The Overbought Markets and the Wild Dance of Sentiment

[SOL]

The forthcoming update is taking slightly longer than anticipated as I've decided to delve into the Gold, Silver, Uranium, and other markets. In the midst of this, the latest batch of sentiment data arrived. If we're fortunate, we might be able to cover this last batch in a few hours. If all goes well, the update could be ready soon. In the meantime I am posting the section from the general market commentary.


General Market Commentary

Most indices, barring the Russell 2000, are trading in an extremely overbought range, a point we have consistently emphasised. From a technical analysis standpoint, all the elements signalling a pullback are present. However, the psychological follow-through, which we consider more significant, has been absent. Now, psychological factors are aligning, with sentiment being one of them.

In a notable development, bullish sentiment readings might register at 54 for the first time in a while (we are still in the process of tabulating the results, which should be completed in 3-5 hours), and could potentially even reach 55. A reading of 55 would match the previous high set in December 2023.

If these readings persist at or above this level for a prolonged period, the markets will experience a more substantial correction. The only scenario where the correction remains "mild" is if the bullish readings do not consistently stay at or above 55.

Therefore, even if bullish readings momentarily spike to 57 and then drop the following week, it would indicate that the correction will fall under the "mild" category. Some individuals might perceive this correction as severe, focusing on the intensity and the number of points the SPX or Dow has lost rather than considering the points they have gained from their 2022 lows. Unfortunately, this is a skewed perspective of market dynamics. The markets will inevitably release a significant amount of pent-up pressure at some point; the question is merely when.

In a situation where bullish sentiment oscillates without consistently trading at or above 55, any pullback should be viewed through a bullish lens. Simply put, the stronger the pullback, the greater the opportunity. That's all there is to it.

In an unexpected turn of events, AAPL, the major player, is beginning to look appealing and might be worth considering if it drops to the 155 to 160 range, provided the pattern does not deteriorate. However, AAPL could serve as the proverbial canary in the coal mine. Since it peaked before the major indices, it will be intriguing to see if it bottoms out before them. If it does, it will signal a very bullish trend.

[deep1nSand]

Thanks for the update Sol. Do you have any views on the short term targets for Bitcoin. Are you still expecting it to pull back to 27-30k before moving up to achieve higher targets?

[Budge]

The forthcoming update is taking slightly longer than anticipated as I've decided to delve into the Gold, Silver, Uranium, and other markets. In the midst of this, the latest batch of sentiment data arrived. If we're fortunate, we might be able to cover this last batch in a few hours. If all goes well, the update could be ready soon. In the meantime I am posting the section from the general market commentary.


General Market Commentary

Most indices, barring the Russell 2000, are trading in an extremely overbought range, a point we have consistently emphasised. From a technical analysis standpoint, all the elements signalling a pullback are present. However, the psychological follow-through, which we consider more significant, has been absent. Now, psychological factors are aligning, with sentiment being one of them.

In a notable development, bullish sentiment readings might register at 54 for the first time in a while (we are still in the process of tabulating the results, which should be completed in 3-5 hours), and could potentially even reach 55. A reading of 55 would match the previous high set in December 2023.

If these readings persist at or above this level for a prolonged period, the markets will experience a more substantial correction. The only scenario where the correction remains "mild" is if the bullish readings do not consistently stay at or above 55.

Therefore, even if bullish readings momentarily spike to 57 and then drop the following week, it would indicate that the correction will fall under the "mild" category. Some individuals might perceive this correction as severe, focusing on the intensity and the number of points the SPX or Dow has lost rather than considering the points they have gained from their 2022 lows. Unfortunately, this is a skewed perspective of market dynamics. The markets will inevitably release a significant amount of pent-up pressure at some point; the question is merely when.

In a situation where bullish sentiment oscillates without consistently trading at or above 55, any pullback should be viewed through a bullish lens. Simply put, the stronger the pullback, the greater the opportunity. That's all there is to it.

In an unexpected turn of events, AAPL, the major player, is beginning to look appealing and might be worth considering if it drops to the 155 to 160 range, provided the pattern does not deteriorate. However, AAPL could serve as the proverbial canary in the coal mine. Since it peaked before the major indices, it will be intriguing to see if it bottoms out before them. If it does, it will signal a very bullish trend.

IMO AAPL goes lower and could get into 130s (quarterly/monthly charts). EU continuing to piss on them and negative propaganda coming out of the East.

Have owned for years and will add if it gets as low as I think it will.

[MarkD]

Seeing smart folks (not MSM) discuss likelihood GOOGL hits $60. All of this lines up with Sol and his team's evaluation.

[Budge]

Seeing smart folks (not MSM) discuss likelihood GOOGL hits $60. All of this lines up with Sol and his team's evaluation.

Couldn't happen to a "nicer" bunch of evil bastards.

[deepthinker]

Seeing smart folks (not MSM) discuss likelihood GOOGL hits $60. All of this lines up with Sol and his team's evaluation.

Couldn't happen to a "nicer" bunch of evil bastards.

I triple that. I don't mind taking a financial hit if it puts some pressure on G. The ads on YouTube are just too much, and the recent mess with their image generator – that was simply unforgettable.

[Budge]

Seeing smart folks (not MSM) discuss likelihood GOOGL hits $60. All of this lines up with Sol and his team's evaluation.

Couldn't happen to a "nicer" bunch of evil bastards.

I triple that. I don't mind taking a financial hit if it puts some pressure on G. The ads on YouTube are just too much, and the recent mess with their image generator – that was simply unforgettable.

"unforgettable" and unforgivable.

[SOL]

Thanks for the update Sol. Do you have any views on the short term targets for Bitcoin. Are you still expecting it to pull back to 27-30k before moving up to achieve higher targets?

Before I respond to your question, let's look at a dangerous disease that's infecting investors. Many investors perceive the stock market as a casino. While this perspective is dangerous, it is not the most concerning. The greater danger lies in their conviction that they can consistently outwit the 'house'.

While it's possible to score some wins in the short term, consistently outwitting the market (the house) over an extended period is virtually impossible and typically leads to tremendous pain. Historical precedents echo this lesson, with the dot.com bubble and the housing crisis serving as stark reminders of the dangers of discarding time-tested principles.

Markets like AI and Bitcoin fall under the "speculative" category at this stage of the game. Why? Their outlook can change in an instant. In the AI sector, new leaders can emerge overnight, causing disruption. As for Bitcoin, it's likely that a group of prominent players (AKA Sharks) are already preparing to short this market when the time is right. Moreover, there's always the potential for an unexpected event to shock these markets.

These points are essential to consider because most markets are currently overshooting to the upside by a significant margin. As we know, what goes up must come down, so a substantial downside move is inevitable. Bitcoin, for instance, barely pulled back before hitting our secondary and higher target. It's possible that it completed the move in one go instead of two, which means the pullback could be more severe.

Yes, we missed out on this move, but changing our investment methodology to chase the latest trend would make us speculators, not investors. If we abandon the key tenets of investing - patience and discipline - we risk losing everything when the market turns. I've never seen anyone disregard these principles and come out unscathed in the long run.

To clarify, a similar trend is emerging in the AI sector. It seems that what we thought would be two separate growth phases—Phase 1 and Phase 2—may have combined into a single phase. This fusion means we could be looking at just two Boom and Bust cycles instead of three. If this is indeed the case, we should prepare for a more intense downturn. However, following this, we will witness an even more explosive spurt, possibly driven by a fresh set of leaders in the industry.

We'll wait for our indicators to pull back before entering this market (BTC). However, promising patterns are emerging in overlooked sectors like Gold, Palladium, Fertilisers, and other commodities. While the crowd may ignore these, the real big players certainly aren't.

[Budge]

Thanks for the update Sol. Do you have any views on the short term targets for Bitcoin. Are you still expecting it to pull back to 27-30k before moving up to achieve higher targets?

Before I respond to your question, let's look at a dangerous disease that's infecting investors. Many investors perceive the stock market as a casino. While this perspective is dangerous, it is not the most concerning. The greater danger lies in their conviction that they can consistently outwit the 'house'.

While it's possible to score some wins in the short term, consistently outwitting the market (the house) over an extended period is virtually impossible and typically leads to tremendous pain. Historical precedents echo this lesson, with the dot.com bubble and the housing crisis serving as stark reminders of the dangers of discarding time-tested principles.

Markets like AI and Bitcoin fall under the "speculative" category at this stage of the game. Why? Their outlook can change in an instant. In the AI sector, new leaders can emerge overnight, causing disruption. As for Bitcoin, it's likely that a group of prominent players (AKA Sharks) are already preparing to short this market when the time is right. Moreover, there's always the potential for an unexpected event to shock these markets.

These points are essential to consider because most markets are currently overshooting to the upside by a significant margin. As we know, what goes up must come down, so a substantial downside move is inevitable. Bitcoin, for instance, barely pulled back before hitting our secondary and higher target. It's possible that it completed the move in one go instead of two, which means the pullback could be more severe.

Yes, we missed out on this move, but changing our investment methodology to chase the latest trend would make us speculators, not investors. If we abandon the key tenets of investing - patience and discipline - we risk losing everything when the market turns. I've never seen anyone disregard these principles and come out unscathed in the long run.

To clarify, a similar trend is emerging in the AI sector. It seems that what we thought would be two separate growth phases—Phase 1 and Phase 2—may have combined into a single phase. This fusion means we could be looking at just two Boom and Bust cycles instead of three. If this is indeed the case, we should prepare for a more intense downturn. However, following this, we will witness an even more explosive spurt, possibly driven by a fresh set of leaders in the industry.

We'll wait for our indicators to pull back before entering this market (BTC). However, promising patterns are emerging in overlooked sectors like Gold, Palladium, Fertilisers, and other commodities. While the crowd may ignore these, the real big players certainly aren't.

You can play BTC or other cryptos short-term but its danger longer-term is government. They hate competition. As soon as they get their CBDC in place they'll regulate any competition out of existence, if not outright ban it (too many terrorists, drug smugglers, rogue nations.... etc. etc.).

On the longer-term outlook, an interesting blog piece by Martin Armstrong today. Back in January 2020, when the DJIA stood at 29,240, he forecast it would reach 40000.

the computer is still indicating that we are looking at a Dow that could rise to 65,000 by 2032, when we are likely to see a change in not just the markets but governments worldwide.

https://www.armstrongeconomics.com/arms ... uary-2020/

[MarkD]

Wonder what the outlook for "...governments worldwide..." implies.

[Budge]

Wonder what the outlook for "...governments worldwide..." implies.

I think he feels everything goes to shit in this decade (after all we've made such a stellar start) with China emerging top dog 2032 on, at least financially. I hate to be biblical but hopefully we don't arrive at the pale horse moment although Lord alone knows certain creatures in this Western World do deserve it. The red and black horses are lined up ready to go.

[AstuteShift]

I was able to take advantage of GBTC and the bitcoin swing for 130k in profit.

Now, I’m just sitting in cash. Daily and weekly charts don’t look good whatsoever on crypto. In terms of price prediction, 40k seems reasonable to flush out the speculators. Chasing now is a recipe for disaster and that’s not what I do and neither does SOL

Patience and discipline is paramount.

I see perhaps a short term rotation into the old economy such as oil good for possible gain but it’s limited

I do not see a bear market since many are still traumatized from 2022 and are hedged positionally for macro type events. The market loves to do the opposite

So at the end of the year I see the market go higher after significant volatility.

So what do you do at this time? Buy your favorite stocks that are oversold and relax.

[stefk]

congratulation for your nice profits. You now have good cash, come with us on the palladium, you will see its fun.

[MarkD]

I picked up RIG after doing my own evaluation. Cheap for a reason but it's making turn on the daily/weekly. Fundamentals suggest it could run for several more bucks as it's undervalued.

Anyone's guess as it's in a LT zone of price. I highlighted where I see O/H resistance on the monthly

https://ibb.co/6g9b0v0

[AstuteShift]

congratulation for your nice profits. You now have good cash, come with us on the palladium, you will see its fun.

Once my funds get settled, I’m venturing into this sector