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Tuesday, February 13, 2018

Market Update 1/12/2018 - The Idiots Guide to Calling Technical Market Bottoms

Where to begin?

It's been an incredibly exciting 2 weeks, since the last time I updated this blog, but there's just no time to create lengthy blogs, with the $VIX trading above 20. Things move fast, above $VIX 20.

Firstly: While most folks were worried about a market crash, which has still yet to materialize, and probably won't, because there is no crash, other than in Oil, perhaps... BitCoin rallied 25% off the lows, after calling this market bottom.

$BitCoin - Before...

$BitCoin - After...

Wall Street is a shell game. Bloomberg pundits - who have their own best interest at heart - first scare you out of the BitCoin trade (reporting: "it could be headed to $1000"), and then then run it up, while taking the broader market down. Always watch what the other - hidden - hand is doing.

Picking up where we left off in the previous blog. We saw the market still trending up on a 60 min. Chart. Well that chart broke, soon after... and that was your cue to sell. When the trend is no longer your friend, you're only left with hope, and fear, and we've seen plenty of that lately.

Once the trend broke we traded rather flat for 2 days, but just before the close on Tuesday Feb. 1st, I was seeing "red flags". I thought we might see another bounce, before a crash, but that didn't happen.
 I had been warning folks to hedge themselves, with some "short ($STOXX600) contracts", for some time, and those who took my advise, saved themselves plenty.

Another clue that the shit was hitting the fan, was the breakout on the $VIX, which had been trapped in a range - consolidating in a bullish down-turned wedge for nearly 2 years! I believe this proves I was right all along; "the market is rigged". The powers that be, had been shorting the $VIX in order to press the market higher, and higher, and higher still, until it finally collapsed. The $VIX short sellers got squeezed, with the $VIX rising 100% on Monday. There is no other explanation.... What's also clear to me, is that they were using the leveraged $VIX funds, to hammer the $VIX down. Result was a massive short squeeze in the $VIX. I've always warned traders not to trade the $VIX, for this reason (it's simply too volatile). Hopefully they learned their lesson, and we'll see less manipulation in the future. Wishful thinking..! 

I know I called it a crash earlier, but there really is no crash. I heard that Jim Cramer called this a "flash-crash, and the destroy Trump media would like it to be a crash, but as someone who anticipated the so called flash-crash, and caught the massive rebound, and sold it, and continues to sell the broader market into an eventual retest of the lows, which didn't occur until a couple months later (around July 1st).... That trade was my ultimately my "claim to fame", so I can tell you from experience, this was no flash crash. This was a washout, as traders panicked - with the Dow down 1600 - but it really doesn't amount to much at DOW 26,000. This plunge only ranked 99th percentage wise, while the Flash Crash shed 998.5 points (about 9%), in only 35 minutes. It's not even in the same ballpark....

Of course no-one could anticipated a one day drop like the one we saw (on Monday). It was "ridiculous", as I tweeted at the time, and we caught a nice 1000 point rally, the very next day. Looked like it was trading into a wave 4 at that point, so we took profits, and watched the market give it all back. 

Calling the ultimate bottom took me at least couple tries to nail down precisely. Ultimately the market traded into an extended wave 5 (triangle), where momentum slowed, and I called the bottom, as well as the subsequent breakout, in real time. This coincided with the $VIX falling below support around the 38 level. There was plenty more reason for the market to make a major bottom right there, but I've already given you everything you need to know, in order to recognize a tradable market bottom


This was pretty much like calling any other market bottom, and it reminded me of 2008, because of the high volatility. I have 10% more experience now, then I did back then, but it was a good refresher course.

I also pinned down the bottom in the US Oil Fund $USO about the same. The oil chart scares me, because it's still in a down-turned (bearish) channel, and is it's going to continue to fall into a wave 3, that will look like a crash. If oil breaks out of it's death spiral, fine, but the risk reward is not good for the oil bulls.

Another call, I'm proud of - but has nothing to do with calling market bottoms -  was to advise my clients to give up, and "get out", of  $REITs. It can be hard to be bullish one day, and bearish the next, but when the charts break, it's time to sell. If you were lucky enough to get out on this bounce, congratulations!

 Of course, the worry warts, are still asking themselves, "is this the market bottom", and struggling with charts, which ain't worth a lick.

Look, We've  been enjoying the rally of the past 2 day's, before selling into yesterday's close, and looking to shake the weak hands - at support -  before we're off to the races again, but this blog is about calling market bottoms, and looking back in our rear-view....  

I'm no longer providing many real-time market updates on twitter. Too many trolls, and too few donations to this blog. I feel that I'm ready to move on to bigger and better things. It was a good run, but I need better exposure....

Of course, in the meantime, I'll continue to provide charts to the folks who continue to make regular donations to this blog.

If you'd like to connect on LinkedIn, that's where you'll find me, doing what I do best.


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