Well, that didn’t take very long. Just 4 trading hours after Nasdaq’s bottom, the fools at traditional financial media outlets have called a market bottom. Wonderful. According to them, if you have any brains left, you should get on this spaceship as it lifts off to 5,000 and beyond. If that in itself is not a contrary indicator, I don’t know what is.
Understandably, the reality is a little bit more complicated. In fact, our mathematical and timing work does not partake in their optimism. Quite on the contrary. As our mathematical work shows, the bear market of 2014-2017 is just around the corner. When it starts it will very quickly retrace most of the gains accrued over the last 2 years. As such, the rally over the last few days might be a simple case a bounce. If you would be interested in learning exactly when the bear market will start (to the day) and its subsequent internal composition, please Click Here.
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Mainstream Financial Media Shocking Revelation: BUY, BUY, BUY!!! Google
Breakout Writes: The rally has begun – here’s how to play it
With less than two hours to go in the trading session on Tuesday it looked like we might be watching the death throes of the five-year old bull market. The S&P500 (^GSPC) was down over 1%, the Nasdaq (^IXIC) was collapsing below support at 4,000 and there seemed as if the last of the dip buyers had finally run out of cash.
Just when all seemed lost the market staged one of the snapback reversals that have been the defining characteristic of 2014 thus far. Cynics would suggest there was something artificial (read: “rigged”) about the start of the rally but that didn’t make it less impressive. Paul Schatz of Heritage Capital says yesterday wasn’t the bottom for stocks in the big picture but says the trading set-up clearly favors the bulls.
“It’s a trading bottom,” opines Schatz in the attached video. “To me it’s pretty clear: if you close below the lows of the reversal day you’re clearly wrong and you get out but I think there’s enough indication to at least warrant a trading rally.”
For the record those lows are roughly 3,950 on the Nasdaq, 1,820 on the S&P 500 and call it 16,000 for the Dow Jones Industrial Average (^DJI) (NB: when in doubt round to the nearest big round number). Those acting on Schatz’s idea would buy stocks now and sell if or when the market closes below those levels. Trades don’t get less complicated in terms of controlling downside risk.
None of which applies to longer-term investors who are probably better off ignoring all the mania and sticking to their long-term plan. Days like yesterday are certainly more entertaining for market watchers but they’re also a sign that all is not well in the financial world. There’s no fundamentally rational excuse for the value of the U.S. stock market to vary by about half a trillion dollars in less than 7 hours.
The animal spirits are in control of the stock market for the time being. Be careful out there.