Powerful Stock Indicator Just Gave An Extreme Crash Warning

[00:00:00] Speaker 1: An incredibly powerful, yet relatively unknown indicator is predicting a stock market crash. [00:00:08] Speaker 2: I would say right now we're in a classic bear market. That's how we're trading. We're trading as a bear market. [00:00:14] Speaker 1: I'm going to reveal exactly what's happening, why this indicator is so strong, and how I'm setting up my own portfolio, not only to protect myself, but hopefully profit from what's likely going to happen over the next three months. And I'm going to explain this to you in three simple, fast steps. Step number one, let's go over this indicator, which quite frankly, I didn't even know about. I read an article in MarketWatch, and this really opened up my eyes. So what is it? It's actually very simple. It's just the Dow represented by this red line versus the NASDAQ. So, and it's only for seven, maybe 10 days. So let's go over what triggered this indicator. We go back to June 15th to June 25th. On the left, we go from 95 up to 100. So this is an index. We start at 100. And again, Dow, red line, NASDAQ, blue line. And you see this divergence. And this divergence just over, you know, a week or 10 days got to 5.5%. Now you say, George, who cares? How is that a big deal? Well, it's actually a very big deal. This has only happened a few times going back to 1971, where you have this big of a divergence between the NASDAQ and the Dow over a seven to 10 day trading period. And going back to 1971, when you get this type of divergence, you have almost a 70% chance that the stock market goes into a bear market within three months. Now, let me be very clear. Like I say on this channel all the time, there are no certainties. There are only probabilities. But a 67% probability that you have a bear market, which would be defined as at least 20% decline, let's say in the S&P 500, over the next or within the next three months, that's a big deal. And that's something we all have to pay attention to. So the next question becomes, what would actually cause this type of stock market decline? Bear market or possibly even a crash. The example they reference in the MarketWatch article was the dot-com bust, where the S&P 500 went down by about 45%, while the NASDAQ went down by a whopping 80%. So what is happening right now as we speak that could cause this type of event? We're going to get into that right now. Step number two. Now let's go right over to an article from Zero Hedge, where they talk about this most recent report from the BIS, the Bank of International Settlements, where they point to a lot of factors out there that could trigger this big bear market that's being picked up by the indicator we're talking about in step number one. So here you go. Bursting of AI bubble. Collapse of circular deals. In other words, that circular AI economy, we're going to go over a chart of that in just a moment, are among top risks to global financial system, the BIS warns. So going back to that chart that we highlighted in step number one, the divergence between the Dow and the NASDAQ over that specific time period could just be a visual representation of what's happening beneath the surface, which is the bursting of the AI bubble and the unwind, let's say, of the circular AI economy. So here's a quote from the BIS. Disappointment in returns could trigger, in other words, return in AI investments, could trigger a sudden pullback in financing and turn the CapEx boom into a protracted investment bust with potential knock-on effects on financial conditions. And that's an understatement. And when you think about how massively this could impact the U.S. economy, you've got to look at it through the lens of GDP. Let's go over to another article really quick. We're going to come right back to Zero Hedge. And right here on Yahoo Finance, we see the AI economy, business investment overtakes consumer spending as the biggest driver of GDP growth. There are many reports that came out during the last revision of real GDP that pointed to 75% of the increase in GDP or economic output for the United States was due to AI CapEx spending that we could see unwinding in the very near future. That's not George Gammon saying that. That's the BIS. Then going back to the Zero Hedge article, they also, they, the BIS, points out that a major equity market correction could have larger macroeconomic consequences today than in the past. I completely agree with this because as we stated in step number one, during the dot-com bust, the NASDAQ went down by 80% and the S&P down by 40, 45%. But back then, the economy wasn't as dependent on asset prices as it is today. If that happened in 2026, there would be a recession, in my opinion, that would rival the GFC. And I'm not alone in that opinion. Let's go right down to the rest of the article. And you can see that they reference the GFC, they, the BIS. Repricing of risk this time, whether triggered by higher interest rates or an AI bust, has the potential to be similarly disruptive in that segment to the 2008 global financial crisis. They go on to say, AI specifically, officials highlighted vulnerabilities linked to funding, including complex arrangements such as so-called circular financing. And we can look at this chart and get a visual representation of just how this works. So there's a lot of squiggly lines here, but I'll simplify it for you. Let's just say that we've got $10 starting with OpenAI. They borrow $10 from the market and they send that $10 to Disney. Disney sends it to Oracle. Oracle sends it to Microsoft. They send it to CoreWeave, Amazon. They buy data centers. Those data centers invest in NVIDIA. It goes over to AMD and then AMD makes a $10 investment back to OpenAI. Now it's just $10, but it's gone full round trip. So each one of these entities has booked it as actual revenue or possibly an investment. And I think to simplify it even further without losing any accuracy, just take two of these companies. So let's just say OpenAI and Microsoft. So you got the same $10. It goes from OpenAI to Microsoft. Then Microsoft sends it right back to OpenAI. And then OpenAI sends it right back to Microsoft. And every single time they go the full round trip, that's another $10 they add to their revenue. So it just keeps going. It's the velocity of money, right? So at the end of a year, if they do this enough time, they could have millions and millions of dollars, potentially billions of dollars in additional revenue. It's not really additional revenue. It's just that $10 going round and around and around in a circle really, really fast. Now, let me be very clear. If the $10 is coming out of profits, eh, it's not that big of a deal. But right now we're way beyond that point where the $10 is coming from either OpenAI or Microsoft going out to the market and buying it or selling their shares, diluting existing shareholders. And that's the point in the cycle where it starts to become a huge, huge red flag, which is likely being picked up in the price action of the NASDAQ versus the Dow. In other words, this is likely one of the main reasons we're seeing that huge divergence that going back to 1971 has been a very powerful indicator that 67% of the time when you get that trigger, you have a bear market within three months. Now, let's go over how I'm setting up my own portfolio to make sure that I'm protecting myself against these risks and hopefully profit from any downside to the market or that 33% chance that the market continues to go up. Step number three. So now let's go over this secret weapon that I have for my portfolio or this strategy that oddly enough, very few retail investors know about. And it's worked extremely well for me over the last year. And we're gonna go over a trade that I just made that is also doing very, very well just over the last few days. Now, let me be very clear. This is not investing advice. This is for entertainment purposes only. Whatever you do, do not do what I'm going to tell you right now. I'm just opening up the kimono and being as transparent with my audience as I possibly can be. So hopefully you guys appreciate that. But let's go over this strategy. So it's called a pairs trade. I think that's the technical name for it. And the reason I love it so much right now is you're not really taking a bet on the direction of the S&P 500. And before we go any further, editor, go ahead and throw up a chart of the NASDAQ. I thought this was interesting. And you can see from its highs, we're making lower lows and lower highs, which would make a lot of sense when you go back to the divergence and that chart, that indicator that we're talking about in step number one. This looks like the beginning of a bear market. But again, there are no certainties. There are only probabilities. So I could come out with this video and the stock market could go up 20% over the next three months. Who knows? So right now there is so much uncertainty that I don't really want to take a directional bet one way or the other on the S&P 500. So this is what I'm doing instead. We're going to look at a chart from today's date going all the way back to June 24. So about the last five trading days. And on the left, we go from $75 up to 86. So you see a delta of about 10 bucks or so. Okay, but over here we go from $87 up to 103. Now what on earth am I trying to do? I'm basically combining two charts. The first chart is of STRC, stretch. These are the preferred shares, I'm sure you've been hearing about in the news, from MicroStrategy or strategy, MSTR. And this red line represents the common equity, MSTR. So on the right, these numbers represent what has happened to MSTR. On the left, these are the numbers that are applicable to the blue line or the stretch preferred shares, which by the way are now paying a 12% dividend yield. So you guys can see how this has played out. Both have come way down. They've kind of chopped along here. We've got that good news. You're going to look at it that way. From Saylor yesterday where he said he's going to sell maybe a billion, a billion two five in Bitcoin to try to buy back some of the common or some of the preferreds. And you've got 2.5 billion in runway to pay the dividend. So the market, yay. So the stock goes up, the preferreds go up, but look at what has happened more recently. The preferreds have stayed a lot higher than the common equity. So what did I do with my own portfolio right around here? I bought STRC. So let's say I bought $10,000. Not the exact number, but we'll just use that for the sake of the example. So I bought $10,000 of STRC, which I'm being paid to own. So you've got a positive carry there, right? And then I shorted $10,000 of MSTR. So what I'm doing is I'm betting that there's going to be a divergence between the two. So if stretch goes up, I'm betting that the common shares don't go up as much. Or if stretch goes down, I'm betting that the common shares will go down by a greater percentage. So what has played out over the last five trading days or so since I put on this trade? Well, we've got stretch is down. It's down about 4%. But strategy, the common equity, is down right around 15%. So you see what has happened here. Because I was playing the spread between the two, my portfolio on this position is up 9%, almost 10%, just over the last five trading days. So I know a lot of you right about now are saying, okay, George, I get how this works here, but how does this apply to the broader markets of the NASDAQ, maybe the S&P 500? I'm glad you asked. It's the exact same concept. So what you can do is you can pick out a stock that you absolutely hate. So as an example, I hate Lennar. It's L-E-N is the ticker symbol. So I've been short Lennar with an offsetting long position in the S&P 500 or the SPY. And over the past year, if we look at how this trade has performed, you would be up almost 40%. Editor, go ahead and throw up the charts and we can see that during this timeframe, the stock market is up and Lennar is down. And if you combine the percentage that Lennar is down with the percentage that the S&P 500 is up, you get close to that 40% return. So in this example, you're getting an incredible, incredible return without taking a directional bet on the stock market itself. And if you want more insider Intel contrarian strategies, or maybe some strategies like this one that you might never have heard of, I've got good news for you. I set up a private investing communities with my good friends, Chris McIntosh, Brent Johnson, Patrick Ceresna, just to name a few called Rebel Capitalist Pro. And it was specifically designed to give retail investors just like you an edge in how to navigate these crazy times and crazy markets we're dealing with in 2026. So if you want to not only survive financially, but thrive financially over the next three months, six months, the next year, check out Rebel Capitalist Pro. I'll put a link in the description below.