A Supremely Emotional Market

It’s disappointing to have been unable to call with perfection a rally of this magnitude. But this is a mirror image of what it would have taken to call for the decline from the all-time highs with perfection as well. I wasn’t bearish enough on the way down, but I don’t feel entirely too bad about that. I got some of each decline, but I also kept looking for reasonable structures to form, such as little bear flags and other signs that pointed lower, but didn’t get them, so I was cautious about directly calling for steeply lower prices, and instead, the selling was relentless.

To have been able to call the decline off the all-time high with perfection would have required one to expect the worst beginning to a calendar year in many, many decades (which is what it turned out to be). And that’s an aggressive thing to expect.

And now, likewise, to have called this rally with perfection would also have required an enormous amount of aggression: imagine expecting a 500-point rally without even any meaningful consolidation, let alone an actual pullback. That is super aggressive. It tells me that we remain in an extremely emotional market.

So, for the time being, it’s hard for me to commit strongly to either the bullish or bearish positions. I would rather wait for a calmer structure to develop. I’m not thrilled about trying to play in rocket ships up or down (unless I can anticipate them). I can still see either bull or bear outcomes here.

The bearish view would like to see sellers show up very soon, and would involve tonight’s action as having cleared out any stops above the February highs:

ES

The bullish view is the one I already mentioned this morning and suggests we’re just going to squeeze all the way to all-time highs:

ES

The only recent fractal I can see right away for this that is similar is from last October. We had a moonshot out of the lows, had a little wedge consolidation, and then continued to creep higher for a couple of weeks before topping out. I have no idea if that’s what we’re doing here, but it’s possible.

ES


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