Interim Update Feb 24, 2022

[SOL]

The Ukraine and Russia incursion is being pushed and will be pushed to the maximum as was the covid story, the idea is to make people panic. All disasters have one thing in common, the idea is to make the masses panic. This projected correction has been pushed further than anticipated, so it remains to be seen now what is in store for the 4th quarter. However, the main takeaway from this as with every disaster in history is that smart money always jumps in to buy when the masses panic. Bearish sentiment is roughly at 55 and could come in at 56 which would represent an extreme development.

A more detailed update will be posted later (as I am travelling at the moment) but as things stand, this is an unusual development on par with the covid crash. The covid crash was rapid, this one is protracted and with bearish sentiment so high. It makes no sense to bail out now for that would be exactly what the big players want. No bull market has ended on a note of uncertainty (ever).

So far Russia is mounting precision strikes as Ukraine has no airforce so they are taking out all of Ukraine's military bases. Once that is done, it is unlikely that Putin will mount a land attack. He is more likely to create a buffer zone. Once this situation has run its course expect some narrative about new diseases making a come back to make headlines. Then when everything looks bleak, the markets will mount a stunning rally and the people that sold will be too nervous to get in. So far the smart money continues to accumulate and then then they will turn into aggressive buyers.

[xkosmox]

Are we anywhere relatively near the bottom of this correction yet? Or still possibly far to go haha.

[SOL]

Are we anywhere relatively near the bottom of this correction yet? Or still possibly far to go haha.

The 12 month high for bearish sentiment is 54, so as it stands it's going to be at a new 12 months high and possibly 24 months high. So on this basis alone, it means that a bottom should be close at hand. The likely outcome is a relief rally and then a drop to new lows and then sideways action, then a stronger rally. I will look at the charts more closely when I am at a stationary place. I don't like to look at charts rapidly as then you start to see what is not there. One has to look at them from multiple angles and then take in the sentiment data, and the geopolitical situation. Right now, it appears that Putin is about to make NATO irrelevant. If he pulls this off (the odds now stand at 80%) then expect China to become more belligerent and to form a stronger alliance with Russia. Members of NATO will start to question its relevance and will start to look at the US as a superpower in decline.

taking a very quick look at the charts. the weekly charts were trading in the extreme to insanely oversold ranges. Now we are in the insanely oversold ranges and moving to the screaming zones.

[spasovid]

Sol, can you please clarify what you mean by "relief rally and then a drop to new lows and then sideways action, then a stronger rally?"

What is your estimate on the timing of each of these moves? Is the relief rally the euphoria rally you mention in the latest MU, or is it an interim rally which doesn't go to new highs (much like the one we experienced from around January 24 to February 9) and then we drop to new lower lows than what we have now?

Is the drop to new lows the 4th quarter event you've mentioned before? I just can't tell if your outlook here is short or intermediate term.

[AstuteShift]

SOL is talking about short term

However, the game plan is simple. Embrace every disaster through bullish eyes as the trend is positive and bearish sentiment are at mouth watering levels

Remember, focus on the trend and the extreme emotion of the masses

4th quarter we have to see if the masses get euphoric then the hammer will fall

[Yodean]

Remember, focus on the trend and the extreme emotion of the masses

Yeh, I've been using myself as a mass sentiment indicator as well. I've been procrastinating in terms of opening my brokerage account this morning, to delay seeing the overwhelming Sea of Blood. The last time this happened was during the cv19 crash. So, we're probably close to some sort of interim bottom.

[AstuteShift]

I’ve been monitoring the social media sentiment.

Nothing but retards screaming the end is near, so definitely a bottom is near lolol

[harryg]

In my trading notes this morning (looking at premarket) I wrote: Markets in freefall mode, look for opps.

“Buy on the sound of cannons, sell on the sound of trumpets” - attributed to Nathan Rothschild, 1800s.

[SOL]

Sol, can you please clarify what you mean by "relief rally and then a drop to new lows and then sideways action, then a stronger rally?"

What is your estimate on the timing of each of these moves? Is the relief rally the euphoria rally you mention in the latest MU, or is it an interim rally which doesn't go to new highs (much like the one we experienced from around January 24 to February 9) and then we drop to new lower lows than what we have now?

Is the drop to new lows the 4th quarter event you've mentioned before? I just can't tell if your outlook here is short or intermediate term.

As Astute pointed I was discussing the short term action. The relief rally could take place anytime, then a move to new lows (that's possible), then some sideways action and then the stronger rally towards the 4th quarter. For anything serious to occur in the 4th quarter, the masses have to be very happy. There are no free markets forces left. Everything now is based on manipulating or massaging the data to generate the desired outcome. However, the trend is positive and central bankers cannot stop printing no matter how vocal they are on this issue because this entire recovery is based on hot money. Take away the hot money and all hell breaks loose and that is not something the big players want. if they wanted that they should have intervened to stop the crash of 2008/2009.

Just remember that there could some variations in the projections because as stated there are no free market forces left. For example, the market tests its recent lows instead of dropping to new lows before the markets start a multi-week to multi-month rally.

[Centeron631]

I wrote down in my investment plan that i will never buy on margin unless into an actual crash with some signs of reversal vs just a correction. (my own cash supply for TI is gone/slipped away and the interim plan was up until today at least - to stand the ground and ignore the buy alerts until this significant upswing going into the eventual "bigger 4th Q correction" so i could create a new cash pot to take advantage of the described 40% ish correction

I read the Trend info on the coded section and certainly appears that the decisions on the actual market trends are based on the monthly charts not the weekly charts and that appears to be the line in the thread "Bail Out" (i see even the Yodean is using margin now to a degree even tho he has 5 months to live on vs i have 5 years put away albeit im much older and cannot got to work and im much less a risk taker)

Yet Sol seems to jump re trends from what monthly charts say to what weekly charts say and jumping from using the words crash (covid) to correction (the relief quote)
"A more detailed update will be posted later (as I am travelling at the moment) but as things stand, this is an unusual development on par with the covid crash. The covid crash was rapid, this one is protracted and with bearish sentiment so high. It makes no sense to bail out now for that would be exactly what the big players want. No bull market has ended on a note of uncertainty (ever)."

Right now all i can say is "huh?" and not trying to be nasty here but trying to make sense so i. a noob to this type of investing, can invest with some confidence knowing what plan to use. Are we in a crash or are we in the correction talked about in the last official update?

[Yodean]

the Yodean is using margin now to a degree even tho he has 5 months to live on vs i have 5 years put away albeit im much older and cannot got to work and im much less a risk taker)

Are we in a crash or are we in the correction talked about in the last official update?

To be fair, I am only using <3% of the margin limit my brokerage account gave me. I never thought I would ever use margin.

But, to some extent I am kind of a YOLO type of guy, so I thought now might be as good a time as any to lose my "margin virginity." It didn't hurt too much, so far.

We'll see.

I try not to get caught up in emotionally-charged words like "crash" or "correction."

Assets are on sale - buy companies you always wanted but thought were too expensive. Buy a little if you think there's more downside, buy more if you think downside is limited. I mean, it's hard to imagine FB at <200, for example, yet here we are.

Focus on what you think the price of that asset will be, 6.66 to 66.6 months from now.

Or if you don't want to have to assess individual companies but you are overall bullish on the technology sector, consider IGM - it's pretty "safe," and should do well in the long-term.

[Eric]

I have margin enabled and it has slightly dinged me in that it has delayed my tax forms, but I have not used it. I've been tempted lately to dip into margin but I just initiated a draw-down of my auxiliary checking and savings accounts instead. I'm getting a massive (to me) federal refund because of a huge increase to daycare deductibility plus bonus 'Rona-Bucks because my son was in utero when 'Rona-Bucks were raining from the sky... I was going to wait for the refund to come before transferring it to the brokerage but I had to transfer a few fills worth now. Hopefully I don't get fired before my refund comes and I'm able to refill the auxiliary bank accounts.

[Yodean]

I'm getting a massive (to me) federal refund because of a huge increase to daycare deductibility plus bonus 'Rona-Bucks because my son was in utero when 'Rona-Bucks were raining from the sky...Hopefully I don't get fired before my refund comes and I'm able to refill the auxiliary bank accounts.

Hey, at least Brandon was good for something.

[SOL]

I wrote down in my investment plan that i will never buy on margin unless into an actual crash with some signs of reversal vs just a correction. (my own cash supply for TI is gone/slipped away and the interim plan was up until today at least - to stand the ground and ignore the buy alerts until this significant upswing going into the eventual "bigger 4th Q correction" so i could create a new cash pot to take advantage of the described 40% ish correction

I read the Trend info on the coded section and certainly appears that the decisions on the actual market trends are based on the monthly charts not the weekly charts and that appears to be the line in the thread "Bail Out" (i see even the Yodean is using margin now to a degree even tho he has 5 months to live on vs i have 5 years put away albeit im much older and cannot got to work and im much less a risk taker)

Yet Sol seems to jump re trends from what monthly charts say to what weekly charts say and jumping from using the words crash (covid) to correction (the relief quote)
"A more detailed update will be posted later (as I am travelling at the moment) but as things stand, this is an unusual development on par with the covid crash. The covid crash was rapid, this one is protracted and with bearish sentiment so high. It makes no sense to bail out now for that would be exactly what the big players want. No bull market has ended on a note of uncertainty (ever)."

Right now all I can say is "huh?" and not trying to be nasty here but trying to make sense so i. a noob to this type of investing, can invest with some confidence knowing what plan to use. Are we in a crash or are we in the correction talked about in the last official update?

A simple answer would be that the Indices are correcting but many top stocks have crashed. Taking a deeper view, we have always stated all strong pullbacks are buying opportunities. The stronger the deviation the better the opportunity. If one uses very long term charts, there are no crashes only corrections ranging from mild to wild. The difference comes down to one's time perspective.

In terms of weekly and monthly charts from the onset, we stated we were expecting two corrections this year. TA only plays a certain role. If the monthly charts are overbought but the sentiment is not bullish then it indicates there is more upside. Take a look at NVDA, look how long it remained in the insanely overbought ranges on the monthly charts.

If your funds are limited now, you can use the upcoming rally to slowly build up cash. There is no need to add more. However, many individuals assume that if they have 60K and they divide that into 10 lots of 6K each and then that 6K into smaller sub lots of 2K each (if they are dividing into 3 lots or 1.5K if its 4 lots), that if they only deployed half of the funds into 10 positions the other half of the funds which in this case would be roughly 30K should be deployed into another 10 separate positions. What happens now is that they have 20 partial positions and if new orders are issued to purchase some of the original positions they have no money left to deploy into the original 10 positions. At most, if the intent was to buy 10 but only half the funds were deployed then at least 50% of that undeployed capital should be left in cash.

For example, you get into 10 positions, some you have 1 lot some you have 2 lots. Total funds used 30K. You have30K left in cash. Out of this at most 15K should be used to get into new positions and the remaining 15K should be left to get into the original 10 in case the stock pulls back or some other opportunity pops up. Additionally, if one's portfolio has not experienced significant gains over a 12 to 24 month period, exposure to high-risk stocks should be limited. We have always stated that only profits should be used to get into high-risk plays issued in the market update. The other option is that one has a lot of extra funds so they don't mind allocating a percentage of this to higher risk plays or lastly the individual is completely at ease when it comes to getting into high risk plays.

Our main investment theme is that as long as the trend is positive, all pullbacks should be viewed through a bullish lens and the stronger the deviation the better the opportunity. This is something no one should forget as we have repeated this over and over again.

We have also stated that we place far more emphasis on MP than on TA. So if the monthly charts are trading in the overbought ranges but the bullish sentiment is trading well below the historical average, then we are not going to place too much emphasis on the Monthly charts. Our focus has and will always be on MP, TA just helps fine-tune things, but we never use it as a stand-alone tool

Perhaps others can shed some more light on some of the queries you have posed

[harryg]

Very useful to reiterate and concentrate on the basics, especially in times of uncertainty.