Jaz wrote: ↑Mon Nov 07, 2022 6:03 pm
No. But, I always had a suspicion the market wanted to retest the late 2018 lows. I just couldn't figure out what would cause it to drop.
What did your Bullish/Bearish/Neutral readings look like for Q3 2008, verses today, Q4 2022?
Sol, please elaborate further. What do you think happens next in this playbook?
I see a stock price pattern in the Wiltshire 5000 which looks so similar and perfect, I am deeply suspicious. As in, Mr. Market is setting a Bear Trap to try and make me unload so he can take all my shares, and do the unexpected, shoot higher. Mr. Market set a Bull Trap last year by replaying the Nasdaq Dotcom Mania pattern, just before it was supposed to go Parabolic, it collapsed.
On the contrary, one could also argue Mr. Market is getting very creative, and knows the masses see the Wiltshire Pattern playing out, but also knows the masses are now conditioned to think it won't happen, as the prior years Nasdaq pattern didn't play out. So, Mr. Market will surprise them, and make the pattern play out and collapse the market.
While other cycles and indicators suggest we are at a bottom, and also know any recession would be of no surprise at all. We also know liquidity is good, and the Fed won't want to be seen to collapse the market by their rate raising sheanigans (to avoid any blame).
This all leads to deep uncertainty, which equals Anxiety. Someone said it is uncertainty, rather than fear which signals a bottom. Might have been you. Anyhow, I am uncertain/anxious. Previously, this has indicated a bottom.
So as stated there are several scenarios two stand out.
First, the war of attrition continues, and the June 2022 lows hold on a weekly basis. This might actually be worse than the second option because while the indices rise and fall, more stocks will fall than will rise. For example, take stock ABC, the Dow tacks on 2000 points, the stock gains 15%. The Dow then drops 2200 points over two weeks, and the stock sheds 10%; it then reports good earnings, but nervous nellies want more, so the stock sheds 30%. The Dow tacks on 3000 points again, but the stock is still down 16%. Many stocks follow this pattern; this is sometimes referred to as a silent bear or a silent massacre, where the indices mask the true extent of the slaughter.
The second option
Care to guess why bonds are still not rallying as fast as they should? There should have been a massive counter-rally in play by now. One of the new reasons is that investors pull money out of bonds and money market accounts and buy more stocks. In other words, they are attempting to act like contrarians. This is a big No-No for the big players. Heaven forbid the small guy masters the simple secret of embracing crashes. In this scenario, the big players create a nice counter-trend rally, which is in play now. The rally is quite strong, and the Dow might even test the secondary, albeit higher, but lower probability targets of 35K. Currently, these higher targets have since moved into the medium probability zone. By taking the Aug highs out would create the look that a new bull is potentially underway, and shortly after that, the markets will pull back softly at first and then gain momentum.
If this trick is employed, the indices will trade decisively below their June lows, even for a brief period. This is the only way to break the mindset of the masses and reinforce the old belief that one should run and sell everything when the market is crashing.
Lastly, while the crowd is anxious, their anxiety is manageable; it has to get out of control. Neutral readings of 53 plus indicate that the crowd is close to hitting the learned helplessness stage; this happens when your anxiety levels go through the roof, but you don’t know what course of action will alleviate them, so you break down.
Bearish sentiment is also not at very high levels. It would need to get to 60 several times (ideally 65) to indicate an extreme inflexion point has been hit.
