24% Collapse Incoming: Trader Reveals Shocking Market Red Flags | Chris Vermeulen

Key Concepts

• Market Internals: Indicators (like money flows and sentiment) that track the underlying health of the market beyond just price action.
• Technical Analysis: The study of price patterns, moving averages, and Fibonacci retracements to predict future market movements.
• Bear Flag: A technical chart pattern indicating a temporary pause in a downtrend before the price continues to fall.
• Fibonacci Retracement: A tool used to identify potential support and resistance levels based on previous price swings.
• Safe Haven Assets: Assets like the US Dollar and Utilities that investors move into during periods of market instability.
• Position Sizing: The strategy of adjusting the amount of capital allocated to a trade based on risk and asset volatility.
• Core PCE (Personal Consumption Expenditures): A key inflation gauge used by the Federal Reserve to determine monetary policy.

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1. Market Outlook and Current Sentiment

Christopher Mullen, Chief Market Strategist at TheTechnicalTraders.com, notes that the market has transitioned from a phase of "euphoria" in 2025—where stocks, gold, and Bitcoin all hit all-time highs—to a period of instability and uncertainty.

• Equities: The S&P 500 is showing increased volatility. Market internals (color-coded bars) indicate that "big money" is moving away from equities and seeking safety.
• Current Strategy: Mullen advocates for a defensive stance. His firm has trimmed positions in the S&P 500 and exited QQQ (Nasdaq 100) positions near the peaks. The portfolio is currently holding only a "sliver" of equities, waiting for a clear signal of either a breakout or a breakdown.

2. Asset-Specific Analysis

• Bitcoin: Currently in a bearish environment. Mullen identifies a "giant bear flag" on the weekly chart, with a critical downside target of $16,000. He views Bitcoin as having the most downside potential, noting that capital has rotated out of crypto into precious metals and, more recently, into technology/AI.
• Gold: While a strong long-term hedge, gold is currently in a "shakeout" phase. Mullen warns that after a parabolic spike, assets often retrace at least half of their gains. He projects a potential pullback to the $3,600–$3,300 range.
• US Dollar: Viewed as the primary "safe haven." Mullen highlights a rounding formation on the monthly chart, suggesting the dollar is on the verge of a significant breakout. He notes that in 2022, the dollar rallied ~18% while the stock market struggled, making it a preferred defensive play.
• Utilities: The outperformance of the utility sector is cited as a "red flag" for the broader stock market, signaling that institutional money is rotating into defensive, low-volatility assets.

3. Methodologies and Frameworks

• Scaling Out: Mullen’s strategy involves selling portions of a position at predetermined Fibonacci levels as the price rises. This locks in gains and reduces exposure before a potential "roll over."
• Trend Following: He emphasizes that trading should not be based on news or pure price action alone, but on "money flows." If the trend is neutral or unclear, the system dictates reducing exposure to avoid "coin toss" scenarios.
• The "Shakeout" vs. "Wait Out" Theory: Mullen explains that if a market cannot "shake out" investors through a sharp price drop, it will "wait them out" through years of sideways, stagnant performance.

4. Key Arguments and Evidence

• Inflation Hedge: While gold is a classic hedge, Mullen argues that owning productive assets (equities, real estate) is the only way to truly beat inflation. However, he warns against buying these assets when they are "stretched" or overvalued.
• The "Spike" Danger: Mullen argues that the final leg of a parabolic move is driven by emotional "FOMO" (Fear Of Missing Out). This emotional capital is almost always wiped out, often pushing the price below the initial entry point of the rally.
• Correlation: Mullen challenges the idea that assets always move in lockstep. He explicitly states that the DXY (US Dollar Index) and the S&P 500 do not have a fixed correlation, and each asset must be managed based on its own technical merits.

5. Notable Quotes

• "The market has two ways to try to get everybody out. The first one is... it will drop significantly... if it doesn't get you out, then it will wait you out."
• "I don't fall in love with assets. I only love them when we're long. And the second they show signs that they're rolling over, we could care less."
• "I don't want to win on coin tosses. I want to win when the odds are dramatically in my favor."

6. Synthesis and Conclusion

The current market environment is characterized by high volatility and a lack of clear direction. Mullen’s core takeaway is that investors should prioritize capital preservation over chasing gains. By monitoring market internals and rotating into safe-haven assets like the US Dollar and Utilities, traders can navigate the current "neutral" phase. The overarching advice is to avoid emotional trading, utilize systematic scaling to lock in profits, and remain patient until the market provides a definitive signal—either a stabilization for a new leg up or a clear breakdown requiring a move to cash.