Markets are facing a black swan event with 'nowhere to hide' as the latest rally has fueled a bubble that could burst at any time, veteran technical analyst says

• Markets are facing a black swan event, according to veteran strategist Jeff Bierman.
• Bierman pointed to a positive correlation between 5 assets, which is a sign the market is overbought.

Markets are facing a black swan event, and investors have nowhere to run as the rally across markets in 2023 has inflated a dangerous bubble, according to veteran technical analyst Jeff Bierman.

Bierman, chief market technician at TheoTrade, pointed to troubling technical signals in the current market rally that suggest the upward trajectory in asset prices is about to come to an abrupt end.

In particular, five assets – bitcoin, gold, oil, bonds, and S&P 500 stocks – are moving in tandem with one another in what Bierman calls an "automatic serial correlation." That's a major bearish signal, in Bierman's view, as it suggests overbought conditions in multiple sectors.

Meanwhile, investors are underpricing future risks to the market, with the VIX Index hovering around 17. That's the lowest value the volatility gauge has measured all year, and it's a sign that traders are "sitting on a mountain of complacency," Bierman warned.

"There's nowhere to hide, no diversification in this type of market. This is a black swan event. It's a bubble that can be burst at any time by an exogenous cataclysmic risk event or any number of factors," he said in a note on Thursday. "This is a witch's brew for the pain trade to the downside."

The warning come as earnings season is off to a wobbly start, with big banks mostly beating estimates but other firms reporting disappointing results. Bearish commentators say that earnings expectations are still too high given the current storm of macro headwinds, with Morgan Stanley's top stock strategist predicting the worst earnings recession since 2008 to come over the next few months.

Meanwhile, a credit crunch in the wake of March bank turmoil also isn't helping the outlook for businesses and the economy.

"Prepare for a bout of volatility," Bierman said of stocks this earnings season. "There is so much room to the downside if the market does not or does disappoint."