 Hey everyone, this is Dan with another episode of my market crash protection videos. I've been warning my subscribers about a potential market crash since January 30th. With what's been happening in the last few weeks, it looks like there's an increasing possibility of a market drop of 20% or more for the S&P 500 in the next few months. The drop for the Nasset 100 will be even more. I know you might not like to hear about this, but if your stock portfolio has been shrinking in the last few weeks, the situation won't get better if you just ignore it. You should really listen to what I have to say and start thinking about protecting your investments. Let's get into the details. First, let's look at how the broad market has been trending since the beginning of the year. On this chart, I plotted SPY, the ETF representing the movement of the S&P 500, and I also plotted QQQ, the ETF representing the movement of Nasset 100. The QQQ is a blue line, SPY is a candlestick chart. As you can see, SPY has been down 13.76% since the beginning of the year, and QQQ is doing even worse. It's been down 22% since the beginning of the year. Certainly, the market is looking pretty bearish at this point, and if you look at where SPY is now, it has gone below the historical support levels established at the end of February and in the middle of March, and also up until a few days ago. So that's a major breach of support as of last Friday, and today is Sunday. At the current level, it's approaching the intraday bottom that was reached at the end of February. This is definitely a very bearish picture for SPY. If you look at QQQ, it's actually worse than SPY because it has already gone below the historical support level established in the beginning of March, and then the same level was tested a few days ago, but then it went up a little bit, then it went straight down and penetrated that support level. Again, it's a very bearish picture. One of the major factors driving the bearishness in the market is the statement the Fed chairman Jerome Power made on April 22. He said that it was absolutely essential for the Fed to be taming inflation and thereby raising the interest rates by 50 basis point, which will happen in May, according to Jerome Power. In addition, he said that they need to raise rates expeditiously to bring down inflation, and that for May, of course, there will be a 50 basis point, and it's absolutely essential to restore price stability. Apparently, the Fed is really preoccupied with the high inflation rate, which is running at 8.5%. Let's talk about the different factors influencing the stock market. First, because of the high inflation rate, and I'll talk about what's causing the high inflation rate. Once we have high inflation rate, which causes the federal reserve banks to increase interest rate and reduce their assets, that's what Chairman Powell has already said. And with these Fed actions, it'll cause the treasury rates and other interest rates to go up. As the interest rates go up, it causes the stock market to go down. If you like what you've seen so far, I'd like to encourage you to click the like, subscribe, and notification button. That will enable you to receive notification when I post my next video. It'll also encourage me to make more videos like this in the future. Thank you very much. Let's continue. Now let's talk about the inflation rate. What is driving the inflation? First of all, it's because the economy has been booming generally for the last 10-12 years, wages have been up, and there's a supply chain issue. In addition, there's the Ukraine war that started in February, and because of the Ukraine war and because of the sanctions against Russia started by the U.S. and by the European nations, the oil and gas prices have been going up, and grain prices have been going up. And then there is a COVID lockdown in China impacting Shanghai and a few other major cities, which causes interruption of the industrial processes in China as well as a transportation processes in China, which will drive up the prices of industrial products. And as the prices related to these items start to go up, then we are back in this spiral of high inflation, driving the higher Fed funds rate, which drives up the interest rates, which drives down the stock market. This is not a pretty picture for stock investors. Let's look at how high will the interest rate go up, and from there we can possibly predict how much the stock market is going to drop because of all these factors playing the background. Also today, the CPI, reflecting the inflation rate is at 8.5%. Fed funds rate is at a low 0.33%, even after the last race hike, which was effective on March 17. And the 20-year threshold rate is at 3.1%. If you draw a line looking back in history, the last time we had inflation rate this high was between 1974 and 1982. And then if you look at what the Federal Reserve Bank did back then to control inflation, you can see that the CPI was pretty low back in the 1960s. Then when it started to go up, the Fed already started to raise rates even back in the late 60s and early 70s. And the rate did come down a little bit, and it picked up again. And by the time the CPI was at 8% around 1974, the Fed funds rate was already at 8%. The 20-year threshold rate back then was already at 7%. If you look at today, we're at 8% CPI and above, but the Fed funds rate is only at 0.33, and the 20-year threshold rate is 3.1%. And that's why a lot of people are saying that Fed has been too slow in reacting to the increasing inflation rate. Now the Fed is trying to pay catch up. And what happened back in the 1970s and 80s was that as the Fed continued to raise rate to control inflation because there was a lagging effect, CPI continued to go up and down, but generally trending up. And actually CPI went as high as 15%. And the Fed funds rate went as high as 22%. And the 20-year threshold rate went as high as 15.78% before the CPI, the inflation rate started to come down. For now, in 2022 and 2023, I hope the 20-year threshold rate doesn't go as high as 15%, 16%, and that the CPI won't go up to 15%. But it's entirely likely that the Fed funds rate can be going up as high as 6% to 8%. And likewise, the 20-year threshold rate can be as high as 6% to 8% before the inflation rate is brought under control. If you want to know more about it, please look up my video posted on April 18, 2022. I explain a lot more details about the movement of the different interest rates and this particular ETF called TMV, which tends to go up as the interest rate goes up. And I'll talk a little bit more about TMV in the next few minutes. Now, if you look at what happened to the stock market during that period between 1978 and 1984, when the Fed was fighting inflation, you can see that the stock market went down as much as 21%. And unfortunately, also the unemployment rate went from about 5% up to about 11%. Basically, we had a recession, which helped, of course, bring down the inflation rate. And hopefully, for this time around, we will not cause a major recession with high unemployment rate at 11%, although I would imagine that the Fed would not hesitate to bring down the stock market in order to cool down the economy to bring down the inflation rate. And therefore, I believe 15% to 20% market drop from the all-time high for S&P 500 is entirely likely. And we need to be prepared for that. If you want to know more about this analysis, you can refer back to the video that I posted on January 30th, 2022. So what are the likely scenarios by the end of 2023, within about a year and a half? First of all, I believe the Fed funds rate will be at 4% and above, actually more like 6% to 8% by the end of 2023. And definitely, it will be much higher than the current 0.33%. And because of the increase of Fed funds rate to control inflation, the S&P will drop at least 17% to 20% from its all-time high. Remember, currently we are at about 13% below all-time high. So we have yet another 4% to 7% to go yet as far as market drop. And of course, QQQ would drop even more. And a 20-year transfer rate will most likely get up to 6% and above. If you look at the historical lesson we learned back in the late 70s and early 1980s, as we mentioned a few minutes ago. But I don't believe there will be a deep market crash like in 2008 primarily because the banks are still healthy. The economy is not totally frozen. It's basically being controlled by the Fed. And as long as the Fed does not lose control of the economy and the major banks do not get into trouble, then we can have what they call a soft landing, which will cool down the stock market and it will slow down the economy somewhat without causing a major recession. And hopefully, then the CPI hopefully will get within about 3% to 4%. And then the Fed will declare victory and stop raising interest rates, which will then quickly restore the stock market. In the meanwhile, aside from the stock market going down as the Fed tries to cool down the economy, unemployment rate will also go up to 5% or so. And then hopefully the inflation rate will be brought within reasonable range. With all these possibilities, what do we do to survive and to even make profit? Let's look at a few ETFs that have been going up since the beginning of the year, in spite of the fact that the broad market has been going down. As we have shown earlier, SPY has been down more than 13% since the beginning of the year, as represented by the candlestick chart, and QQQ has been down more than 20%, as represented by this blue line. You look at all these lines up here, they are all above 0%. The most impressive performance was logged by this ETF, UCO, which went up 80.66% since the beginning of the year. UCO, you might know already, it's an ETF, that's the triple ETF actually, that's paid to the price of crude oil. And then next to that, SQQQ, which is the inverse ETF, the triple ETFs, paid to the price of NASDAQ 100, except it goes up and down three times faster, and it went up by more than 67% since the beginning of the year. And next to that, TMV, which is an ETF, I mentioned earlier, related to the movement of the 20-year Treasury yield, and that picked up an impressive 62%. And USO also is an oil-related ETF, except it's not as leveraged as UCO, but it went up, nevertheless, an impressive 40.73% already. SPXS is an inverse triple leverage ETF, paid to the movement of S&P 500, it went up about 40% also. XLE, that's an ETF holding the stocks of major oil companies and energy companies, that went up 31%. These are all interesting investment choices to counter the market downtrend, and actually have been holding and trading some of these. I'll talk more about that in the next few minutes. Now, I'm not just going to go in tomorrow and start buying these ETFs, because as you can see, these lines that have been going up and down, they are the right times and they are the wrong times to buy these ETFs, and that's why we need to look at the technical indicators. In the next few days, I will post a video about technical analyses for these ETFs. Then how might the market start to recover? First of all, if we have more positive Q1 earnings, which are being announced in the last couple of weeks and will continue to be announced in the next couple of weeks, and if the Q1 earnings are positive and the companies have bullish Q2 projections, then it will boost the market or at least stabilize the market somewhat. But as we learn already, the low earnings for example for Amazon for Q1 has been disappointing, and the earnings for Tesla for Q1, even though it's very good, but Tesla stock price hasn't gone up much, actually has gone down a little bit since the earnings announcement. So this first bullet point looks like so far has not been helping the stock market much. It's just because of bearish momentum in the market, it's just so strong. And then of course, the end of the Russia Ukraine war will help certainly reduce the energy cost and the grain cost, and that will help reduce the inflation and reduce the necessity for the Fed to continue to raise interest rate too much. And the end of COVID lockdown in China will also help lower the inflation rate, and if the inflation rate somehow can fall to 3-4% range, either by the end of the Ukraine war or the end of COVID lockdown in China, or maybe because the Fed has already raised interest rate so much in the next few months, that finally inflation rate falls to about 3-4% range. At that point, the Fed can then declare victory and stop raising rate, and then we will see hopefully the market rebounding quickly after that. And of course, at the end of Fed as a reduction will also help. If unfortunately, we see high unemployment rate at about 6% and above instead of the current 4% and below, then the Fed might ease the monetary policy by lowering the interest rate or maybe continue to do QE to boost the economy. And in that situation, the stock market will pick up. But that's a tragic way of bringing up the stock market. I hope we don't have high unemployment that we could possibly achieve low inflation with reasonable unemployment rate. And at that point, hopefully the market can rebound. What are my strategies in the next few months? What are my strategies? First of all, I've been selling shares of the stocks in my portfolio when the prices fell below critical support levels and I've been sharing some of my trades with my Twitter subscribers. By selling the stocks, I was able to free up assets to go into the ETFs that I've been talking about. For example, I've been buying stocks or ETFs that tend to go up with interest rates. For example, I've been holding TMV, the ETF, paid to the 20-year treasury rate. And I've been holding and trading stocks and ETFs that tend to go up with energy prices. And those include UCO, the ETF, UNG, that's GAS, ETF, UCOs, Oil-related ETF, XLE, that's a energy-related ETF, and COP, ConocoP Phillips. The energy prices certainly are related to the Ukraine war. If the Ukraine war ends in the next few weeks, then the energy prices will go down quickly. And that's why I've been tuning to the world event very diligently and I intend to unload my energy-related stocks and ETFs quickly if there's going to be peace in Ukraine. I've been keeping some shares of stocks with strong fundamentals such as applied materials, ASML, AMD, Berkshire Hathaway, B, shares, Google, O'Reilly, Qualcomm, and TSM. I've been swing trading recovery stocks or stocks with long-term potentials including LUV, the Southwest Airlines, RCL, Royal Caribbean, TSLA, Tesla. And I've been swing trading the very aggressive and very volatile three times inverse index ETF such as SQQQ. At this point, I'd like to suggest that you also subscribe to my Twitter account, which is DanMarketL. For example, on March 17th, I said I bought TMV shares and actually subsequently I bought two or three more batches of TMV shares. At this point, this first batch bought on March 17th. It's up 29% already and it's still in my portfolio. April 22nd, I said I sold shares of LUV Southwest Airlines. I bought on January 4th at a 6% gain and also I sold another batch of LUV shares bought on March 16th at 10% gain and that's a recovery play. And then on April 28th, on a dip, I bought LUV shares again. Then on April 29th, I sold SQQQ shares. I just bought it a day ago and realized 8.3% gain. Again, if you like what you've seen so far, I'd like to encourage you to click the like, subscribe, and notification button. As usual, I will welcome your comments, suggestions, and questions. I'd like to remind you that I'm not a financial advisor. I share my stop trading strategies and analyses for educational and entertainment purposes only. If you want to buy or sell stocks, you should make your own decisions and you should definitely consult with your financial advisors before you do so. Let's wrap up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.