One Last Intermediate-Term Discussion for the Weekend (Important Perspectival Considerations)

This post is just some chill weekend things to consider. Maybe a companion to a cup of coffee or some whiskey. Nothing urgent in here.

This is back burner stuff, so just tuck this away somewhere and pull it out only in case we need it. As I’ve said, I’m not particularly in love with the bullish thesis, but I also won’t completely dismiss it yet, either. I want to summarize why, and discuss a target possibility and what that could mean for various instruments.

  1. We know that especially by the June lows, sentiment reached absurdly poor levels, levels typically associated with lows that have great endurance (months not weeks).
  2. We know that historically, the market has never topped (so far as I can see) before a hiking cycle has begun (I understand this time might be an exception).
  3. The structure off the top of the market has been especially choppy, perhaps too much so for a real bear market.
  4. The rally we recently had broke a lot of records, and did a lot of things that typical “bear market rallies” tend not to do.
  5. The breadth thrust we had during that rally we just had was unusually strong. Stronger than the thrusts in typical—even very strong—bear market rallies of the past.
  6. Also, the NYSE Composite Index made a new high after the other major indices, which it has never done before. Usually, it diverges, making a lower high when the S&P makes a higher high at the high. The NYSE Composite topped on 1/14/22; the S&P on 1/4/22. Highly unusual.

Because of all of that, I am at least open to the possibility that we go to all-time highs once more. That may sound ridiculous, but that rally did impress me. Now, if we go and check back in on that head and shoulders neckline that we just broke today and fail from it, so be it. I’ll be all bear for months. But what if we don’t? If we don’t (fail from it), this is roughly what I would expect.

IF we do rally, I’m not expecting some ridiculous rally to 7500 or anything like that. There is a terrific fib at 4950.25 on the nose. It is the 50% extension of the rally from the COVID low to the all-time highs, extended from the June low:


Purple “c” at the top right would be 50% the length of purple “a” found at the January 2021 all-time high.

Zoomed way in, maybe it does something like below. We can have one more impulse wave up (if we’re in a 4th wave now). And in doing that, the pink 4 (maybe a triangle), pink 5 (maybe an ending diagonal), then a nest of ones and twos can take weeks and we see a choppy distribution and head and shoulders way up there like this:


In other words, the Big Red A I expect may simply be at a nominal new high. It’s a really good place for a bull trap. The vast majority of people, on breaking to a new high, would get extremely bullish, quite the contrary to what they are right now. It would clear up the chop to our left. It would clear up the “market has never topped prior to a hiking cycle” problem. And honestly, it wouldn’t take them a lot to do it. A big rally in Microsoft, Apple and Tesla could get us most of the way there.

For instance, with Tesla, I do view it as a huge distribution top:


There is no long-term hope for this. It just can’t support higher valuations in the long-term. Nothing like a long-term, multi-year rally from here shooting permanently out of this range. However: if it is the distribution I believe it is, very little stops it from having a UTAD, an “Upthrust After Distribution.” If it does, it certainly can do this:


In fact, it is common. Now, if we get a 60% rally in Tesla as its terminal move (lifetime terminal, it will never see these prices again, ever) and big rallies (maybe not this big) in a few other names, you can see how a 700-point rally in the S&P is not absurd. It would be completely compatible with Tesla being under distribution, to still have a rally like that.

But it’s not as if Bitcoin and everything are going to all-time highs, either. I think its forever top is in already. But, that’s not to say that it can’t have a big rally, too, because it hasn’t really seen one yet. It’s only consolidated on the way down. Little is stopping it from pulling one of these:


This has already been distributed. But it’s also allowed to reenter the distribution range one more time for its LPSY “Last Point of Supply,” perhaps checking in on that long-term moving average one final time to let Michael Saylor out lol. Things like this are allowed and things can still be extremely bearish in the long term.

Or take a stock (or anything else “growth” that’s already been in a long bear market) like Palantir. It’s basically done nothing but go “down and to the right” for a year and a half. But it’s also allowed to have a bigger rally here, if it needs to:


If it did something like that, that’s a 70% rally from here. But after that it can go to zero if it wants to.

Or what about AMC? It’s also clearly been in distribution:


And all I’m saying is: it could drop here, yes. Yellow “c” can be at 0 and we can be on our way there now. The distribution can be over. But, sometimes distribution takes forever. And I know it already has. But it can sometimes take even more forever.

What if there’s more distribution? Another test of supply (green path)? Or what if it has its own UTAD (red path)?


Possible! Can’t rule it out.

So when I refer to the “bullish potential,” this is all I’m referring to. An index like the S&P can push to a new high, maybe the Nasdaq does not. And it can do so on a few names (e.g., Tesla, etc.), while a lot of other names have very big rallies, too, while still remaining way off their highs (e.g., Bitcoin, Palantir). The broad NYSE Composite can struggle while SPY squirts up, for example.

Or take Google. We don’t actually know if this chop its been in is redistribution. What if they’ve accumulated it here at an average price of $110 because they know they can revisit the distribution range once more and get rid of it at $130 one more time while everyone gets super bulled up because of the S&P and Tesla? What if? You would if you could, right?


This could simply be a bear flag, too and it could just break down from here. But it might not.

So I wanted to make sure all of this is clear when I refer to the bullish stuff. I do think we’re in trouble. But I can’t rule stuff like this out. Like a last gasp sort of thing. I do think the Fed will not be accommodative for a long time. But that doesn’t totally rule out weird shit like everything above. They’re not mutually exclusive ideas. And so when I say bullish, I mean maybe into early next year or something, not like a multi-year rally to much beyond the prior all-time high.

Imagine the melt-up calls coming in at 4950. Maybe the market needs that. I don’t know. I am open to stuff like this happening. If they do want to put us up there, they absolutely will use bears to do it, too. And so we should be on guard just in case.

Have a nice weekend.

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