Good morning Breeze,
So very good to see your charts this early Saturday morning, as the last two days have given us volatility, weakness in commodities, a less positive labor growth situation, and an army of bears coming out and sounding alarm bells. In short a lot of noise and most of it negative.
I don't have fancy algorithms and I am constantly learning new things about the mass psychology of the market (your XYZ 3-3-3 was another golden nugget) and its very scripted responses loaded with negativity, all of which is intended to promote fear in the MARKET , which almost always takes people down the wrong path - which provides buying opportunity for those with calm and cash to make the best buys of the year.
Your charts of today so far have covered: SPX, SPY, SOXL (a leveraged etf on SOX, SMH ( Henry Costanza's favorite index on SOX - RIP).
What I do watch and pay attention to is when my account start taking fast and huge declines in computed value. Additionally I hand calculate CLX,PPP,AYDIS,and Bottom spotter, and Track Larbros 2cs-p daily.
A more than interesting note regarding all of your charts today is the fast declines in all of them began 8 trading days ago AND they all feature gaps (that started 7/24/24 that open). A more than important additional observation is that 8 days ago Joanne McCable's MOJO indicator started flashing a warning sign that a climate change from green to red had in fact turned red
With yesterday's action "bottom spotter has been activated". I agree with your note that Primary wave (circle) 3 looks to have been completed. Primary Wave (circle)3 began in November of 2023. During its long run there were several periods where bottom spotter was activated:
1) On 4/10/24 bottomspotter got activated with an intitial reading of -.45 and an associated 2cs-p of 44.4 .
bottom spotter continued for 12 trading days and in those days 2cs-p hit a low of 35.8 on 4/23. The most negative of the bottomspotter numbers was - 6.13 on 4/17. One day before the bottomspotter was activated, the 30 day CLX became more negative (-.13) than the 30 day PPP (-.07). This action corresponds with your SPX chart labeled C of wave (4) of primary wave (circle) 3
2) On 5/29 bottomspotter got activated with an initial reading of -4.37 and an associated 2cs-p of 78 (a pretty high and safe number). Bottomspotter continued for 8 days and in those days 2cs-p hit a low on 66.6 on 6/04 ( that's not a typo)the most negative of the bottomspotter numbers happened on the second day and was -5.5. Joanne's climate change turned from green to red the day before bottomspotter triggered on 5/28/24 with the 35 ema clx = .88 and the 30 sma PPP at 1.10. This decline corresponds to your SPX chart of wave (circle) ii of wave (4) of primary wave (circle) 3 of primary wave (circle) 3.
This was a vicious start but more normal in length. I think perhaps a clue of this short corrective was its brutal start and short duration as 2cs-p stayed lofty in the 60's and 70's. The best clue yet was during this short corrective wave the 30 day CLX stayed positive during the entire bottomspotter activation period and always more positive than the 30 day PPP. Both clx numbers ranged in the positive 1 and 2 range during the bottomspotter activation period.
So to recap this recent bottomspotter initiated on 7/24/24 the 2cs-p has on Friday dipped to a low of 33.8 (very close to 4/19's low of 34.5) The April wave took 8 days to get there AND this wave ALSO TOOK 8 days to get to that similar low level.
It will be important to look at offsets and the 10 looks to good starting Monday and the 30 day offsets looks to be supportive on Wednesday (what would be day 11). It should be over if we retain a bull market wave Primary wave 3 (with an extension developing.
In my opinion, bottom spotter activation periods are periods of retail selling. This selling always occurs during periods of fear and the news media focusing and repeating on similar negative events.
This corrective wave has been reporting news of Middle East War, not rewarding positive earnings and punishing harshly revenue misses and killing if a negative Q 3 guidance happens. We've hoped for AND NOT gotten a Fed rate cut, YET he 2 year Treasury rate has imploded from last months 4.7 to Friday's 4.24ish. Almost a 50 basis point slide as the Fed hinted of a possible rate cut in September This suggests that the Fed never leads rate changes, they simply confirm that rates have indeed changed albeit with a short lag. That's a good observation in my opinion.
So we are in a stronger corrective wave based on retail selling is strong. It has gone 8 days like the shorter wave in May did, not yet the 12 days like April did. It has reached a modestly lower 2CS-p of 33.8 that April's larger decline achieved. 2CS-p can get this low and it is not the beginning of a larger corrective wave. So where are the 30 day CLX and PPP numbers?
30 day CLX = +2.63 and 30 day PPP is +2.37. BOTH healthy and CLX is greater than PPP = Still a bull market.Surprisingly high if this is a bigger Wave 4.
The mojo numbers define a market climate change. those have warned for 8 days of decline.
A very damaging corrective wave can be defined when the 30 day PPP is more negative than the 30 day CLX and 2CS-p can get as low as low 20's and even mid teens (think 2002 and 2003 lows). We're not there. Those lows are palpable when the US is seen as under threat and failing.
Joanne's genius in watching the CLX numbers with two different moving averages preloaded the benefits of an exponential number and comparing it to a 30 day sma number. It was devised to provide a possible warning of a market direction change ahead.
As an example of how great the lead in time can be, goes back to when the market turned up from a long depressed period such as occurred on 3/26/2020. On 3/26 the 35 ema crossed up over the 30 sma and the 30 day CLX took all the way to April 8th. to cross up over(10 trading days - 8 of which have transpired in the recent warning).
What's so important is the Primary wave 3 we've enjoyed so well for the last 18 months. Wave threes are waves of power. They even allow the secondary and tertiary stocks to explode upward (perhaps what were seeing recently?). Wave threes are also the waves most prone to extend.
Wave fours can be long and hard to trust.
Wave fives are so dangerous that they can truncate (never reach the TA projected levels).
I'm hoping we don't leave this wealth builder behind.
Keeping in mind that if Ted' Aguhob's(wave genius A=C has happened) a possible big reversal day develops, what I'm going to look for is that gap that happened between the low of 7/23/24 (5550.9) and the high of 7/24/24 (5508.04). If it stalls with a lot of selling, I'm cutting any losers and trimming some excess recent buys.
If it blasts up and catches a lot of shorts being squeezed, we may well be seeing an extension. Couple that with a bond rally with lower rates being confirmed, we'll see a synchronized global reflation of some degree and that is bullish for stocks , bonds, and commodities.
I lived through a war in the Middle East with Iraq and Kuwait - that is extremely bearish.
Both are high probabilities, so its time to listen to the market and pay attention.
Thank You for those excellent charts. They have really helped me think through the current market.
I really hope your empty B and C go away!
Military repositioning of our troops to the Middle East is not encouraging.
Thank you so much for sharing your excellence!
Bob |
