Here’s My Thinking Here

It’s frustrating for me to have untold legions of people criticize me for being bullish here—cautious, to be sure, but yes, generally bullish—but I continue to believe this is only a correction. Now, part of that comes with the territory of having a big account, and putting myself out there, and I accept that. But I don’t easily tolerate emotional people screeching at me, making the flawed assumption that I’m being bullish just because. I have reasons, and I’ve elaborated on many of them recently, but I thought I would bring some of the thoughts together to defend my position to some degree, so that folks know that I am—for all of my many failings—actually attempting to be rational here.

  1. We know that markets, historically, can tolerate rate hikes well, often for quite some time before a bull market ends. And we haven’t actually even seen hikes yet.
  2. We have no 10Y/2Y yield curve inversion here (though it’s moving in that direction), and even if we did, it would mean little to us here today as markets tend to top (on average) six months after such an inversion.
  3. Much of this recent selling has been news-related. Historically, news-related selloffs are almost always reversed.
  4. Historically, wars are, as awful as it is, often not as bearish for equities as we might want to presume. And it’s not even clear yet to what extent we might classify this geopolitical event as “a war,” nor to what extent the U.S. will be involved.
  5. Bear markets are most often associated with recessions. And presently, the economy is still growing, though its rate of change of growth is slowing. Now of course many, many individual names have had outright bear markets, but as far as whole indices, it’s not something we typically see without also seeing recessions.
  6. Bear markets often start on peak euphoria, and frankly, most of the sentiment data seems to point to the opposite: that since the COVID crash low in particular, sentiment has been especially bearish.

I have more, but you get the idea here. I’m not simply shooting from the hip. I am acknowledging that none of this stuff points to a market top. And thus, so far as I can conclude in advance, this appears to be merely a correction. And now that raises a new question: how big and how long? Extremely hard for me to say.

I know that the vast majority of corrections in stock market history take on the appearance of a 3-swing structure of some kind.

And so, even at the January 24th low, I could see a 3-swing move on the S&P 500, like this:

SPX

Read more “Here’s My Thinking Here”


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page.


I May Need to Adopt an Even More Aggressively Bullish Count for the Indices

As you know, I have been viewing the S&P 500 as being within its “3rd of 3rd of 3rd,” which would result in us entering a knot of fours and fives sooner rather than later, but I may need to aim a bit higher, and I’ll point out a couple of reasons why.

The defense of the count I’ve been using on $ES is that we have these higher lows (green arrows) and some clear impulse waves (red arrows) and so that lets us nest ones and twos to our hearts’ delight.

ES

Read more “I May Need to Adopt an Even More Aggressively Bullish Count for the Indices”


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page.


So How Bad Are Things? Weekend Market Update

Alrighty, there are a lot of things I want to discuss, so I’ll just dive right in. We’re seeing some delicious selling, and so we need to ask: Is this it? And if not, then how serious is it? And I will try to address those in this article.

First, Is this it?. I don’t know yet, to be blunt. And as much of me that wants this to be it (because I am bearish by nature), I am not yet convinced that it is it. And I will present some evidence that questions whether this is really it.


Bitcoin

Now, for the Great Liquidity Thermometer, I have been warning that it risked failure and with it equity markets (e.g., here). The frustrating part has been that Bitcoin often leads, and I’ve been watching it closely for signs that it would give up that head and shoulders pattern neckline before equities took a bath, but it held on to that level for as long as humanly possibly before finally taking a bath concurrently with equities.

At any rate, it’s given given us something more of an actual plunge—finally—but now how does that plunge look? Well, on the one hand, we have no idea yet if it’s finished. It could still be well within the move. If it is, we will want to see much lower prices still, as the H&S pattern’s measured move is somewhere deep down around $12-22K. And yet, I will note two features of the plunge so far.

The first feature is the volume profile. Bitcoin’s little plunge so far has taken it (unsurprisingly) to a POC (point of control, red line, the price at which the greatest volume has traded in this timeframe) and it has a huge volume node it will need to work through in order to go lower:

BTC

Read more “So How Bad Are Things? Weekend Market Update”


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page.


One Technical Observation for $NQ

Bitcoin is breaking down finally, but I would feel more confident about us being in a crash were oil following suit, and it continues to resist total failure. That said, I want to point out one technical feature in support of (at least) a bounce on $NQ.

A lot of people ask me why I use the 250-day EMA instead of some other number or moving average type, and here’s a good example of why.

While everybody is celebrating the Nasdaq 100’s loss of its 200-day simple moving average, note that we’ve actually come to rest on the 250-day exponential moving average (green arrow on the right). And note, too, that during a total lockdown of all world economies with the emergence of an unknown virus, we still mustered an 11% bounce off of this moving average before (green arrow on the left). Now, $ES is near an important trend line (here), and the Nasdaq is at this EMA, so, no promises, but the potential for at least a strong bounce seems to me to be present here.

NQ


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page.


$NQ May Also Support Another Drop

$NQ‘s wave structure is a little clearer, as it’s given us two distinct drops out of that consolidation high we were in. And if this is a triangle 4th wave we’re in now (red degree), it, too, would support one more drop.

NQ


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page.