Bottoms are Different, with update after today’s close

We are on rally alert as of the end of the Biden speech on oil this morning. To my way of thinking, the market is still in the bubble, although it is pushing strongly on the bottom of it. In light of that, the market shows a lot of characteristics of being in the stage of making a major rally bottom, and maybe eventually new highs.

Bottoms are very different from Tops. Tops are predicted over and over, and finally one of them happens (this is because the public wants to be bullish and the Fed wants them to be bullish, so the buying just keeps pushing the envelope. Bottoms on the other hand, are rarely predicted, they just happen because the public cannot believe the market went down. If you are lucky you get to confirm these bottoms within a few percent of the actual low tick.

The Market has Done its Job…

For me this S&P market has done its job, it sold off into the January support level and then proceeded for a few weeks to trade around in the 4200 to 4444 range with all the rallys collapsing, and even a little exploration of the area under 4200, eventually thanks to Putin, convincing everyone that the world has changed.

The World has Changed…

And it has changed, we will be a less global world going forward and depending on whether Putin ends up in court in the Hague or riding around on his pony, things will be different in a lot of ways. I do think this market collapse has done a lot to get Wall Street to talk about P/E’s and other fundamentals. This has led to new thinking, like things are starting to look very different to them.

The Funny Part…

But here is the funny part, they are now convinced the 2-year rally was about fundamentals, and now they see the fundamentals as bearish. Wait, wasn’t that rally really about the Fed Balance Sheet, the funny money, and guess what, it is still all there, and who knows how much Washington will add to the debt when they start to rebuild Ukraine.

And, some other things..

One thing to keep in mind if you are of the inclination to be a buyer of this market, and that is, the market will bottom before the news, so waiting for confirmation that Putin has gone down will mean you are late.

Another point is that I went back to look at charts for a few days surrounding the bottoms of 2009 and 2020, there was a lot of information in the data but no confirmation in the charts, this kind of situation is a Fast-Thinking intuitive event not a Slow-Thinking analytical event. Check our archives, we did well in both 2009 and 2020.

As I suggested above, things are going to change, community will become more important than the global. The move to solar, wind, and electrical equipment will be in the forefront. Technology will be key, probably not the Peleton and Facebook type however.

Update After Close and comments for this coming period….

This was a valuable day with lots of information spewing out. We saw how the market reacted to a little news. That confirms the analysis for me. I continue to use the often-mentioned SPX 4444 level as where the upside breakout will occur and leverage is applied, just building core positions at these levels. The street is fearful, and that is key.