Stock Market Crash 2023: Navigating the Turbulence Ahead

Stock Market Crash 2023: Plans and course of action

Stock Market Crash 2023: Navigating the Risks and Opportunities

Updated Dec 31, 2023

The MOAB  (mother of all buys) signal has reached a score of 99, which is an unusual development as it is the first time in decades that this has occurred. Once it hits 93, the next move is a failure or a full confirmation. This development could be viewed as a warning of a head fake, creating the outlook for a breakdown when the market breaks out.

On September 21, we first penned this article, and our predictions have materialised as of our update on December 31. The financial markets experienced a noticeable retreat, particularly with the SPX witnessing a decline from nearly 4400 to 4100. This marked a substantial drop of almost 300 points, a notable event occurring over two weeks from around October 17 to October 27.

This suggests a fast decline in the stock market, which could range from moderate to severe, but the markets will likely quickly recover from this decline. Therefore, it’s essential to focus on the opportunities that may arise rather than the severity of the upcoming correction. Tactical Investor, Sept 21, 2023



Strategic Deception: Navigating the Stock Market Crash with Tactical Fakes

When markets are trading in a wide range after experiencing a strong rally, when bearish sentiment did not spike (60 or higher), the markets tend to pull back sharply before mounting an even stronger rally. However, this time there is something different. The bears expect a strong pullback, and the bulls expect a strong rally.

The best strategy would be to head fake them both by making it look like the markets will break out to new highs, then drop sharply to create the impression of a sell-off, but the sell-off never gathers traction. It is a medium sell-off, so both groups are caught off guard. The road map projected the path the markets might take until March 2024, placing support and resistance lines. The support lines are well above last year’s lows, and the resistance is above what most would expect (as high as 4700 for the SPX).

Applying this to the current situation suggests that the best course of action for the SPX will be to trade to new highs for 2023, which entails a break past 4200, say a move to the 4250 to 4300 range, then a reversal (which appears to be sharp) and drop to the 3600 to 3900 range, with a possible overshoot (low probability outcome) to the 3450 range. Then a sharp upward reversal, followed by another pullback (not very sharp) where the SPX puts in another higher low and then starts to grind its way up to the 4400 to 4700 range.  Tactical Investor May 2023

One of the most vital bullish signals will be if, during the above action, the number of individuals in the neutral camp soars regardless of whether the pullback is strong, medium, or mild. It will be a monstrously bullish signal if the numbers in the neutral camp move to the 48 to 55 range; the higher, the better.


 Stock Market Crash 2023: Projections

Based on the data provided, here is my conclusion on the potential for a stock market crash in 2023:

The MOAB signal reaching an unusually high score of 99 suggests that a significant market move is imminent. However, it is unclear if this will result in a breakdown or breakout. The data points to a possible sharp but short-lived decline followed by a recovery.

The current market conditions of low volatility and trading in a range indicate that a breakout, likely to the upside, is more probable. However, the persistently high bearish sentiment levels could indicate underlying uncertainty that sets the stage for a correction.

If a pullback does occur, the data suggests it would be moderate to severe in size but short-lived. The market would likely recover and resume its upward trend, potentially reaching new highs in 2023. The key would be to take advantage of opportunities during the correction rather than focus on its severity.

The scenario of a brief move to new highs, followed by a reversal and pullback that fails to gather momentum, could “head fake” both bulls and bears. This could set the stage for an extended bull market run with higher highs in 2024.

A significant increase in neutral sentiment during any pullback would be a strong bullish signal, indicating that the correction is temporary and the uptrend will resume.

One should remember that the following correction should be viewed through a bullish lens.


Sentiment Readings and its Impact on Stock Market Crash 2023

Indeed, as fear levels surge, regardless of the market’s pullback intensity or duration, a defining moment awaits us. It will be the opportune time to uncork that cherished bottle of booze we have prudently set aside. The surge in fear, significantly when it spikes, is a compelling sign of an impending turnaround in the market.

Amidst the backdrop of uncertainty and apprehension, heightened fear often precedes significant shifts in market sentiment. Seasoned investors recognize this phenomenon as a potential inflexion point where the tides of fortune may soon change. As we witness fear’s ascent, we can take solace in knowing that our prudent foresight has prepared us for this moment.

So, let us embrace this occasion with a sense of celebration and optimism. As we raise our glasses to toast our resilience in the face of market fluctuations, we also toast to the prospect of new opportunities. In the dynamic world of finance, periods of heightened fear often open doors to remarkable possibilities, and our readiness to seize them sets us on a path to success.

Sentiment Shift: Mass Psychology Takes the Helm:  Sept 21, 2023 Update 

In the past 18 months, sentiment patterns have been far from typical. It’s crucial to remember that deviations from the mean are always temporary. In the last seven weeks, bullish sentiment has surged to 54.5, approaching the upper limit of our projected range (50-55). Consequently, bearish readings will likely rise to the 50-55 range and possibly beyond. “The equation must and always does balance.”

We closely monitor mass psychology, with sentiment being a critical component. If bullish sentiment surpasses 55, we will unequivocally pause all our plays. More details are provided in the General Market Commentary section.

Sentiment readings have now returned to the mean. While they aren’t the sole component of Mass Psychology, they play a vital integrated role in several of our tools. In short, this implies that Mass Psychology will now take the lead. The prominent players have effectively persuaded enough technical analysts and the crowd to abandon caution and fervently pursue the next significant trend at any cost. Technical analysis and most fundamental ratios will not be as effective as in the past 12-16 months.

The markets are expected to enter a phase of dissonance, or in other words, chaotic trading. It’s essential to remember that when a rally, such as the one observed in the Nasdaq and AI stocks, reaches its peak, it is usually followed by a significant decline. So, exercising caution is prudent. However, there’s a notable exception in this case. Given the unique nature of this concentrated rally, only the overheated sectors and indices are expected to be significantly affected. Sectors outside the hot high-tech industry and indices like the Russell 2000, SP400, and, to a lesser extent, the Dow Jones, may experience milder declines.

Stock Market Update 2023: Navigating Bullish Momentum and Exercising Caution

The most recent bullish reading stands at a noteworthy 56, a level that would have been considered quite high in the past. However, as mentioned earlier, there’s an above-average likelihood that readings could climb to 60 before the markets reach their peak. It’s intriguing to observe the swift rise in bullish readings, especially considering that not too long ago, they traded below their historical average for nearly 19-month average, creating a sentiment anomaly unlike anything seen before. Reiterating a point made multiple times this year, we’ve collected ample data from this anomaly that will enable us to navigate and, more crucially, thrive under similar conditions if they were to arise again.

The crowd appears a tad bit too happy, though not quite reaching the heights of exuberance. As financial markets often overextend in both directions (upwards and downwards), we anticipate a parallel trend in overall sentiment. The highlighted story underscores a notable upswing in Americans’ enthusiasm for stocks, a sentiment not observed at this level since 2021. In light of this, its time to err on the side of caution.

Given the prevailing momentum, it’s likely that the markets will continue to chug higher into the next year, and bullish sentiment readings may well reach 60 before the markets reach their peak. However, attempting to pinpoint the exact top contradicts the fundamental principles of mass psychology, which advise caution when the masses exhibit excessive bullishness. In light of this, we are choosing to scale back on holdings in popular sectors and redirect our focus toward holdings in overlooked sectors.  Market Update Dec 26, 2023


Unlocking the Path to Stock Market Success

1. Grasp the Power of Mass Psychology: Gain an advantage by understanding the collective sentiment that drives market behaviour. Tap into insights on how the majority thinks.

2. Embrace Contrarian Investing: Adopt a unique perspective and seize opportunities others avoid. Learn to identify undervalued assets with growth potential.

3. Anticipate Emerging Trends: Stay ahead of the curve by identifying sectors on the verge of breakthroughs. Recognize emerging trends before they become mainstream.

4. Pinpoint Promising Stocks: Discover a methodology for identifying strong stocks within these promising sectors. Uncover the criteria that set winners apart from the rest.

5. Master the Fundamentals of Technical Analysis (TA): Enhance your decision-making process with technical indicators.

Remember, while no magical formula guarantees success, integrating and applying these strategies significantly increases your chances of achieving remarkable results.

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