Ok, so let me summarize some things much like I did the other day.
In the October rally, I assumed the bear market wasn’t over and that we would have a another huge drop, perhaps taking us even as low as 3000. However, as we topped, things like high-yield credit, and the structure itself, breadth, and other things I watch were a bit odd, and I became less inclined toward that view and opened up the possibility that the October low was the the low, at least for the first of several bear markets that we may encounter over the coming years (and that was laid out here).
As we stand here today, I am more and more inclined to the view that the October low was the low. Adding to that hypothesis is the growing eagerness of market participants for a catastrophe. That counts, to my mind, in the bulls’ favor. I think sentiment is too bearish. I also think that the market is going to be further ahead of the Fed than we can easily see from our individual vantage points. I do not think the low is going to be loudly announced. I think we will see it looking backwards. And so all of this continues to make it plausible that the low is in.
Now, if the low is in, a lot of things can still happen going forward, including a deeper drop. I don’t have enough here to be strongly convicted.
Let’s look at the possibilities. We’ve just dawdled and dawdled and dawdled down here. This may have been an accumulation much like the one I suggested here. And the primary count I have been using remains intact. Carrying over yesterday’s thought, we could have simply made another 1-2 in orange, which follows on the heels of the 1-2 in blue: