Hello friends.
This is our primary macro wave count at the moment. We expect a peak at 4260 for the SPX followed by the 'crash' that everyone has been cheering for. The main thing that has to happen for this count to be the correct one is that retail traders have to stop cheering for a crash and position themselves long. Some of this capitulation can already be seen, as Burry has signaled to his widespread fanbase of losing retail traders that he was "wrong to say sell" and implied that they should cover their shorts and start buying again. This is a good start for bear capitulation, but I need to see more before I would short this market.
The current situation in markets is very interesting. A few massive banks have gone under, and the FED has responded with the strongest tool they have to fight any sort of crisis -- liquidity creation. This substantial liquidity creation moved the fair value of the SPX upwards by over TWELVE PERCENT in the past month. One of the things that is really crucial to understand about this recent wave of liquidity insertion is that it is NOT a start to infinite QE. In fact, the Federal Reserve is still rapidly burning through the money supply. This was more like a temporary hit of cocaine (liquidity) for the addict (market) to stave off unbearable withdrawal symptoms (bank collapse), but the withdrawal must continue for the addict (economy) to heal and it will be painful. So it is a temporary high, but the liquidity burning is set to continue at least for the rest of this year, and possibly well into 2024. Because of this liquidity destruction, we know that the fair value of the stock market will fall over time, assuming there are no more emergency insertions. (I think that was likely the only big one we're getting, and don't expect more anytime soon).
So that is ""why"" the market rallied in the face of what looks to an average trader like a terrible situation for risk, if you would like to have "reasons" why an incomprehensibly complex system did something you don't understand and then pretend you know exactly what happened and why. Anything else other than liquidity is a sideshow.
Our trading plan is to mostly wait for any big trades. We want to catch the actual top, unlike all of these early retail bears, who must be purged out before the top can come in. There may even be an opportunity to long the market on the shorter time frames heading into the peak, but that is not within the scope of our macro count. If we manage to catch the peak, it will make sense to hold the trade for a long time, since there is no end in sight to the liquidity deletion.
This is our primary macro wave count at the moment. We expect a peak at 4260 for the SPX followed by the 'crash' that everyone has been cheering for. The main thing that has to happen for this count to be the correct one is that retail traders have to stop cheering for a crash and position themselves long. Some of this capitulation can already be seen, as Burry has signaled to his widespread fanbase of losing retail traders that he was "wrong to say sell" and implied that they should cover their shorts and start buying again. This is a good start for bear capitulation, but I need to see more before I would short this market.
The current situation in markets is very interesting. A few massive banks have gone under, and the FED has responded with the strongest tool they have to fight any sort of crisis -- liquidity creation. This substantial liquidity creation moved the fair value of the SPX upwards by over TWELVE PERCENT in the past month. One of the things that is really crucial to understand about this recent wave of liquidity insertion is that it is NOT a start to infinite QE. In fact, the Federal Reserve is still rapidly burning through the money supply. This was more like a temporary hit of cocaine (liquidity) for the addict (market) to stave off unbearable withdrawal symptoms (bank collapse), but the withdrawal must continue for the addict (economy) to heal and it will be painful. So it is a temporary high, but the liquidity burning is set to continue at least for the rest of this year, and possibly well into 2024. Because of this liquidity destruction, we know that the fair value of the stock market will fall over time, assuming there are no more emergency insertions. (I think that was likely the only big one we're getting, and don't expect more anytime soon).
So that is ""why"" the market rallied in the face of what looks to an average trader like a terrible situation for risk, if you would like to have "reasons" why an incomprehensibly complex system did something you don't understand and then pretend you know exactly what happened and why. Anything else other than liquidity is a sideshow.
Our trading plan is to mostly wait for any big trades. We want to catch the actual top, unlike all of these early retail bears, who must be purged out before the top can come in. There may even be an opportunity to long the market on the shorter time frames heading into the peak, but that is not within the scope of our macro count. If we manage to catch the peak, it will make sense to hold the trade for a long time, since there is no end in sight to the liquidity deletion.