Interim update Jan 10, 2022

[SOL]

It looks like the correction albeit milder correction is underway. Bullish sentiment is too low and the markets are trading in the extremely oversold ranges on the weekly charts for this to turn into a very strong correction.


A small excerpt from the latest update

. As uncertainty is high, the next correction whether its mild or wild will prove to be a buying opportunity.

Some of the reasons we suspect that the markets will experience a milder correction in the first quarter;
• Bullish sentiment is running below its historical average for 7 weeks in a row. Neutral readings continue to trend upwards
• The markets are trading in the extremely oversold ranges on the weekly charts
• One of the bigger reasons is due to what is taking place in the Nasdaq 100. 50 companies in the NDX are trading in the neutral or oversold ranges. It is hard to envision a massive correction taking place when 50% have already experienced correction ranging from firm to severe. In the Dow 30, 11 of the stocks are trading in the oversold to extremely oversold ranges.

Based on the analysis of the NDX, 50% of the stocks have experienced firm to severe corrections. These stocks are mostly trading in the oversold to extremely oversold ranges. Market’s don’t usually experience a strong correction under such conditions. If they do, it always leads to the creation of a mega opportunity.

Don’t place too much weight on the January effect, for the past 25 years it has generally been one of the worst months for stocks. It is no longer an indicator of what one should expect for the rest of the year. In other words, the January effect should be treated in the same light as the Feb, March, July, etc, effect.

Finally, rising rates are not necessarily a bad omen for stocks. Consider that from June 2004 to June 2006, the Fed raised rates 17 times. The markets only crashed several years later. According to Reuters, the total world debt is close to 300 trillion. There is simply no way in hell, this debt will ever be paid back. So logic dictates that while the Fed will talk big to scare the masses, they will never allow rates to rise significantly. If they did, the great depression would look like a walk in the park and there would be no safe place to hide accept on the top of a mountain or in a nuclear bunker

[bpcw]

Bullish sentiment has dropped significantly since TIs latest update according to https://www.aaii.com/sentimentsurvey/sent_results

[outof thebox]

Bullish sentiment has dropped significantly since TIs latest update according to https://www.aaii.com/sentimentsurvey/sent_results

I wonder what TI's latest sentiment data will reveal. I suspect bullish sentiment will be well below the historical average, which means in the long run, one should look for good companies, and deploy capital albeit in segments into these stocks.

[MarkyMark]

It looks like the correction albeit milder correction is underway. Bullish sentiment is too low and the markets are trading in the extremely oversold ranges on the weekly charts for this to turn into a very strong correction.

Hi Sol,
Given the recent developments, do you still expect a milder correction or are we facing the risk of a major correction?

[SOL]

It looks like the correction albeit milder correction is underway. Bullish sentiment is too low and the markets are trading in the extremely oversold ranges on the weekly charts for this to turn into a very strong correction.

Hi Sol,
Given the recent developments, do you still expect a milder correction or are we facing the risk of a major correction?

This correction cannot be the big one. while it appears to be strong it will be mild in comparison to the next one. Too many experts are calling for a crash. Bullish sentiment is now lower than during the COVID crash. Current bullish sentiment readings are at a stunning level of 18. An interim update will be posted here today

[bpcw]

Yes sentiment has plunged, I'm seeing on one forum that people are losing all their savings and apparently the Nasdaq is shit! The buy the dip is wearing thin with people which is when you should buy the dip!

[DOCLUC]

Yes sentiment has plunged, I'm seeing on one forum that people are losing all their savings and apparently the Nasdaq is shit! The buy the dip is wearing thin with people which is when you should buy the dip!

that is the key point.
Do not fail (hard) in entering too soon.
Hope Sol will cover the point in the coming update

[Yodean]

Yes sentiment has plunged, I'm seeing on one forum that people are losing all their savings and apparently the Nasdaq is shit! The buy the dip is wearing thin with people which is when you should buy the dip!

Nasdaq has dropped from its recent high of 16.2k or thereabouts to just above 14k, which is roughly 13%, or in the upper end of the range mentioned by the TIT for the Q1 correction. It's more or less playing out as planned, with some unexpected overshoots here and there - a delayed, somewhat strange Santa rally, followed by the current drawdown.

My base case given the extremely low bullish Horde sentiment readings is some type of ROAR (Rally of All Rallies) between February and May, after the dust settles a bit.

I suspect the Fed will have to back off a bit on its recent statements, etc.

[Budge]

Yes sentiment has plunged, I'm seeing on one forum that people are losing all their savings and apparently the Nasdaq is shit! The buy the dip is wearing thin with people which is when you should buy the dip!

Nasdaq has dropped from its recent high of 16.2k or thereabouts to just above 14k, which is roughly 13%, or in the upper end of the range mentioned by the TIT for the Q1 correction. It's more or less playing out as planned, with some unexpected overshoots here and there - a delayed, somewhat strange Santa rally, followed by the current drawdown.

My base case given the extremely low bullish Horde sentiment readings is some type of ROAR (Rally of All Rallies) between February and May, after the dust settles a bit.

I suspect the Fed will have to back off a bit on its recent statements, etc.

Quarterly trend is still intact on the major indices (DJI, S&P500, Nas Comp, NDX) although DJI is the weakest.

The downward pressure of daily and weekly which will continue is causing monthlies to pause/start rolling over.

[deepthinker]

I concur with the latest MU in that we could see another sell off in March but it will probably set the tone for a stronger rally into at least the 3rd quarter before a major top is hit. At that point, i think all the charts will be trading in the extremely overbought ranges, daily, weekly, monthly and quarterly