Folks Insanity Incoming welcome to the last trading week of 2022, A year of severe Financial constipation. This has been quite the Humdinger of a year. This is the first year I was thinking, you know, maybe life isn't so short after all. In fact, maybe it's a little bit too long.

On the bright side though, Santa may be coming this year, but instead of going ho ho ho, he might be going ho ho No in today's video I Want to go through Market sentiment the market data, the presence of a Santa Claus rally and the top three trades that you need to know about heading into this week and before we even get into it I Do want to remind you our Santa 45 coupon code will be expiring at midnight tonight. So if you'd like to get access to Zipgrader, you and our step-by-step lessons, private chat, daily morning briefings I Will go ahead and put the link to that down below. Make sure to check it out before tomorrow I Hope all of you had a Merry Christmas or a merry whatever you celebrate and we'll get right to work. Okay, so Market Data: So historically, in the last five trading days of the year and the first two trading Days of the New Year you tend to have what people like to call the Santa Claus rally.

The reason for this is because because of the January effect, you tend to get a lot of people going and tax loss harvesting selling their positions off in November and early December and then they go and buy back in a bit more than 30 days later, which tends to be in January And so people think that if they buy in before that January re-buybacking period happens, then they're going to be able to buy in at depressed prices and ride the wave upward. And usually the more the market is down before the January situation happens, the more the rally is. However, according to Market Watch historically when stock market gains failed to materialize during the Santa stretch, the S P 500 act out just a 0.53 average gain in the first quarter that followed, and you actually look at some of the worst Santa Claus stretch performance over the last two decades like in 2007 and 1999. Well, that negative performance came right before or during massive Market contractions.

So if nothing else, if we don't get the historical Santa rally this year, well, that's an even bigger Omen for 2023 and how bad it's going to be, it could mean that people aren't even been willing to bet that tax loss Harvesters are going to buy back in in January Just like they weren't willing to bet that they would back here and here next now that we're about to head into a new trading year in about a week. I Want to go ahead and bring up this: Market cycle chart from Wall Street cheat sheet. So usually during an uptrend after a long period of nothingness, you have the emotions of disbelief in the rally. Then you have hope, then you have optimism, then you have belief, then thrill.

then Euphoria and then it starts dumping Again, you have complacency. We just need to cool off until the next rally people say. And then you have anxiety. Why am I getting margin called.

This dip is taking longer than expected. The holy triple Layer dip. Then you have denial. Oh my.

investments are with great companies Dogecoin will never go bankrupt. They will all come back. Then you have Panic Everyone is selling I need to get out now and then capitulation I'm getting 100 out of the markets I Can't afford to lose any more I'm down 75 90 95 percent. Now is the time to capitulate.

And then you go through this period of anger and eventually total depression due to all of the money that was lost over the downtrending part of this cycle. And then when things start actually recovering, you get disbelief and think, oh no, this is another sucker's rally I'm not going to be a sucker this time. And it's worth mentioning that this overall chart can take not just months, but actually up to many years to complete and each stage can be short or can be long, which makes it really difficult to gauge right. But the question that I have for you is, where do you think in terms of the broader Market we are in this overall cycle? Which part of the cycle are we on? Let us know your thoughts in the comment section down below, because obviously, if you're somebody looking for long-term deals, the point of Maximum Financial opportunity is in the trough, which is somewhere around the anger to depression stage, right? Ideally, if you're a long-term holder, you'd probably want to buy in somewhere around there, right? So where do I think we are in this current cycle? Well, you've certainly had certain areas of the market that have had versions of panic and capitulation.

but in the broader Market in a broader sense, it's hard to argue that that the S P 500 has had capitulation, or even any sort of real Panic We're down 19 percent from highs in a year that, quite frankly has seen the worst pace of tightening we've ever seen before alongside the backdrop of four decade High inflation and wars. And all of that, the market is down 19 in an economy that is so constipated that not even Taco Bell could clear it up. In order to get panic and capitulation, you need to get to a period of time where the vast consensus is everyone is getting out. Let's run for the exits, ask questions later, and while we've had many panics this year, they don't resemble a real sustained Peak Panic stage like you would see in this overall trend.

You need one that creates this massive sustained dump that leads to full-on capitulation. And then and then what follows is a period of time where markets don't really bounce back at all because few are motivated to buy again. And so markets stay flat and depressive for long stretches of time before people emotionally can handle belief in getting back into the market again. Long-term holders are the ones that that floor is in the stock market.

Every single time you get a massive crash. those are the ones that are the last to capitulate. But once they've capitulated, it's very, very difficult to get them back in the market Because they were very, very strong during the downtrend. They said we won't sell no matter what.

So once they've capitulated all of a sudden, they now have the idea that we won't buy no matter what. Which makes it very, very difficult for markets to see any sort of rally once they've gotten to that anger phase, right? and they don't come back very easily. Not until markets have once again recovered quite a bit and you go back to the chart on the S P Quite frankly, we've had some aggressive downtrends, but even the most recent one got bought up super fast and again, remember after Peak panic and capitulation people don't come back in and buy Up Dips again for a long time. So therefore, in my view, I would argue that in the broader Market you are somewhere around denial.

You've had a lot of participants who are in the boat of saying okay, well yeah, sure, the FED raised rates at a faster Pace than has destroyed previous economies in previous markets. But then those those same participants are still in denial that that's going to have a big impact on anything, it's common for analysts to say yeah, maybe a little bit of a Slowdown but that's not going to impact my companies. That's not going to impact my market. as if even the strongest buildings aren't damaged when there's a tsunami.

The main difference between a good and a bad company in a financial storm is whether it can hold out and survive. But all companies get damaged, right? And when you're in an economic blood battery period, all companies lose value. at least the ones that are negatively impacted. Obviously, there's some that take advantage of the situation or a position to, but most get damaged.

And so right now we are in this denial stage where people are outrightly denying that the economy is going to contract at all in 2023 and certainly not massively contract, which is what's most likely to happen in my view or at best. They actually think that the collapse is going to happen, but they think it's not going to do substantially anything to the companies that they're bullish on. In fact, most earnings estimates have barely been revised at all. Most analysts expect earnings to be even better in 2023, as compared to 2022.

That's despite the economic Bloodshed So then you have to go and ask one specific question: Why are major Banks and investment managers saying that markets will continue going up in 2023? and at worst, it's just going to be a mild recession. Why are they saying this? Well, the reason they are saying this is the same reason that your real estate agent isn't going to tell you the housing market is about to tank right before you buy a house because then you won't buy the house if you want to go and you want to sign up in a fund and the fund manager was like, okay, yeah, okay, go ahead and give me your money. But we may be entering three years of a massive recession where you're going to lose another 50 percent of it. Would you be more or less likely to invest with them? I'm going to go ahead and say you'd be less likely to invest with them.

So this is why you won't get a straight answer from the industry that is trying to get you to invest money with them. Quite frankly, if you look at pretty much any statistic, it looks like next year you're going to have an economy that is terrible. substantially worse than 2022. And unless the FED pivots is going to continue on a downward spiral.

Charlie Wait a second. What are you talking about? Are you dumb Biden Promised that we are in the best economy ever in the history of Man. Are you trying to say that Biden doesn't know what's going on? I Mean he seems so. Alert in his press conferences, he's just a breath of young, fresh air.

Well remember this for a second. Monetary policy has a delayed effect of at least six months, but usually takes about 18 months to be fully effective. Anybody that says, oh, the Feds rate hikes haven't crashed the economy? Yeah, they haven't because they haven't been felt yet. Six months ago, we were at around 125 basis points, which means we are just starting to feel the impact of what 125 basis points is on the economy.

12 months ago though, we were at zero, 18 months ago, we were at zero. So no, the Feds rate hikes have not crashed the economy yet because they have not been felt. We don't know what 125 basis points is going to look like when fully effective, let alone 500 basis points or whatever the terminal rate ends up being. and we won't know that for a while.

but we're going to start finding out in the the upcoming quarters. So in My View From A Valuation and sentiment Standpoint: We are currently at about the denial stage: Denial that the economy is going to see any serious contraction, Denial that companies are going to be seriously affected, Denial that there's any more substantial pain coming, and when all of a sudden you have more pain than is expected. All of a sudden, that denial turns into what it turns into panic. and then it turns into capitulation.

Think about what the biggest themes are going to be heading into 2023. I See five and all of them in no particular order. Number One: the Federal Reserve and their policies are still going to be first and foremost on many investors. Minds Number two: the economic Bloodshed and earnings recession which is going to be a result of destroyed pricing power that we saw in 2022 out of control debt that we saw the last three years spiral and of course the monetary policy medicine.

Number three: the continued war in Ukraine and Western economic war against Russia. These are going to have huge impacts. Number four: trade relations with countries like China which tensions have increased once again. And yes, Sally Number Five: Inflation will still be a Tip-Top concern at least until the year over year is really obviously down.

Until that happens, it'll be hard to convince investors that the FED is really going to Pivot anytime soon. Seems like the FED wants to Stamp Out inflation and it seems like Powell is dedicated to doing that because they don't want to be wrong on inflation again. They'd rather see lots of people lose their jobs than to have inflation be a little bit more elevated. and they are dedicated to doing that based on what they're saying.

Okay, next, let's go ahead and move on to my top three plays or rather play categories and or ideas. Number one: One of the things that I'm looking for more of are Contrarian Bankruptcy Place. for example. we had a briefing winner in that category this past week by the name of Coors Coors had been beat down massively on Chapter 11 bankruptcy.

We briefed on it roughly 30 minutes prior to market open on December 22nd. that was at just under nine cents a share and it went up and on to more than double to 19 cents before selling off, and then it had another Rebound in the next extended hours. Now someone says Contrarian Bankruptcy play, What does that bring up in your head? First and foremost, it brings up the word risk. These plays are fun though, because they often get beat down massively.

They provide real reason for short sellers to dump massively on them, and then they attract attention from speculators trying to short-term squeeze the Justified shorts and the fact that these are often so low float causes them to really Skyrocket But they almost always lose that steam very, very quickly and dump massively. So it's very important that if you are going to play and look for contrarian Bankruptcy Rally plays like we've called out several times in the past, well sure play them if you want, but have clear risk management and clear real expectations. These are not stocks to buy and hold no matter how much some random person on Twitter tells you, you need to hold them, my thought process is throw them in the garbage as fast as possible. Number two, you have the Vix.

Futures I Think one of the most underrated tools in the trading space is the value in trading the Vix. If you were following us back in the beginning of the 2020 cough cough crisis, we recommended Vic's instruments at that time and those skyrocketed as fear and uncertainty and doubt skyrocketed. And I believe as we head into 2023, that is going to be a very big theme. Once again, you look at the Vix.

Right now, things are pretty calm. The Vix has calmed down to around 20, which is elevated historically. but for 2022, I mean that's pretty low, especially considering we were just at around 30 in. October I Believe you're going to see a spike up to 30 and Beyond sometime in the next month or two, especially as earnings reports start coming out, perhaps even this week if we get some crazy year-end catalysts.

So how do you play the Vix? Charlie Well, Uvxy leverages the Vix 1.5 times and Svxy shorts the Vix. Svxy has done way better recently as the Vix has calmed down, but Uvxy may have its turn just around the corner. and number three, the third bash trade right now. Well, I Believe that the third best trade right now and maybe the best trade right now is really cash.

Wealth destruction will continue to be prevalent in 2023, and as people rush to sell shares and property cheap, those who have some cash will be Kings I Understand fully well that inflation has been bad, but Equity drops and overall valuation drops in complete obliteration throughout the economy have been way worse this year and looks like they're going to be way worse again in 2023. And it looks like inflation is actually going to be a little bit better at least in 2023. So that means that your dollar may go less far at the grocery store, but it's going to go a lot farther in terms of buying companies and properties and taking advantage of inefficiencies in the market if you look at the value of a dollar today versus the value of a dollar exactly a year ago. Yes, that dollar goes substantially less far when it comes down to everyday items and everyday cost of living expenses.

However, it goes substantially farther in terms of what you can can buy in terms of companies in terms of real estate value. increasingly. Real Estate Value that's just started kind of cooling off and I believe that dollar is going to be worth even more in terms of opportunities that we're going to see in 2023.. So stopped in To keep in mind here, if there are massive opportunities and you don't have any cash, well, you're not going to be able to take advantage of them and ask them Politicians have once said never let a good crisis go to waste Anyways, folks.

I Hope that you are enjoying your holidays again if you want to take advantage of that. Santa 45 coupon code on zip Trader you I will put a link to that down below. Just put in the coupon code before checkout and you can lock in that deal. Have a great rest of your day and we will see you in the next video.