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.
- 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).
- 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).
- The structure off the top of the market has been especially choppy, perhaps too much so for a real bear market.
- 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.
- 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.
- 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:
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