Will the S&P 500 Crash By 50%? How Gold Could Protect Your Portfolio | Chris Vermuelen
What this covers
Join James Connor as he welcomes Chris Vermuelen, the chief market strategist at the Technical Traders (@TheTechnicalTraders) for an engaging discussion on the current state and future outlook of the financial markets.
From gold's surprising rally and the potential tech stock tumble to the unexpected ascent of commodities like oil and copper, this episode dives deep into strategies to protect and grow your wealth amidst looming market shifts.
Don't miss Chris' insightful analysis on gold's bright future, the precarious position of tech giants like Apple and Tesla, and why now may be the time to look at energy stocks. Whether you're a seasoned investor or just starting, this conversation is packed with valuable insights to navigate today's volatile markets.
Timestamps: 00:00 - Introduction 00:28 - Chris Vermuelen's Outlook 01:17 - Short-term Bullish, Long-term Bearish? 02:14 - Understanding Market Stages 03:59 - Panic Selling & Market Predictions 05:58 - Commodity Strength as Market Indicator 07:10 - Industrial Growth & Potential Recession Signals 08:44 - Precious Metals & Economic Cycle Tops 10:34 - Tech Giants' Vulnerabilities 13:50 - Nvidia's Volatile Position 15:04 - Gold's Investment Potential 19:06 - Exploring Copper & Oil Markets 23:16 - Bitcoin's Digital Gold Rush 25:34 - Energy Market Dynamics 30:18 - Copper's Economic Indicators 32:42 - Canadian Market Insights 34:44 - Global Market Forecast
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Rilion argues that despite near-term strength in equities (another month of upside), the stock market is entering a stage-three topping phase that will lead to a 10-20% pullback in Q3-Q4 2024, potentially cascading into a 40-50% bear market correction by 2025, while precious metals and energy commodities will rally into the downturn before joining the decline.
- Technical stage analysis shows equal-weighted indices and most stocks forming bearish topping patterns despite S&P 500 all-time highs, indicating market breadth weakness
- Commodity leadership (energy, gold, copper) at economic cycle peaks historically precedes recessions, signaling the market is in final bull-run phase
- Apple and Tesla both breaking critical support levels would trigger cascading margin calls and forced liquidation, catalyzing stage-four bear market decline
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Traders should never try to pick market tops; instead, they should identify when overbought assets consolidate with high volatility (bull flags, pennants) and develop a clear exit strategy: if the position breaks down, exit; if it breaks up, scale in; most traders fail because they lack a plan and hold until massive losses.
“just keep in mind whenever you have a huge move and it's digesting with with big pops and drops this pattern here looks very similar to what we have here lots of volatility here it's usually a sign of it's short-term weakness the question is is it just a pause or is it a breakdown and that is where you need to have a strategy in place saying okay if it you know starts to break break down between some of these lows do you get out and wait wait do you bet on the downside to profit from it or um you know what what are you going to do and that's where most people fail most people don't have a game plan they just buy into something and they hope and then they ride that roller coaster until generally somebody will hold something until it becomes a huge loss so they could be up huge right now but it'll start to break down it collapses and it goes down and then they take have so much pain that they have to just get out uh people don't realize you should be scaling out you should be locking in gains when things get overbought and at resistance like they are right now and if it starts to break and run higher you just you can buy back in and play the next leg up”
A liquidation cascade occurs when forced selling (margin calls, leveraged fund liquidations, stop-losses hit) creates a snowball effect where each layer of stops gets hit, triggering automatic selling at lower prices, which hits the next layer of stops, and so on.
“when there is massive selling in the stock market and people are having all kinds of panic and real forc liquidation margin calls gold will most likely pull back and have some type of Correction”
Investors need to understand that market cycles and corrections are cleansing events that should be viewed as opportunities rather than purely disasters; the key is to protect capital during declines, preserve wealth, or attempt to grow it during downturns, and then redeploy capital when the market firms up and turns around
“you just need to understand that you know um you need to protect yourself from it and then preserve your capital or grow it as as the markets are falling and then redeploy the capital when the strategy when when the market firms up and turns around”
The process of extracting gains and repositioning capital involves three steps: (1) scaling out and locking in gains at resistance when things are overbought, (2) waiting for and identifying the breakdown/pivot point, and (3) jumping back in for the next leg when the market stabilizes.
“the keys you know waiting for the to turn around identifying it and then jumping on board for that next run”
When commodity sectors (precious metals, energy, gold miners, copper miners, industrial capital goods) lead the market during an economic cycle near the peak, it is typically a sign the economy is slowing and a recession is near, because companies expand capacity and CEOs make capital investments based on false confidence without understanding the cyclical downturn ahead.
“typically when we get very close to a stock market top an economic cycle uh like a the economy slowing down we tend to see precious metals Commodities do well energy is on fire energy stocks are ripping higher they're leading the way and we also see industrial capital goods like indust the industrial sector um equipment um people upgrading um their their factories and things because they don't realize there's a cycle at play here they think they're going to keep growing this covid bubble is going to continue but that's not really the case”
The equal-weighted S&P 500 (RSP) and Russell 2000 together provide a gauge of the broader stock market that reflects what the majority of stocks are doing; these indices have broken below their topping pattern and are in a complacency move, indicating majority stock weakness.
“this is the RSP which is the equal weighted SP 500 so every Stock's got the same waiting the tech doesn't have a heavy waiting in it and it's the Russell 2000 which is kind of the next the 2000 in kind of majority a good gauge of stocks and so if we look at what the majority of the stock market is doing uh we we put in uh a major top here and now we're kind of just this Market is in this kind of complacency move it's working its way back up um the majority of stocks are not doing very well at all”
Momentum traders are a category of market participants who buy assets that are going up and sell when they start to decline; they create positive feedback loops on the way up (buying strength) and negative feedback on the way down (selling weakness), amplifying both rallies and crashes.
“there's a lot of momentum traders in Nvidia people who just keep piling in and um they got their eye on it that when it starts to roll over they're all going to want to get out and there's a lot of general public people who don't really know much about trading or investing who have been chasing Nvidia higher and once they start to lose a bunch of money um they have really no real strategy at play they all start to panic out and it just creates a Wipeout effect in massive volume”
Recent panic selling in the S&P 500 (today's sharp decline) represents a healthy short-term signal because it tests the 20-day moving average, which has repeatedly provided strong support; historically such panics are followed by bounces as put-option buyers get caught off guard when the market rallies.
“this pink line is the 20-day moving average and and so the SP 500 just keeps bouncing up this 20-day moving average and today we've got a pretty big gap down or as you and I are recording this and we've seen these big moves to the downside over and over again and I have an indicator that shows us when there's Panic selling when the average investor is just dumping shares I use the New York Stock Exchange up and down volume ratio and uh we're seeing that today we have Panic selling in the market uh it's not huge volume to the downside just people are thinking the market is topping and they're getting out and typically every time we see this uh and and we tend to see the put call ratio Spike up and pop which we are seeing right now as well uh the markets want to go higher more or less people are dumping their shares they're scared and they're buying downside leverage like put options to profit from falling pricing and they seem to always get caught off guard um because the Mark we're in an uptrend are betting against the market”
Rounding bottom patterns represent V-shaped or U-shaped consolidation formations where an asset forms a gradual curved base before breaking out to the upside; these patterns typically indicate exhaustion of selling pressure and potential start of new uptrends
“we see oils put in this rounding bottom it kind of tried to eat through resistance here and and now it's breaking out and it's it's running higher”
The S&P 500 has been up approximately 17-18% since the uptrend started in November, whereas the NASDAQ is underperforming and tech stocks are lagging, which is a warning sign that the rally is running out of steam because normally the NASDAQ should be significantly outperforming.
“we had a new trend start back in November for the SP 500 and the SP 500 is is up uh roughly um 177% so the SP 500 has been doing very well if we compare that to the NASDAQ from when the uptrend started uh the NASDAQ isn't performing um quite as well it's it well it's it's down very sharply today it's it's picked up speed but overall the sp500 over the past week has been outperforming the NASDAQ by several perent and typically the NASDAQ should be blasting past and outperforming so and it was earlier throughout this this this trend so the NASDAQ and the tech stocks are starting to lag they're starting to pull back and uh that is a sign that it's running out of steam”
A V-shaped bottom is a chart pattern where price crashes sharply and then reverses sharply upward without a gradual base building; it is difficult to trade because the reversal happens too quickly and traders often miss the move.
“v-shaped bottoms are difficult because they reverse so quickly you can miss a huge chunk right off the bat I like I like something that unfolds over time as a process not just you know straight down straight back up”
Stan Weinstein's four-stage market cycle framework (stage one = basing, stage two = breakout/uptrend, stage three = topping phase, stage four = downtrend) is the foundational analytical model guiding Rilion's market interpretation.
“this is based on Stan Weinstein's book um how to profit from Bull and bare markets he breaks the market down to four stages”
The New York Stock Exchange up-down volume ratio is an indicator Rilion uses to detect when there is panic selling in the market (when average investors are dumping shares into weakness).
“I have an indicator that shows us when there's Panic selling when the average investor is just dumping shares I use the New York Stock Exchange up and down volume ratio”
A bear flag is a chart pattern where price sells off sharply, then consolidates sideways (the flag), creating a pause before the downtrend resumes in the same direction; repeated bear flags in a stock signal continuing downward pressure.
“it is a series of bare Flags meaning price sells off and then it Flags in the opposite direction this is known as a pause and then it continues down whichever the direction was into that flag”
Recent external forces (Russia and Saudi Arabia) are pushing oil prices higher via supply-side pressure, and they are currently 'winning' against the US government's effort to keep oil prices down for political (inflation/election-year) reasons.
“it it's also worth noting that we are in an election year of course the current government is trying to keep the oil price down because they don't want higher inflation but then you have these external forces let's just say Russia and also Saudi Arabia they want the oil price higher so it looks like there's a bit of a battle going on here and it looks like uh Russia and Saudi Arabia are winning right now”
Barron's March cover story 'Bet on the Bull' declaring markets poised to go higher, combined with AI appearing in trivial consumer products ('AI in toothbrush machines'), signals we have reached a frothy market peak similar to late-stage bubbles where breathless media coverage reflects excessive optimism.
“I think I might have shared this with you um once before but you know Barons came out in March saying bet on the bull you know markets poised to go higher we got the AI bubble is now in toothbrush I in tooth toothbrush you know machines um I just feel like we are in this frothy level”
The stock market is currently in stage three of a four-stage market cycle (topping phase), characterized by hitting new all-time highs while most individual stocks and equal-weighted indices form bearish patterns, creating a masked or misleading picture of market strength.
“from a high level is a stage three topping phase and uh this is this is very difficult phase uh for especially for those trading sectors or individual stocks because are all over the place and the overall stock market when we look at the SP 500 and the NASDAQ for example they are hitting new all-time highs and they don't reflect this blowoff top that we saw in Gross stocks in 2021”
A super-cycle is a multi-decade bull market in a commodity (or asset class) that spans 15-20+ years, characterized by distinct phases: initiation, consolidation, rally into economic peak, correction, then multi-year recovery; gold is currently in the rally-into-peak phase of a super-cycle that started in 2019.
“we started a new super cycle 2019 multi-year consolidation now gold is running and it could run all the way to 26 2700 over the next couple of months remember remember this is the monthly chart so a few more bars and the stock market could could be topping out here and even if the stock market tops out gold silver miners could continue to claw their way higher as that alternate currency that defensive play”
The average investor remains bullish and thinks markets are strong, which is contrarian to how markets typically behave—when everyone is bullish and flush with money, the market typically reverses and catches investors off guard.
“A lot of people don't think that's going to happen the average investor thinks things are good and typically when everything is really good and everybody's got you know as much money they've ever had in their life typically things go the other way and catch everybody off guard and this will do exactly that”
Even if the stock market tops out and begins selling off, gold, silver, and miners could continue rallying higher as an alternate currency and defensive play until a major stock market crash and forced liquidations occur, at which point they will experience sharp corrections similar to the 34% gold pullback that occurred in 2008
“gold silver miners could continue to rally and become the leader we saw this back in 2008 uh before the market topped so this this is nothing out of the norm”
The key to successfully navigating precious metals cycles is patience to identify when they turn and jump aboard for the next multi-year run; precious metals super cycles take 10-15 years to unfold.
“the key is just patience these are these are super Cycles these take like 10 15 years to unfold we're getting there um I think the bottom is in for for gold and silver and miners it's just um we just need to wait for this multi-year rally to the upside”
The general lack of public interest in gold, silver, and mining stocks (most people do not want to buy them) is a positive contrarian signal because it indicates the sector is deeply out of favor and undervalued, creating conditions for substantial upside when sentiment turns.
“I think the big um uh I think we're seeing countries and and loading up on gold and but no one else is really interested in Gold I think I can talk to pretty much almost any random person and nobody's interested in buying gold or silver um or even really minor because the only people who are interested in Are People Like Us who kind of live and breathe it and are waiting for this next big leg which is a bullish sign if nobody wants something that means it's out of favor that means it's getting undervalued and it means there's going to be a ton of upside when things turn around the keys you know waiting for the to turn around identifying it and then jumping on board for that next run”
The TSX will likely perform well after a financial reset and subsequent multi-year commodity super-cycle because it is resource-heavy with significant weighting to gold, energy, and commodities, which will lead the recovery out of the recession.
“overall I mean the this space I think I think we could see the uh the Toronto Stock Exchange do fairly well after we have this financial reset because I think we're going to see that super cycle and and commodities really take off Gold's going to do well I think energy is going to do very well uh and this is very heavily weighted to those so um you know we're not the TSX isn't crazy Tech heavy uh we need the next bottom in the stock market for resources to take off and then the resource socks will take off and drive the TSX up”
Countries are loading up on gold, but retail investors show no interest in purchasing gold or silver, creating a divergence between institutional and retail demand.
“I think we're seeing countries and and loading up on gold and but no one else is really interested in Gold”
Apple is forming a double-top pattern near critical support, and if it breaks below ~$166, it could experience a precipitous fall of 15-17% that will severely damage market momentum because Apple carries significant weight and any breakdown will trigger sharp sell-offs across the broader market.
“Apple's definitely right down here testing a pretty major support level we could argue this might be a technical a double top which is not a good sign if we if it starts to break down here we could see a very precipitous fall in apple this will take the a lot of the wind out of the sales for the stock market uh surprisingly the stock stock market has gone up even though Apple has been you know moving lower pretty much all year so that just goes to show how much power Nvidia has and some of the semiconductor space but apple is not looking good just based on this chart pattern um we we could get a really rough gauge of the downside potential which is which is roughly going to be about 15 to 177% uh Apple could fall very quickly if it breaks this kind of 169 you know 166 level”
A 40-50% stock market correction could unfold over multiple years similar to the 2000-2002 tech bubble, rather than occurring in a single year; the correction could 'bleed out' and take 2-3 years to work itself out as most people are unaware that a correction is coming because they believe the economy is strong
“I think this could bleed out over next year as well I feel like it's more a little bit more like a 2,000 Tech bubble where it could actually take two or three years to slowly work itself out um a lot of people don't think that's going to happen the average investor thinks things are good and typically when everything is really good and everybody's got you know as much money they've ever had in their life typically things go the other way and catch everybody off guard”
Energy stocks typically break out before the underlying commodity (oil) breaks out with a lag of days or weeks; oil broke out a couple weeks ago after energy stocks (XLE) broke out ~1.5 months prior, which is the normal lead-lag relationship, but gold miners have not broken out while physical gold is running, suggesting gold/mining is not about to have a huge rally like prior cycles.
“energy and energy stocks do well just before the stock market before the economy kind of tops out and you know oil only broke out a couple weeks ago uh if we look at the uh energy energy sector stocks like XLE uh this is a really good view like we had a bottom here in kind of energy stocks and they broke out like a month and a half ago and just scream screaming to the upside and this to me is this is what gold miners should be doing typically you see for example energy stocks The Leverage play around a commodity so energy stocks usually break out first and then the underlying commodity follows suit a few days later or a couple weeks later and so energy stocks broke out and ran and then oil broke out a couple weeks later um as a delay gold in the precious metal space isn't doing that which is telling me that this isn't I don't think the startup a huge run in the precious metal space because we should see gold miners and silver miners breaking out and running and then gold limps around and breaks out afterwards um but we're not seeing that so um we've had about a 25% run in GDX uh it's had a very nice run we're seeing a very big run in energy stocks um I think um again this is just a sign that we're in those last legs but Energy's on fire and um the energy stocks are are really threatening to to start another huge move”
Barrick Gold (second-largest gold miner) shows a better technical chart pattern than Newmont because it is forming a base and fading into resistance in an orderly consolidation, whereas Newmont shows a V-shaped bottom which reverses too quickly and causes traders to miss major moves; Rilion prefers bottoming formations that unfold over time.
“so baric has got a much I like this chart much better I mean it really you know hasn't perform very well you can go back 20 30 years um but overall I like I like the chart pattern of baric a lot more simply because I feel like it's trying to build a base here um it it kind of had a level through here that created a bottom it kind of broke through that it ended up coming kind of right up into resistance this kind of breakdown level and now it's fading back down I like this fade silver has got a very similar chart to this very very similar uh this fade is just be there's no interest it's just fading out and that is perfectly fine it's actually a very strong pattern um last time we saw a fade like this we saw a huge rally in barold um and I and I think you know we'll eventually see the same thing and it'll work its way higher um I like it more than numont just just because I I prefer a bottoming formation where newon is more like it just keeps falling it's more like a v-shaped bottom v-shaped bottoms are difficult because they reverse so quickly you can miss a huge chunk right off the bat I like I like something that unfolds over time as a process not just you know straight down straight back up um so I I like the chart um this very similar to like just if we look at the overall General basket of gold stocks you look at gold miners I mean it's pretty much the same as baric”
Newmont Mining, the world's largest gold producer, has massively underperformed and currently trades near its 1981 level, reflecting decades of value destruction despite paying dividends; this extended underperformance is typical of a sector that has been out of favor.
“when you look at Newmont I mean it's just been beat up really hard um I mean we're going I don't know how far back this goes but it is a long time um it is right back to where it was in when I was born 19 1981 like that's not yeah they pay dividends but um you know you could say they're getting oversold they're at support”
Gold is using Fibonacci extension analysis to target the 2355-2360 range in the near term, then will likely pull back from a multi-year bull-flag pattern; the monthly chart shows gold at the 0.618 Fibonacci extension of a pattern dating back to the 2015 low, which projects a longer-term target of 2670-2700.
“based on this last rally and this bull flag pattern um we can get a really good gauge of where it should find some of these support levels here now are the next resistance areas and more or less gold came up uh just the other day it hit this this measured move whoops of um 61% extension now the way Fibonacci extension works is it measures the momentum of the first leg and then it figures out where that pause and pullback is and when price does reverse whatever the power of this first leg up should be the power of the second leg and what I have found is whenever price comes up to the 618 level uh and pauses for a day or pulls back which it it did um just a session ago we pretty much always go up and hit the 100% measured move which is about 2355 2360 so I think the next upside Target is um is this 2355 area for gold”
Bitcoin has hit a new nominal high and entered a parabolic feeding-frenzy move with straight-up bars that make Rilion nervous; after the gap-up and pullback, it is now consolidating in a bull flag / pennant pattern, which if it resolves upward could push Bitcoin to $100,000, but the structure is similar to overbought consolidations that often precede sharp reversals.
“there is no doubt um Bitcoin is in a is in an uptrend it is consolidating actually just a lot like Nvidia it's just it's had a huge run it's just chopping around it's building potentially a bull flag or a pennant formation and if this resolves um with the underlying Trend which is up we we could see another big rally it could go up to 100,000 uh dollars you know per Bitcoin um fairly easily so this I mean there's you don't want to pick a top I'm not a fan of ever picking a top the trend is up it's digesting with volatility”
The S&P 500 could pull back to $460-470 per share (the Spy), which is only an 8-9% pullback; however, Rilion expects a much larger 15-20% pullback this year to the $410-430 range (a Fibonacci retracement zone between 0.618 and 0.38), followed by a potential 40-50% crash down to 2018-2020 lows.
“I I have a feeling we'll use Fibonacci retracement here so there's a few different levels we could look at so if we take the the low that we saw back in October I think the stock market could very easily this is the this is the Spy I think it could pull back roughly to about the $460 $470 per um per share which based on where we are right now is really only about an 8 n% pullback now I do think um we could see much much bigger pullback as we as things unfold I think I don't know if this will I think this this could very easily happen this year I think we could see the markets pull back 15 uh 20% down into this this the these this range where it rallied up and pulled back it also happens to be a Fibonacci retracement zone between the the 618 and the the 38 and this is the window where whatever the run up is this is where the market typically in this box tends to pull back to”
Oil has put in a rounding bottom and is breaking out through resistance; it ran higher after a breakout a couple weeks ago, and Rilion expects it to find resistance around $90-95 per barrel based on measuring the volatility depth from the base and projecting it forward onto the breakout level.
“I I I I like oil I mean um that's kind of the kind of space that I grew up in is the the golden oil guy but we we see oils put in this rounding bottom it kind of tried to eat through resistance here and and now it's breaking out and it's it's running higher uh naturally we see energy and energy stocks do well just before the stock market before the economy kind of tops out and you know oil only broke out a couple weeks ago uh if we look at the uh energy energy sector stocks like XLE uh this is a really good view like we had a bottom here in kind of energy stocks and they broke out like a month and a half ago and just scream screaming to the upside”
Freeport-McMoRan (major copper producer) is leading copper higher with a 15% YTD gain vs copper's 5%, and it is breaking out above recent highs; short-term Rilion is bullish on copper miners (third-best performing sector), but longer-term he expects a reversion because Freeport is at the upper end of a very volatile 4-year range with repeated sharp selloffs.
“so it is leading copper it's starting to break out above some of these uh these highs from over the past year um it's musling its way up and again I think um I think a lot of people are moving into sectors and commodities or stocks based around Commodities like this um because I think a lot of people think um the econom is going to continue to grow it's going to continue to get stronger uh housing's going to take off copper is going to be needed um all those things so the fact that it's breaking out and moving is a strong sign for copper um I think there's there's upside potential but overall I mean this is a very big volatile chart pattern that has been really struggling for the past four years and uh it is at the upper end of its range which each time it's got up here it's had a very big selloff”
Energy stocks are on fire and threatening to start another huge move; they broke out a month-and-a-half ago and are screaming higher with a large pennant formation that could trigger another massive leg up.
“and um if you look at this massive pattern we go way back in time here this is a giant pennant formation a big pause a launch pad for potentially another big run a big push higher um in the space”
The 20-day moving average (pink line) is a key technical support level; when indices are in a strong uptrend and bounce off the 20-day MA repeatedly, it confirms the underlying uptrend is intact.
“this pink line is the 20-day moving average and and so the SP 500 just keeps bouncing up this 20-day moving average...in a really strong uptrend it should it should hold”
James Connor is the host of Wealth on, a channel focused on examining both fundamental and technical research to provide insights into markets and financial assets
“hi and welcome to wealth on I'm James Connor when examining the economy and financial markets I like to study both fundamental research and also technical research to provide insights on where the market might be going”
The Canadian stock market (TSX) is resource-heavy and has struggled for the past few years, not achieving massive gains like the S&P 500 over the past 10-20 years, partly due to struggling commodity prices.
“the Toronto Stock Exchange has definitely struggled it hasn't had um really massive gains uh over the past couple of years like uh the SP 500 it's not breaking probably over the last 10 or 20 years yeah I mean it it's yeah it's definitely it's been a very slow grind”
Rilion publishes his charts and analysis daily on The Technical Traders website, shares all the trades he executes (focusing on ETFs), and has written a book titled 'Asset Revs: How to Hold Only Equities or Assets That Are Rising in Value Even During Bear Markets' that teaches his investing philosophy.
“sure yeah they can go to the technical traders.com and I share my charts analysis every day there I share all the trades that I do I focus on ETFs and if they're interested in learning my style of investing which I call Asset Reves they can go to Amazon or chapters and pick up my book it's called asset Reves it's uh how to hold only equities or or assets that are rising in value uh even during bare market”
James Connor (the host) mentioned a prior conversation with David Rosenberg in which Rosenberg was also negative on the Canadian economy and Canadian stock markets.
“yes um it's interesting that you say that you're negative on the Canadian uh markets because I just had a conversation with David Rosenberg he's also negative on the Canadian economy and the markets and uh if anybody wants to watch that I will include a link to that in our show notes below”