Some of you may think I'm a perma- bull. Definitely not. My goal is to be on the correct side of any market.
To accomplish this goal I study many indicators from the four market dimensions; Time, Price, Sentiment, and Momentum.
I base my opinion on the weight of evidence. If 80% of the evidence is bullish I'm bullish. Of course sometimes the low probability scenario will happen and that's when
I'm on the wrong side of the market. It doesn't bother me because if I continue to follow my method I will be right more often then I'm wrong.
The last several weeks I've been on the wrong side of the US stock market. My prior posts had mentioned a 80% chance that November to January was bullish.
What happened was the most bearish December since 1931! If you have to be wrong it may as well be spectacularly wrong.
The majority of my indicators are still bullish and some of them have extreme readings that haven't occurred in several years.
The weekly Stochastic is the lowest level since 2012 and represents selling exhaustion.
The Put/Call ratio last week reached incredible levels. On 12/20/18 there was a total freak out to buy put options. This is pure panic and in the stock market it means buying opportunity. The only time the Put/Call ratio was higher was in 2010, which I suspect was an aberration caused by the Flash Crash.
Deep oversold momentum with extreme bearish sentiment indicates a significant bottom could be near. There's another interpretation for this extreme readings - it could represent a major shift from bull to bear market. If the September to December drop is the first phase down in a bear market there could be a significant bear market rally of 60 to 90%.
Please see what happened after the SPX bull market top made in March 2000. The first phase of the bear market had a 90% retracement that terminated in September 2000.
Based mostly on Elliott wave evidence I believe the bull market from 2009 is still in effect. Typically within a five wave pattern, waves "two" and "four" tend toward equality.
The supposed Primary wave "4" decline as of 12/21/18 is down 18.1%, Primary wave "2" was down 17.1%.
My SPX post on 12/19/18 noted Fibonacci support at 2485 which was blown away. There are no other significant Fibonacci levels nearby. However there's chart support of a double bottom made June to July in 2017 at SPX 2405 and 2407, the SPX low on 12/21/18 was 2408. This double bottom plus the Fibonacci relationship between Primary wave "2" and the supposed Primary wave "4" is additional evidence a significant bottom could be forming.
A final note on some anecdotal evidence. This week the news media informed me the Nasdaq had entered a bear market. This reminded me of October 1987 just after the crash
when the news media informed me the Dow Jones Industrial Average was in a bear market. Please examine a chart to see what happened after the crash - a new bull market.
Thanks a lot news media!
The strongly believe a multi week or multi month rally could start soon, retracing at the very least, 60 to 90% of the September to December drop.
I will have another post soon examining the SPX from January 2018 to the present.
Mark
To accomplish this goal I study many indicators from the four market dimensions; Time, Price, Sentiment, and Momentum.
I base my opinion on the weight of evidence. If 80% of the evidence is bullish I'm bullish. Of course sometimes the low probability scenario will happen and that's when
I'm on the wrong side of the market. It doesn't bother me because if I continue to follow my method I will be right more often then I'm wrong.
The last several weeks I've been on the wrong side of the US stock market. My prior posts had mentioned a 80% chance that November to January was bullish.
What happened was the most bearish December since 1931! If you have to be wrong it may as well be spectacularly wrong.
The majority of my indicators are still bullish and some of them have extreme readings that haven't occurred in several years.
The weekly Stochastic is the lowest level since 2012 and represents selling exhaustion.
The Put/Call ratio last week reached incredible levels. On 12/20/18 there was a total freak out to buy put options. This is pure panic and in the stock market it means buying opportunity. The only time the Put/Call ratio was higher was in 2010, which I suspect was an aberration caused by the Flash Crash.
Deep oversold momentum with extreme bearish sentiment indicates a significant bottom could be near. There's another interpretation for this extreme readings - it could represent a major shift from bull to bear market. If the September to December drop is the first phase down in a bear market there could be a significant bear market rally of 60 to 90%.
Please see what happened after the SPX bull market top made in March 2000. The first phase of the bear market had a 90% retracement that terminated in September 2000.
Based mostly on Elliott wave evidence I believe the bull market from 2009 is still in effect. Typically within a five wave pattern, waves "two" and "four" tend toward equality.
The supposed Primary wave "4" decline as of 12/21/18 is down 18.1%, Primary wave "2" was down 17.1%.
My SPX post on 12/19/18 noted Fibonacci support at 2485 which was blown away. There are no other significant Fibonacci levels nearby. However there's chart support of a double bottom made June to July in 2017 at SPX 2405 and 2407, the SPX low on 12/21/18 was 2408. This double bottom plus the Fibonacci relationship between Primary wave "2" and the supposed Primary wave "4" is additional evidence a significant bottom could be forming.
A final note on some anecdotal evidence. This week the news media informed me the Nasdaq had entered a bear market. This reminded me of October 1987 just after the crash
when the news media informed me the Dow Jones Industrial Average was in a bear market. Please examine a chart to see what happened after the crash - a new bull market.
Thanks a lot news media!
The strongly believe a multi week or multi month rally could start soon, retracing at the very least, 60 to 90% of the September to December drop.
I will have another post soon examining the SPX from January 2018 to the present.
Mark