# This Could Get A Lot Worse...
**Date:** 2026-09-08  
**Source:** [YouTube](https://www.youtube.com/watch?v=mGEOPY2IuEk)

## Main Thesis
The market is showing significant signs of stress and dislocation, with rising commodity prices, pressure on bonds, and a divergence in credit risk between tech and banks. While not in a full panic, complacency is high and the situation is becoming more serious, warranting close attention to key breaking points.

## Charts & Technical Analysis

### 1. New York Stock Exchange (NYSE) (daily)

**Bias:** NEUTRAL
**Pattern:** Pressuring a trend line
**Key Levels:** trend line

The advance-decline line has been rising for ages, which is a great sign. However, it has recently been pressuring a key trend line. If this trend line is lost and a lower high is made, it could be a significant warning sign that many people who only watch the S&P 500 or NASDAQ will miss.

### 2. Japanese Yen (None)

**Bias:** BEARISH
**Pattern:** Squeezing

The Japanese Yen is squeezing due to accelerating yields, which are forcing the Bank of Japan to raise rates. This raises the question of the carry trade unwinding, where money could be taken out of US treasuries and brought back to Japan, potentially causing an illiquidity problem.

### 3. Diesel / Crack Spread (None)

**Bias:** BULLISH
**Pattern:** non slowing down market
**Key Levels:** over $100 per barrel

Diesel prices are hitting new record highs, reportedly over $9.50 a gallon in California and over $100 per barrel for the first time ever. The market is not slowing down and this will have a huge impact on the upcoming PPI and CPI inflation reads.

### 4. Fed Watch Tool (None)

**Bias:** NEUTRAL
**Pattern:** flip-flopping
**Key Levels:** around 60% probability of a September hike

The probability of a September interest rate hike has been flip-flopping between 50%, 65%, and is now back to around 60%. This shows uncertainty in the markets, which makes them prone to volatility. A hike could put pressure on the debt and bonds market.

### 5. 5-year Corporate CDS (Tech vs Banks) (None)

**Bias:** NEUTRAL
**Pattern:** Dislocation
**Historical Comparison:** Similar to 2020 where the banking CDS showed calm before the storm until something got serious.

There is a complete dislocation between credit default swaps for banks and tech. The banking sector shows no concern ('calm before the storm'), while the tech sector is showing a 'huge freakout'. This raises the question of which market is correct, especially since tech is borrowing heavily for capex and AI.

### 6. 60-day auto loan delinquencies (None)

**Bias:** BEARISH
**Pattern:** On the rise

60-day auto loan delinquencies have been on the rise since 2022. While not a good timing indicator, it is part of the puzzle showing strain in the system, alongside rising credit card debt, as people spend above their means.

### 7. US Treasuries / Bonds (None)

**Bias:** BEARISH

Ray Dalio is concerned about bonds. Norway's sovereign wealth fund is considering reducing its bond allocation from 70% to 50%, and China plans to reduce its holdings. This, combined with tech companies issuing high-yield debt, is creating a liquidity drain. While the market hasn't panicked, it's time to pay more attention than at any point in the last couple of years.

### 8. S&P 500 (None)

**Bias:** NEUTRAL
**Pattern:** Kangaroo market, potential flag
**Key Levels:** 7500 support, 8000, 8140
**Historical Comparison:** The closest match is the 1970s, which, if followed, would imply a 14-15% drop typical of a midterm election year, followed by a rally.

The market is trapped in a 'kangarooey' state at resistance. The closest historical analog is the 1970s, which suggests a potential 14-15% drop. 7500 is the major put support, and some are using technicals to call for levels like 8000 or 8140.

### 9. Bitcoin (None)

**Bias:** NEUTRAL
**Pattern:** Pressuring resistance, rangebound

Bitcoin is pressuring resistance levels but has remained rangebound. It is currently stabilizing at resistance, and many are asking if this is some kind of 'pit' or bottoming pattern.

### 10. UWM (United Wholesale Mortgage) (monthly)

**Bias:** BEARISH
**Pattern:** Dropping off a cliff, new lows

As a proxy for the mortgage market, UWM has been 'dropping off a cliff' in 2026, making new lows on lows. This reflects a notable decline in overall mortgages being written.

### 11. Rocket Companies (RKT) (None)

**Bias:** BEARISH
**Pattern:** Declining

Similar to UWM, Rocket Companies has also been declining, though not as severely. This supports the theme of a slowdown in the mortgage industry.

### 12. US 10-Year Yield (weekly)

**Bias:** BULLISH
**Pattern:** Closed at a new high

The 10-year yield managed to close at a new weekly high, which suggests that yields may not be done rising yet. This could put pressure on corporate markets.

### 13. Corporate Grade Bonds / Junk Bonds (None)

**Bias:** NEUTRAL
**Pattern:** Calm before the storm

Corporate grade bonds are being pressured by high interest rates, but junk and high-yield bonds are not 'freaking out completely'. This suggests a 'calm before the storm' scenario.

### 14. ICE BofA US High Yield Index Option Adjusted Spreads (None)

**Bias:** NEUTRAL
**Pattern:** Calm before the storm
**Historical Comparison:** Compared to 2007 and the 1997-1998 period, which were late-cycle markets with high complacency.

This spread is at very low levels, indicating a 'calm before the storm' and high complacency in the market. This is similar to late-cycle periods like 1997-98 and 2007 before major crises.

### 15. XLY/XLP Ratio (None)

**Bias:** NEUTRAL

The ratio of consumer discretionary to consumer staples stocks is not yet 'falling off a cliff', which is one piece of evidence that the market is not in full panic mode.

### 16. Financials (XLF) (None)

**Bias:** NEUTRAL
**Historical Comparison:** Compared to 1998, 2000s, and the GFC, noting that a total market freakout is difficult without the banks also freaking out.

Financials are not yet 'falling off a cliff'. While lesser-quality financials are under some pressure, the broad banking sector is not panicking, which is usually a prerequisite for a major market crash.

### 17. US Oil (None)

**Bias:** BULLISH
**Pattern:** Higher highs, higher lows
**Key Levels:** 110

Oil is making a series of higher highs and higher lows. If it breaks out and closes higher, it could go to $110 a barrel 'just like that'. This would be a significant input cost and a potential excuse for a market sell-off.

### 18. Agriculture (weekly)

**Bias:** BULLISH
**Pattern:** Closed above previous closures

Agriculture had a strong weekly close above previous closes, indicating prices are rising. This, along with oil, is putting pressure on the upcoming PPI and CPI reports.

### 19. Semiconductors (None)

**Bias:** BULLISH
**Pattern:** Improvement, hardware picked up

The semiconductor sector has seen an improvement, with hardware stocks picking up. This is in contrast to other areas of the market that have slowed.

### 20. SanDisk (None)

**Bias:** BULLISH
**Pattern:** Rallied from VWAP support
**Key Levels:** anchored VWAP off the lows

SanDisk, a poster child of previous rallies, came down to an anchored VWAP from the lows and has since rallied back up, showing strength.

### 21. Nvidia (NVDA) (weekly)

**Bias:** BULLISH
**Pattern:** Strongest weekly close ever, higher highs and higher lows, double bottom

Nvidia had its strongest weekly close ever and continues to make a series of higher highs and higher lows after coming off a double bottom. The technical chart does not look weak.

### 22. Nvidia vs SPY (NVDA/SPY Ratio) (None)

**Bias:** NEUTRAL
**Pattern:** In line with the S&P, has done nothing

Since August of 2025, the NVDA/SPY ratio has gone nowhere, with Nvidia performing only in line with the S&P 500. A close above the current range could show further strength.

### 23. Hang Seng (None)

**Bias:** NEUTRAL
**Pattern:** Stuck within range

The Chinese market remains stuck within a trading range, despite news about government interventions.

### 24. Gold Stocks (None)

**Bias:** BULLISH
**Pattern:** Decade low accumulation

Gold stocks have been in a decade-low accumulation pattern, suggesting a potential bottoming process and a possible breakup across the board.

### 25. GLD (SPDR Gold Shares) (None)

**Bias:** NEUTRAL
**Pattern:** Nowhere land
**Key Levels:** major supports

From an options perspective, GLD is above major supports but is currently sitting in 'nowhere land' without a clear direction.

### 26. Gold (4-hour)

**Bias:** BULLISH
**Pattern:** Rally from hidden demand

On the 4-hour chart, gold made a slightly higher high, pulled back to a hidden demand zone, and rallied. It makes sense for buyers to try here. The risk level mentioned, 4280, was garbled in the transcript.

### 27. Silver (None)

**Bias:** BULLISH
**Pattern:** Inverse head and shoulders
**Key Levels:** neckline

Silver is potentially forming an inverse head and shoulders pattern. A break of the neckline would be a bullish signal, with a measured move that could line up with previous highs.

### 28. QQQ (Nasdaq 100) (daily)

**Bias:** NEUTRAL
**Pattern:** Trapped

Based on daily options levels, the Nasdaq is trapped for now. The specific levels mentioned in the transcript were garbled.

### 29. IBIT (iShares Bitcoin Trust) (None)

**Bias:** BULLISH
**Pattern:** Stabilizing at resistance

Used as a proxy for Bitcoin with an options market. A break through the current resistance could lead to a 'positive gamma kind of read' on the market.

## Regime / Cycle Analysis
The market is described as being in a late-cycle phase, characterized by 'kangarooey' (choppy, up-and-down) price action and high levels of complacency. This is highlighted by the very low credit spreads, which are compared to the 'calm before the storm' periods of 1997-98 and 2007. A major intermarket theme is the potential unwinding of the Japanese carry trade, which could drain liquidity from US Treasuries as funds are repatriated to Japan. Other signs of strain include rising auto and credit card delinquencies and a significant divergence between credit risk in the tech sector (high) versus the banking sector (low).

## Key Calls & Predictions
- Warning that the market situation 'could get a lot worse' and is more serious than at any point in the last couple of years.
- Watch for a breakdown in the NYSE Advance-Decline line and the NYSE Composite's trendline as a key warning sign for market breadth.
- Upcoming PPI (Thursday) and CPI (Friday) data will be critical due to surging oil and agriculture prices.
- A breakout in US Oil could send it to $110/barrel very quickly, potentially acting as a catalyst for a market sell-off.
- The bond market is showing extreme complacency ('calm before the storm'), which is a major risk factor.
- Long-term liquidity risk is growing as sovereign wealth funds (Norway) and countries (China) announce plans to reduce their US Treasury holdings.

## All Instruments Mentioned
US dollar yen, treasuries, credit default swaps, S&P 500, NASDAQ, New York Stock Exchange (NYSE), Japanese Yen, Diesel / Crack Spread, Fed Watch Tool, 5-year Corporate CDS (Tech vs Banks), 60-day auto loan delinquencies, credit cards, gold, bitcoin, bonds, UWM (United Wholesale Mortgage), Rocket Companies (RKT), US 10-Year Yield, Corporate Grade Bonds / Junk Bonds, ICE BofA US High Yield Index Option Adjusted Spreads, XLY/XLP Ratio, Financials (XLF), US Oil, Agriculture, Semiconductors, SanDisk, Nvidia (NVDA), Nvidia vs SPY (NVDA/SPY Ratio), Hang Seng, Gold Stocks, GLD (SPDR Gold Shares), Silver, QQQ (Nasdaq 100), IBIT (iShares Bitcoin Trust)

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*Generated by FX Evolution Monitor on 2026-09-08 20:01:23*