Followthrough Will Incline Me to Believe This Was an Almost Permanent Low

Few points:

  1. There are tons of signs pointing to the possibility that this was bottoming behavior on the scale of the COVID crash low. The index and index ETF volume reached record levels in all sorts of places and all sorts of time frames.
  2. The intraday reversal was also one for the record books.
  3. Sentiment here is worse than during the COVID crash, and we’re still in a growing economy. (Everyone’s long portfolios have been ruined and they are extremely bearish as a result).
  4. All of these growth stocks I keep looking for major bottoms to form in produced magnificent, high-volume hammer candles today (and of course the indices all did too).
  5. Now, these need followthrough, but if we get it, given the evidence I laid out this weekend (here), I believe this may be a low to which we may not return for possibly years.

I am inclined to count the structure as below, either as primary (pink) B being in, or, since this depth took me somewhat by surprise, I am now more open to it being a primary (pink) two. Now, we need that followthrough, we need to get back over the green trend line that we fell through, and indices like the Nasdaq 100 have only returned to their 250-day EMA (from beneath) and it needs to fully recapture that. But, I lean to the view that they will. I think this washed out all of the dumb money that has been haunting the markets for over a year. There was a statistic posted on Twitter today regarding what might be interpreted as total retail capitulation (here).

This has made everyone so thoroughly bearish, that if we do keep rallying out of this, and we have a low in, it will be a first impulse wave (of some degree). And you and I know exactly what everyone is going to try to do to that rally: everyone and their mother and father and brother and sister are going to try to short this rally. And if I’m right (that a low is in—contingent upon some followthrough now), then it will pullback (that will be the first “2”) everyone will be piling in short, but the exact opposite of what they expect to happen may happen: we enter the 3 to the upside instead.

ES


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