Great Collapse

Yesterday’s “Black Friday” continued, with U.S. stocks crashing. The Nasdaq fell by 2%, and the S&P 500 dropped 1.5%.

In my article yesterday, I mentioned that the Nasdaq had broken below the key level of 22,000. If it breaks further and the trend becomes clear, this wave of decline will accelerate! After consolidating for over four months, nearly five months, the market finally chose to move downward.

The main reason is the ongoing conflict; with the Federal Reserve not cutting interest rates and no expectations of such, capital outflows are inevitable. I also said yesterday that this drop, with a 10% decline, makes it very likely that the Nasdaq could fall to 20,000 points, since it hasn’t experienced a significant correction since its rally began in April 2025.

Looking at crude oil prices, oil continues to rise. Light crude increased by 2%, now quoted at $98. Brent crude rose by 3.5%, now at $112. Oil prices haven’t been suppressed, so market panic remains within expectations.

Regarding the major Chinese markets, the Shanghai Composite is also not optimistic. On Friday, it fell 1.24%, with three failed attempts to rally, forming a pattern similar to a triple top. This time, a 4,000-point decline with a bottom break could lead to an accelerated fall. The break and the weekly MACD divergence confirm this.

Additionally, on the weekly chart, it’s clear that the third wave of the market cycle has ended, and the third wave is notably weak. This wave started in September 2024, over a year and a half ago, and is now undergoing a “deep correction.”

Although the central bank issued a statement on March 18th about maintaining financial market stability, markets are driven by capital. A false alarm can be effective once or twice, but repeated false signals lose credibility. Real policy support and liquidity are needed; mere words are becoming less effective, including from the Federal Reserve.

Recently, I’ve been focusing on U.S. stocks because the global economy largely depends on the U.S. stock market and the Federal Reserve. Currently, the correlation between cryptocurrencies and U.S. stocks is as high as 80%. However, last night, Bitcoin didn’t fall much. I believe we can’t say Bitcoin is breaking out independently yet; most likely, it’s because too many people are trading based on U.S. stocks, and occasional disconnection is inevitable—because the market can’t keep making everyone money.

If U.S. stocks continue to decline, Bitcoin probably won’t hold up either and will likely follow suit.

On Friday, I discussed the Chinese market with a friend. He said, “The A-shares market is different; it’s not very market-oriented but a ‘distorted’ Chinese-style market, heavily influenced by the government. So, overseas economic impacts are less significant for it.”

I said I partly agree. As a trader, whether in U.S., Hong Kong, or A-shares, you must study U.S. stocks because, as I mentioned, the global economy looks at U.S. stocks. For example, a surge in crude oil prices can trigger a sharp decline in U.S. stocks, affecting the global economy, including China. I believe the impact on the A-shares market is at least 40-50%.

Adding to the unfavorable technical patterns, I told him last Thursday to get out quickly. He showed me the central bank’s announcement and said, “I see 4600!”

I didn’t say much afterward because disrupting people’s financial plans is like killing their parents and blocking their future. Everyone has their own judgment.

Now, let’s discuss two important news updates:

First, Trump posted on his official social media:

"We are gradually approaching our goals and can start reducing our military presence in the Middle East to counter Iran’s terrorist regime:

(1) Completely weaken Iran’s missile capabilities, launch systems, and related facilities.

(2) Destroy Iran’s defense industrial base.

(3) Eliminate its navy and air force, including air defense weapons.

(4) Never allow Iran to reach nuclear capability stages and always keep the U.S. in a favorable position.

(5) Protect our Middle East allies at the highest level, including Israel, Saudi Arabia, Qatar, the United Arab Emirates, Bahrain, Kuwait, etc. The Strait of Hormuz must be guarded and patrolled by other countries using it—without U.S. involvement! If requested, we will assist these countries in operations related to the Strait of Hormuz, but once the Iranian threat is eliminated, such actions will no longer be necessary. Importantly, this will be a straightforward military operation for them. (Trump still maintains a tough stance at the end)."

So, the likelihood of a de-escalation in the conflict is high, aligning with what I said yesterday—finding an exit point!

Second, a major news update:

Federal Reserve Vice Chair Brainard stated: “I expect to cut interest rates three times by the end of 2026 to support the labor market.”

Yesterday, we mentioned that rate cuts might not happen this year, but then another Fed official made comments. Be aware that he said he personally expects three rate cuts, not that the Fed is planning to cut three times. The FOMC operates on a voting basis, so one person’s words are not decisive. It’s a typical Powell move—giving you a slap, while the vice chair offers a consolation prize to soothe the market! Anyway, it at least provides some expectations.

Finally, my overall view: the impact of these developments may take time to fully digest. The recent breakdown and decline—whether in U.S. stocks or A-shares—may just be the beginning. However, U.S. stocks tend to rebound strongly the day after a 2% drop, so a short-term rally is possible. But for the long term, the market still relies on the Fed’s intervention. If stocks fall significantly over the next one or two months, the Fed may indeed shift policies to support the market.

For the A-shares, the same applies: when will the central bank stop just talking and actually cut reserve requirements, interest rates, or provide liquidity support instead of merely managing expectations?