Stage 4 Market Decline: The Phase Where Markets Fall 7x Faster w/ Chris Vermeulen
Speakers
Chris Vermeulen — Founder, TheTechnicalTraders.com
— Chopping Block co-host
Summary
- Chris Vermeulen predicts a "Stage 4 Market Decline," characterized as a financial reset where markets fall 4-7x faster than they rise, potentially mirroring 2008 or 2000.
- While the S&P 500 remains in a technical uptrend, the NASDAQ and "Mag 7" stocks have already broken down, signaling a leadership rotation to the downside.
- Precious metals (Gold/Silver) are flashing short-term bearish signals; Vermeulen has liquidated his physical holdings, expecting a 10-20% correction before the long-term bull market resumes.
- The "diversification" myth is debunked: Emerging Markets and Dividend stocks will likely correlate 1:1 with the downside during a liquidity event, offering no safety.
- Cash and the US Dollar are currently the preferred positions, with Long-Duration Treasuries (TLT) potentially becoming a defensive play as the recession hits.
Trade Ideas
"The S&P 500... is still in an uptrend. We are actually long the S&P 500 here still... The moving averages are still layered properly." Despite his bearish macro outlook, Vermeulen follows price, not predictions. The S&P 500 is above its 150-day moving average, meaning the "tide is rising." He will remain long until the trend technically reverses, even if other sectors are failing. LONG (Trend Following). The NASDAQ is dragging the market down; if SPY breaks below the 150-day MA, the trade flips to short/cash immediately.
"The NASDAQ definitely showing a lot more weakness... making a series of lower highs... definition of a downtrend." "The Mag 7 has already done what the NASDAQ I think is about to do... broken this support level." Tech leadership has fractured. The "Mag 7" (tracked by MAGS) have broken support, and the NASDAQ (QQQ) has been rejected at resistance. Vermeulen explicitly states he has "closed out our NASDAQ position" because it lost momentum. AVOID (or SHORT if aggressive). A sudden rotation back into tech if AI sentiment reignites.
"The bond ETF like TLT could come back to life. There could be an opportunity in bonds as the stock market falls." As the economy rolls over into a recession (Stage 4), interest rates typically fall, and investors rush into safe-haven Treasuries. This causes bond prices (TLT) to rise while stocks fall. WATCH (Look for entry as stocks break down). Stagflation (high inflation + recession) would hurt both bonds and stocks simultaneously.
Chris Vermeulen
Chief Market Strategist, TheTechnicalTraders
"I sold all my physical metals... The short-term chart is very bearish." He notes Gold has a "bear flag" pointing to a 11-20% drop, and Silver could fall to $28. While long-term bullish ($5k+ Gold), the short-term technicals indicate a "liquidity flush." In a financial reset (Stage 4), metals often get sold off alongside equities to cover margin calls. He is waiting for a washout (Silver ~$50 or lower) to re-enter. AVOID (Cash out and wait for lower prices). Geopolitical escalation causes an immediate safe-haven bid, invalidating the bearish technical pattern.
Chris Vermeulen
Chief Market Strategist, TheTechnicalTraders
"When we see stage 4 declines hit, usually the dollar index outperforms... In 2022... the US dollar rallied about 17%." In a global deflationary event or financial reset, capital flees to the safety of the US Dollar. As equities and foreign currencies collapse, the USD strengthens (the "Milkshake Theory" dynamic). LONG (Defensive Play). The Fed cuts rates aggressively earlier than expected, weakening the dollar.
Chris Vermeulen
Chief Market Strategist, TheTechnicalTraders
"When the stock market actually enters a stage four decline... We see all of the international markets move in sync." Investors often mistakenly buy Emerging Markets (EEM) for diversification. However, in a liquidity crisis, correlations go to 1. EEM often leads the US market to the downside. There is no hiding place in foreign equities during a US recession. AVOID. A specific country (e.g., India) decouples from the global trend, though Vermeulen views this as unlikely.
Chris Vermeulen
Chief Market Strategist, TheTechnicalTraders
"It looks like it has put in a top... huge price that ran up and then it got slammed with selling big volume." Copper is a barometer for the global economy ("Dr. Copper"). The chart shows distribution selling (big money exiting). A breakdown here confirms the thesis of a global economic slowdown/reset. AVOID (or SHORT). A massive Chinese stimulus package could artificially bid up industrial metals.
