. It's as simple as that.

In terms of the bottom, it'll likely be a situation where inflation is somewhat under control or the Fed reverses its "hawkish" policies and does what it has always done when stocks crash – flood the economy with money.

At the bottom, we'll also see peak pessimism – and positioning that shows investors expect stocks to keep falling.

CM: Is there anything that we should be watching for over the next few weeks that could change your game plan?

GD: Yes, it's possible that stocks will just continue lower without a relief rally. As I briefly mentioned earlier, that's something I'll be considering. And I have a game plan for that. But for now, my focus is on trading this relief rally around May 25.

CM: Before we wrap up today, do you want to mention anything else?

GD: I'll just say for anyone who is interested in Ten Stock Trader but may be on the fence about it... just know that I'm dedicated to doing things the right way.

This means I focus on risk management on every single trade. You'll know exactly what to risk in case things go wrong. Also know that you don't need any prior trading experience to become a subscriber. I'll lay out everything you need to know for every trade... And we've had plenty of complete beginners enjoy success with my service.

It's a volatile environment in stocks right now. We haven't seen anything like this in years. But as I've said today, I think it will continue... And I look forward to navigating this rocky environment successfully – and helping my subscribers do the same thing, too.

CM: Thanks, Greg.

One more thing...

A lot of people liken technical analysis to voodoo or some other "too good to be true" idea – how can one predict the future, after all?

But as Greg said today, his analysis is a way to gauge probabilities and manage risk.

And for this reason, as far as I'm concerned, there is a place for technical analysis – or "chart art," if you will – in everyone's portfolio, even long-term investors.

When we started to see more bear market "warning signs" flash earlier this year, Greg's research was already confirming a downtrend in U.S. stocks.

So even if you aren't interested in what happens in the next few days or weeks, it's worth hearing what Greg says on the matter... You just might learn something new.

Good investing,

Corey McLaughlin

Editor's note: Earlier this week, Greg sat down to share his thoughts about the markets... and more specifically, to explain everything about the "aftershock" he believes will hit on May 25. He also talks about how his brand of technical analysis can set investors up to make multiple doubles through the volatility – without even touching a single stock. In case you missed it, you can listen to a replay of Greg's message right here.