May 15, 2020
If the 62% retracement is familiar to the majority, they are ignoring it. The comparisons to 2000 and 2008 are just the most recent when looking at today’s market. The history of the .618 retracement is well known back to 1929 and before. It also fits the market phases model seen below the first featured chart.
The 62% bear market rally is the so-called “Return to Normal” phase of all market cycles, seen here overlayed with the speculative bull market in gold back in the late 1970s early 80s.
The “Greatest Bull Market” shows the same type of pattern as it cut through the behavioral phases that all markets go through. Today we are in the denial phase, the “I can’t believe it” period. That can be applied to the market, the economy, and the pandemic and other known unknows that will be impacting the market, like the geopolitical events and the election.
Our tidal model is providing sell signals in the current time window that are nearly identical to the configuration of the peak of February 12 (19th for the Nasdaq), with an inverted cycle and the same tidal forces. Next to October, May is the second most active month for panics. The time window running from May 22- May 30 should experience the same type of long bar days seen from March 9 through the 16th
If the secondary peak is in place as expected the decline will unfold like the chart on the left which is the primary top on 2/12/20. Hence, the price level at “2” should not be exceeded and another near term decline for <i> should make new near term lows before the meaningful period of the decline digs-in.
Contrary Thinker has already pointed out that Bitcoin is a risk asset, not a hedge. We have pointed out that after near-zero pricing to 10s of thousands of dollars bubble and bust, it takes years of base building before anything bullish re-emerges. From the massive spikes we saw in the late ’70s in gold and crude, all of my clients wanted to buy them after the markets crashed and it took decades to recover.
The same will hold true for the Cryptocurrencies boom’s fairy dust will take a while to rub off. The featured chart here provides three short term sell signals, one based on our OB/OS model, one based on the tidal forces flipping to down – see the track record on the left-hand side and the red high-lighted area points to the markets failure to hold its new support area.
The Bitcoin has been leading the stock market lower.
Another market that should concern risk markets is junk bonds. The narrow trading range has set the market up for a dynamic trend. Our Volatility model has been coiling up in a Technical Event #2 for a week plus. These #2 events are leading signals of a one-way trend. A drop below 77.58 should set it on its way. A move above 80.40 would be a break for the bulls.
For reasons CT has pointed out previously, our bias is bearish and the break should be lower and should lead stocks lower.
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Great and Many Thanks,
Jack F. Cahn, CMT
A Thinking Man’s Trader Since 1989,
Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889
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