$SPX The bottom end of my 2022 forecast range has now hit. I was
looking for 3,800 on an overshoot and Friday we got to 3,810. I now
think the bearishness is very overdone, just as the bullishness was
overdone at 4,800 on SPX where I was selling assets and prior
selling at 4,600 before that. Nobody believes the market can rally
anymore. Walmart down 25% in 3 days or something, XBI has already
bottomed off the $60s and closed at $70.33 on Friday. Crypto is
hanging in the range. IWM also a higher low and recently
outperforming SPX.
Tesla finally got unwound and all of tech has been severely
shot, even the generals. We are at the bottom of the channel here
with positive divergence established on the oscillator. This is the
place to accumulate, not sell or short. I think we are setting up
for a powerful rally over the next days/weeks that will surprise a
lot of people. The 50 day moving average is all the way up at
4,300! That's how stretched things are to the downside.
Markets love to get new players to short or longs to sell in the
hole and stop them out. Friday was a perfect example taking out
people who were late to the party or coulnd't take anymore pain.
The risk/reward is bullish here.
Worst start to the market since 1932, 7 weeks down in a row, at
the bottom of the channel. Nobody believes and it has been near 5
months months now. It isn't that bad in a short period of time.
Once sentiment clears, the move will surprised many. Imagine after
that and if after a few cuts, the Fed would pivot. Things could
pullback then head up again. If you shorted here, you would be
buried.
Could we have a bad beat and go down more? Sure. But the
risk/reward is for a rally in the near term. I don't watch every
tick because it can cloud judgement and once emotions get involved,
it can be tough to be objective. Taking some steps back has my mind
open to being flexible when markets change. I think they are about
to change. I used the hedges well when things rallied and that is
how to place them to get through tough periods. Gotta get them off
and not be greedy when they plunge it like they did Friday
though.
yes we could have a trade low here or even an intermediate trade
low (one that lasts 1 - 2 months). Watch Bitcoin this weekend
if that starts to dump then we may need a bit more work. But I
could see a trade from Friday from what I'm seeing.
that said - as far as the low for 2022, to me that's doubtful.
Sure if that was the bottom of the bear market, I'll give you 1%
odds on that, but I think this bear market may need 1 - 3 years to
work off, like the 2000 - late 2002 bear market, the late 2007 -
Mar 09 bottom. Let's assume we have an intermediate trade low
from Friday - what I would favor is choppy prices over the summer
higher but ultimately lead to another lower high of some sort -
then likely some sort of dump in the fall.
Maybe we are in the 1st or 2nd inning of a bear market - still a
long way to go.
We had enough fundamental factors this time around all lining
up, perfect storm (Fed raising rates, still needs to start selling
balance sheet, inflation, ridiculous debt, supply chain issues,
NFT's Cryptos), that I think we need a longer bear market to work
that off. Bear markets need to be long enough and frustrating
enough to change the overall psychology of investors. All that
excess and crazy stuff (multi million $ NFTs) of the last few years
needs to be washed away and only time will do it, a 5 month bear
market is not enough for that. Just my opinion.
Anyway on Friday we had indexes t test the lower ranges and
reverse - many have long legged doji candlesticks and a lot of
black candles (many times mark reversals) and divergence via RSI or
MACD. The SPX moved right into that demand zone and confluence of
trendlines and rallied off. The VIX would not go up. There's
divergences on a lot of the McClellan Oscilaltors. The weekly
charts still don't look good though.
Thanks for the great discussion Matt. I'm open minded to a
longer downside in terms of time and price over the next year or
two. I would actually prefer it as it would avoid the bigger
concerns for the system. The more we can get this sentiment under
control the better. I just know my odds are better to accumulate
long here on weakness than short given all that has transpired over
time. We are about 10% away from the 50 day moving average now.
That is significant. The average bear market rally is 7.3% and that
would put us up near 4,200 to start.
How about the "digital real estate". Someone paid $500,000 to
live next to Snoop Dogg in the virtual world. I remember the land
of make believe from growing up, though this is a whole new level
of ridiculous
$SPX The bottom end of
Posted by fundamentalvalues on 21st of May 2022 at 10:46 am
$SPX The bottom end of my 2022 forecast range has now hit. I was looking for 3,800 on an overshoot and Friday we got to 3,810. I now think the bearishness is very overdone, just as the bullishness was overdone at 4,800 on SPX where I was selling assets and prior selling at 4,600 before that. Nobody believes the market can rally anymore. Walmart down 25% in 3 days or something, XBI has already bottomed off the $60s and closed at $70.33 on Friday. Crypto is hanging in the range. IWM also a higher low and recently outperforming SPX.
Tesla finally got unwound and all of tech has been severely shot, even the generals. We are at the bottom of the channel here with positive divergence established on the oscillator. This is the place to accumulate, not sell or short. I think we are setting up for a powerful rally over the next days/weeks that will surprise a lot of people. The 50 day moving average is all the way up at 4,300! That's how stretched things are to the downside.
Markets love to get new players to short or longs to sell in the hole and stop them out. Friday was a perfect example taking out people who were late to the party or coulnd't take anymore pain. The risk/reward is bullish here.
Worst start to the market since 1932, 7 weeks down in a row, at the bottom of the channel. Nobody believes and it has been near 5 months months now. It isn't that bad in a short period of time. Once sentiment clears, the move will surprised many. Imagine after that and if after a few cuts, the Fed would pivot. Things could pullback then head up again. If you shorted here, you would be buried.
Could we have a bad beat and go down more? Sure. But the risk/reward is for a rally in the near term. I don't watch every tick because it can cloud judgement and once emotions get involved, it can be tough to be objective. Taking some steps back has my mind open to being flexible when markets change. I think they are about to change. I used the hedges well when things rallied and that is how to place them to get through tough periods. Gotta get them off and not be greedy when they plunge it like they did Friday though.
yes we could have a
Posted by matt on 21st of May 2022 at 11:09 am
yes we could have a trade low here or even an intermediate trade low (one that lasts 1 - 2 months). Watch Bitcoin this weekend if that starts to dump then we may need a bit more work. But I could see a trade from Friday from what I'm seeing.
that said - as far as the low for 2022, to me that's doubtful. Sure if that was the bottom of the bear market, I'll give you 1% odds on that, but I think this bear market may need 1 - 3 years to work off, like the 2000 - late 2002 bear market, the late 2007 - Mar 09 bottom. Let's assume we have an intermediate trade low from Friday - what I would favor is choppy prices over the summer higher but ultimately lead to another lower high of some sort - then likely some sort of dump in the fall.
Maybe we are in the 1st or 2nd inning of a bear market - still a long way to go.
We had enough fundamental factors this time around all lining up, perfect storm (Fed raising rates, still needs to start selling balance sheet, inflation, ridiculous debt, supply chain issues, NFT's Cryptos), that I think we need a longer bear market to work that off. Bear markets need to be long enough and frustrating enough to change the overall psychology of investors. All that excess and crazy stuff (multi million $ NFTs) of the last few years needs to be washed away and only time will do it, a 5 month bear market is not enough for that. Just my opinion.
Anyway on Friday we had indexes t test the lower ranges and reverse - many have long legged doji candlesticks and a lot of black candles (many times mark reversals) and divergence via RSI or MACD. The SPX moved right into that demand zone and confluence of trendlines and rallied off. The VIX would not go up. There's divergences on a lot of the McClellan Oscilaltors. The weekly charts still don't look good though.
Thanks for the great discussion
Posted by fundamentalvalues on 21st of May 2022 at 11:20 am
Thanks for the great discussion Matt. I'm open minded to a longer downside in terms of time and price over the next year or two. I would actually prefer it as it would avoid the bigger concerns for the system. The more we can get this sentiment under control the better. I just know my odds are better to accumulate long here on weakness than short given all that has transpired over time. We are about 10% away from the 50 day moving average now. That is significant. The average bear market rally is 7.3% and that would put us up near 4,200 to start.
one of the things from
Posted by matt on 22nd of May 2022 at 11:33 am
one of the things from the last speculative bubble in the markets
How about the "digital real
Posted by fundamentalvalues on 23rd of May 2022 at 08:16 am
How about the "digital real estate". Someone paid $500,000 to live next to Snoop Dogg in the virtual world. I remember the land of make believe from growing up, though this is a whole new level of ridiculous
I'd have to say to
Posted by cozz101 on 23rd of May 2022 at 08:20 am
I'd have to say to that person, "Get a Life".... a real one!
Great points @fundamentalvalues. It seems that
Posted by mirhamedali on 22nd of May 2022 at 09:53 pm
Great points @fundamentalvalues.
It seems that 90% of traders are in a bear mindset now. I think surprises will come to the upside.
I purchased some QQQ OTM calls for 1-2 months out a few days. Massive upside potential on those
I plan to buy some OTM puts once we get back to around 4100-4300 resistance area. They should be dirt cheap at that point with excellent risk/reward.