October 24, 2022
The social media mob is really perky after last week’s performance.
With the majority of commentaries that cross my desk, it’s clear most are moving away from doubt and have bought into the annual seasonal kick-off of a bull market that makes an average of 17% in mid-term election years, from the October low.
Comments range from off-the-seat-of-the-pants use of DMAs, “Highest close for the S&P 500 in two weeks, and just above the 30-day moving average.” Well at least he is unique, I hope he is not back-fitting.
“Positive RSI Divergence on WEEKLY SPX Chart = Bullish – This positive divergence has historically preceded meaningful $SPX reversals”
The problem is his scope is only from 2009 and RSI does not work that way. A deep oversold is a confirmation of a bear and because of its extreme oversold, each subsequent new low is expected to diverge. Hence making that concept (bullish divergence) useless and the most common weakness cited by experienced professionals.
Another bullish twist comes from a good source of market data and information. However, information should not get confused with knowledge and wisdom; and I am afraid to say their analysis.
The Stock Traders Almanac annual book (2023 version is on the market, $100 +/-) is a handy reference tool. The owner publishes bits in the social sphere like the table inserted below. The publisher points out that of all the months of the year, October stands alone, since WW2 as the seasonal bear market ender. In other words, that time window starts more bull markets compared to any other month. Can’t argue with that.
But what you find in almost everything you read regarding market data and market analysis is the unwavering bullish tone. Here is what I mean,
October 13, 2022
Nature of a bear market
“…good news is ignored, and bad news is exaggerated.”
After a top is in place there is indifference reflected by the public and media. Buy dips are programmed into behavior. However, with the smart money, the early adopter uses the mass of new entrants for liquidity to sell into. As the decline starts to pick up steam, the late majority average down their cost by buying more. The good news stops getting positive follow-through in higher prices because demand is overcome by supply. Good news leads to prices going lower and bad news accelerates the downtrend.
The structure of the bear is complete with its own forms and patterns, like one-day wonder advances: sharp and short-lived reversals that live for one to three days.
Fake news begins to propagate making headlines. Add to that all of the misdeeds, scandals and reckless speculation, and corrupt biz practices of the past upcycle come to light.
The overall mood of the unreflective
October 10, 2022
The “Time Factor”
Patterns and certain regularities are revealing themselves in the US markets. “Volatility Reports” posted in our LI Group demonstrated the 6.5-week cycle, and how it nailed the low on September 30, the day of the closing low thus far for the Dow but the Nasdaq made a new two-year low today.
A subcycle of that dominant cycle, 1/8 of it made the S-T top 6 days later on October 5. The chart of the small-cap index on the left has the lunar cycles noted with green dots for the high tide and red dots for cycle low. There is no claim to efficacy at pining down the precise high or low pivots but it does a 50/50 job providing a near-term idea for a change of trend. Moreover, when the high or low cycle is inverted, that failure itself is notable.