This ‘Extreme Fear Signal’ Is Actually a Blessing for Cryptos

  • Cryptos have been tracking stocks for about three years now. If stocks are ready to rally, cryptos are ready to rally even more.
  • We just discovered a technical indicator – the McClellan Oscillator – with a 100% track record (on over 100 data points) of calling a stock market bottom and predicting massive returns over the next 12 months.
  • The 50-day moving average of the McClellan Oscillator dropped below -15 last week and has stayed below that number ever since. That’s about as weak as the reading has ever been and speaks to “peak fear” and “peak weakness” in the market.
  • And it’s not just stocks – cryptos also benefit from a low reading.
cryptos - This ‘Extreme Fear Signal’ Is Actually a Blessing for Cryptos

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As many of you know, over the last two weeks, my team and I have embarked upon our biggest stock buying spree since the COVID-19 pandemic emerged in March 2020. Many of those stocks have absolutely soared since we bought them just weeks ago.

But what many of you probably don’t know is that we are also considering going on a massive cryptocurrency buying spree over the next few weeks.

For context, we haven’t recommended any new cryptos for almost a year now. Now, suddenly, we’re gearing up for a shopping spree.

Why?

Because dozens of fundamental, technical, and sentimental indicators that we track closely have hit extremes recently. They’re extremes that they only tend to hit when stock bear markets bottom and new bull markets are born. And cryptos have been tracking stocks for about three years now. If stocks are ready to rally, cryptos are ready to rally even more.

To help illustrate, let me tell you about the most compelling of these indicators – one  that we ourselves just discovered last Friday afternoon.

It’s a technical indicator that flashed an “extreme fear” signal just last week. This indicator has flashed this exact same “extreme fear” signal more than 100 times over the past 32 years. And every single time, the stock market was higher a year later, with an average return of nearly 30%.

Needless to say, after we discovered this, we became more bullish than ever. Not just on stocks, but on cryptos, too.

To be clear, this “crypto winter” may not be completely over. But it’s almost certainly in its final innings. And the weight of evidence today strongly suggests that investors who buy cryptos now will make a lot of money over the next 12 months.

So, we’re buying cryptos today.

Here’s a deeper look.

The Weakest Market Ever?

The technical indicator we are referring to is the McClellan Oscillator.

In short, it is a unique statistical measure of the number of advancing stocks in the market relative to the number of declining stocks. It’s a market breadth indicator.

Specifically, the indicator measures the difference between the 19-day and 39-day exponential moving averages of net advancing stocks. The higher the difference, the wider the market breadth. The lower the difference, the narrower the market breadth.

The McClellan Oscillator is broadly considered the best measure of stock market breadth.

In any event, the 50-day moving average of the McClellan Oscillator dropped below -15 last week and has stayed below that number ever since.

That’s an unusually weak McClellan Oscillator reading. It’s about as weak as the reading has ever been. It speaks to “peak fear” and “peak weakness” in the market.

For context, this oscillator has dropped below -15 only 109 times before on record (going back to 1990). That means the oscillator has spent just 1.4% of trading days where it is today (below -15).

A graph showing that the McClellan Oscilator is as negative as it has ever been

Now, here’s the bullish part: Stocks tend to rally big after the McClellan Oscillator gets this negative.

And not just sometimes – but ALWAYS.

A Perfect Track Record

Guess when the last time was that the McClellan Oscillator was this negative? Yep. March 2020, at the depths of the Covid-19 pandemic.

How about before that? June 2016 – right after the Brexit vote.

And before that? June 2012, when everyone was worried that the economy would slip back into a deep recession.

The McClellan Oscillator was also this negative in June 2010 (amid a foreign debt crisis), November 2008 (at the depths of the great financial crisis), August 2002 (the bottom of the dot-com crash), June 1999, and August 1990.

What do all of those months have in common? They were all extremely close to an absolute bottom after a stock market rout.

The other thing they have in common? Stocks soared in the months that followed.

Here’s the exact data. Since 1990, on the 109 occurrences when the McClellan Oscillator dropped below -15:

  • 74% of the time, stocks were higher a month later, with an average return of 4%.
  • 82% of the time, stocks were higher three months later, with an average return of 8%.
  • 94% of the time, stocks were higher six months later, with an average return of 16%.
  • 100% of the time, stocks were higher 12 months later, with an average return of 29%!

Table showing when the 50-day Moving Average of the McClellan Oscillator drops below -15

In other words, we just discovered a technical indicator with a 100% track record (on over 100 data points) of calling a stock market bottom – and predicting massive returns over the next 12 months.

That’s a big deal.

And it’s not just stocks – cryptos also benefit from a low McClellan Oscillator reading…

Correlated With Cryptos

Stocks and crypto have become increasingly correlated ever since the Covid-19 pandemic emerged. And that correlation has only grown stronger over time.

Back in the summer of 2021, for example, the S&P 500 and Bitcoin (BTC-USD) were about 10% to 20% positively correlated. Earlier this year, that correlation jumped to about 50%. Since August, it has averaged about 70%.

A graph comparing the change in the SPX and XBT-USD

Cryptos and stocks aren’t just positively correlated as risk assets. Their correlation is growing stronger the deeper we go into the 2022 bear market.

The implication, then, is that when this bear market ends, both stocks and cryptos will soar in tandem.

More than that, whenever stocks rebound, cryptos rebound even more!

Take the summer rally in stocks, for example. The S&P 500 popped 18%. Bitcoin surged 38%. Or how about the spring rally in stocks? The S&P 500 popped 11%. Bitcoin jumped 27%.

In this bear market, whenever stocks rally, cryptos rally more.

Therefore, when this bear market ends, it reasons that stocks will soar. And cryptos will soar even more!

A Bitcoin Triangle Convergence

Ostensibly, cryptos are consolidating right now before their next big move. And the plunging McClellan Oscillator is one massive data point in our favor. And we believe now is the time to position ourselves for “Boom Cycle 2023”!

Cryptos are a hedge against money-printing and a major risk-on asset. Therefore, cryptos tend to work exceptionally well when monetary policy is loosening. And they tend to crash when monetary policy is tightening. Monetary policy has been tightening all year long, hence the crash in cryptos. But the macroeconomic tides are starting to turn. Inflation is falling. The economy is cooling. Markets are crashing. Financial stress is building, etc. And all are supportive of a Fed policy pivot. Tightening will turn into loosening at some point in 2023. And likely at the first hint of this potential pivot, cryptos will soar and enter a new boom cycle.

We became more convinced of this thesis this past week.

Why? Because Wall Street Journal reporter Nick Timiraos (who is widely considered to be “the Fed’s mouthpiece”) wrote about growing concerns within the Fed calling for a rate-hike slowdown.

This policy pivot is underway – and just in time for the third convergence on our “Bitcoin Triangles” chart, which graphs the price action on Bitcoin  as a series of descending triangles. Notably, every single major move in Bitcoin year-to-date has been sparked by a convergence of descending triangles.

The third convergence is due in early November, which is also when the Fed meets next.

A graph showing the price of BTC in decline compared to macro events; convergence approach

Therefore, the time to start “phasing in” to cryptos has come. And the tokens we’re most excited about are those that add real-world value — cryptos using the blockchain to solve real-world problems like the energy crisis.

These are the cryptos my good friend and colleague Charlie Shrem and I will discuss on Thursday, Oct. 27, at 4 p.m. Eastern during our special Crypto Insider Summit.

The Final Word on Cryptos

It increasingly appears the markets are working through a bottoming process right now. There’s simply a ton of evidence suggesting as much.

If so, that’s incredibly bullish because the greatest returns in stock market history are made when bear markets turn into bull markets.

On average, the stock market rises about 10% per year. But after the 2020 bear market, stocks soared 27% in 2021 – about 3X their average.

After the 2018 brief bear market, they popped 29%.

After the 2008 bear market, they rose 24%.

Following the 2002 bear market, they soared 26%.

And after the 1990 bear market, they popped 26%.

You get the point. In the years after bear markets turn into bull markets, stocks tend to soar by more than 20%, or more than double their average annual return.

They perform twice as good.

But cryptos will do even better.

After its first crash in 2011, Bitcoin rose more than 55,000% over the next two years. After its second crash in 2014, Bitcoin rose more than 9,000% over the next three years. Then after its 2018 crash, Bitcoin rose more than 1,500% over the next two years.

And following its 2022 crash, Bitcoin will once again rise more than 1,000% over the next two to three years.

This isn’t rocket science, folks. It’s just history repeating itself. And investors who recognize this are – right now – putting themselves in position to make fortunes in the crypto market over the next two to three years.

What exactly are these “insiders” doing?

Well, that’s exactly what Bitcoin legend Charlie Shrem and I are going to discuss in our roundtable tomorrow afternoon, at 4 p.m. Eastern. We’ll give you our outlook on the crypto markets, talk to a few insiders about what they’re seeing these days, and unveil an investment strategy tailored to maximize gains in the coming new crypto bull market of 2023 and beyond.

Trust me. This is an event you won’t want to miss.

To prepare yourself for Boom Cycle 2023, sign up now and receive our Crypto Watchlist completely free! We’ll be releasing new, insider-only content up until that special broadcast airs, so don’t miss out…

Then make plans to attend the event Thursday, as Charlie and I reveal our No. 1 crypto to buy for the dApp megaboom.

Learn more about our Crypto Insider Summit here.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/hypergrowthinvesting/2022/10/this-extreme-fear-signal-is-actually-a-blessing-for-cryptos/.

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