The Chief Information Officer says the stock market is in for a tough "reset" that could take years to recover from

• Technical trader Chris Vermeulen thinks the stock market is getting ready for a "reboot".

• The defensive areas of the market are bouncing back, which is typical of the latter stages of a bull market.

• Vermeuelen warns that bull markets are inevitably followed by bear markets and financial reboots.

The stock market has been in the midst of a long bull market, but there are signs that it will eventually run out of steam, followed inevitably by a bear market and a tough "reboot," according to Chris Vermeulen, chief investment officer at Technical Traders. "The

In an interview with Bloomberg, the director of investment banking pointed to the recent rally in defensive assets such as precious metals, energy stocks and industrial stocks. These areas typically do well in the latter stages of a bull market, which is inevitably followed by a bear market or "financial reboot," Vermeulen said.

He predicted that investors are likely to enter another bear market, similar to the one that followed the Internet bubble and the 2008 financial crisis. He warned that this could end up with investors suffering painful stock losses and people's wealth falling by as much as 30%-50% over the next year.

"I think we are entering an important market top, more or less a financial reboot," Vermeulen said Tuesday." This is short-term, temporary pain. But we need a market reset. We need regular correction and correction for the market to continue to rise.

That reset could also accompany a recession, Vermeulen said, with industrial stocks in particular signaling a slowdown. While the sector has performed well in recent months, industrial buyers typically upgrade equipment at the end of a growth cycle because of the "huge delay" between business slowdowns and orders for new machinery.

"They don't realize that we are at the end of a growth cycle and the music is about to stop." Industrial stocks continue to go way up. They are hitting all-time highs, which signals that we will see these companies finally start to slow down.

Investors are still worried about a potential recession, especially as inflation remains stubbornly high and the Fed seems poised to keep interest rates higher for a longer period of time. According to the New York Fed's latest estimate, the likelihood of the economy falling into recession by next March is 58%.

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