Friday, March 13, 2020

Market Update: What's 6,000 Points Among Friends?

Yesterday, INDU captured its target zone -- good for an amazing 6,000 points in only 12 trading sessions (!).

So, accordingly, last night, I spent almost exactly an hour working on a SINGLE, detailed chart of the micro count, because we need to know if INDU could reconcile as a complete five-wave decline, to thus mark ALL OF C down.  Then I clicked out of the chart on Stockcharts, selected "Yes" to save my work, and...

it didn't save.

I have no idea what actually happened to it, or why -- but there was my original, unaltered chart, smirking at me smugly, secure in the knowledge that it could never be defaced with labels and that my efforts were in vain.  As if, instead of working my tail off sweating every detail, I had been a politician and done nothing.

Of course, this was around 8:25 p.m. local Hawaii time, and the market opens at 3:30 a.m. here (and I'm already WAY short on sleep since the mainland did its time change and pushed everything an hour earlier for us), so that, as they say, was that.  I had no choice but to back away slowly from my computer, while cussing Stockcharts (and technology in general) to high Heaven.  Despite my hopes, this cussing did NOT inspire Stockcharts to correct its mistake, and this morning, the chart remained as it had been last night:  Unaltered, and still smirking at me.

I did not, do not, and will not have time to recreate it.  Possibly ever, the way this market has been moving.  It is lost forever in the sands of internet crapola.

Or something like that.

Anyway, the bottom line conclusion of that chart was that, yes, technically, we CAN resolve the move as a complete five-wave decline to thus mark ALL OF (C) -- but it would probably look slightly better with another new low (the last micro-wave was a little spotty and looks more like the b-wave low of an expanded flat than a complete impulse).  But that's almost a toss-up, and given that we just captured 6,000 points in roughly two weeks, we probably shouldn't get too greedy here, but should instead focus on risk management.

It's also interesting to note that the Fed finally stepped in with a trillion dollars in Monopoly money to help the market feel like, "You know what, maybe Coronavirus is NOT going to end civilization as we know it, as least not today."  And that they did so right at the Big (C) inflection point.

Funny how that works.  Almost as if the charts lead the news (they do).

Anyway, let's look at three charts.  It should be four charts, but missing from the party is, of course, the micro count, because presently the only copy that exists is in my head.  Thanks, Stockcharts!

First up... raise your hand if you thought I was off my rocker when I initially proposed this count:

Yet here we are, with the bottom of A of (4) decidedly broken, and in the target/inflection zone for Wave (C).

And, as I mentioned earlier, while it might look slightly better with another new low, we probably shouldn't get too greedy.  6,000 points is a LOT to capture in roughly two weeks -- in fact, it's almost certainly some kind of record in absolute terms.  So, as the song goes:  "You gotta know when to hold 'em... know when to walk away..." and all that.  We held 'em.  Now may be time to count our winnings and capture/protect the lion's share of profits.

In fact, in actuality, we effectively caught this ENTIRE decline, because we were initially looking for a smaller c-wave off the all-time high (we were looking for about 1,600 points initially), then we captured that initial target and adjusted in real-time to the much lower target.

That's actually pretty incredible, when you stop to think about it.  We're not perma-bears (and I do mean "we" collectively; not as in the royal we) who "finally got one right."  We were bullish heading into the all-time high, then reversed footing and were likewise on the right side of this unprecedented decline the entire time.  This move is one for the history books, and we are now among the tiny fraction of a percentage of traders who can say:  Not only were we there, but we saw it coming.

We can be proud of that.

Now, this next chart is interesting.  RSI is demonstrating a potential change of character for the market, for the first time since 2010:

So, does the above mean it's all over for the bull market?  It can... but it's also not uncommon to see this type of move during the final highest-degree fourth wave:

And keep in mind that the above is MONTHLY RSI, and we're not even halfway through the current month, so things can change between now and March 31st (wait, are there 31 days in March?  Or 30?  "30 days hath September... all the rest, I can't remember."  Isn't that how it goes?  No matter!  You get the idea.)

Anyway, RSI could be signaling that we're on the final leg of the bull (which is what I have suspected for a while -- just been waiting for us to FINALLY get done with this (apparent) complex fourth wave).  And keep in mind that "final leg of the bull" can run for several years.

Or, to be a party pooper, maybe things are more serious than that -- we'll just have to see how it goes from here... but I suspect the Fed and the world's Central Banks/governments can still produce at least "one last hurrah" before the system runs out of hurrahs.  We're seeing some cracks now, and we're being reminded that, ultimately, the Universe consists of forces much larger than printing presses and monetary stimulus.  We've had such a long, generational run, that we've forgotten there are tides and currents over which we have exactly zero control -- and there are problems which cannot simply be "printed over" with fiat currency.

Coronavirus is our early reminder of this fact.  For those whose eyes are open.

In conclusion, INDU has reached the target/inflection zone, but would probably look a LITTLE better with another new low, though this is not required.  Instead of pushing our luck here, we should be taking a victory lap and limiting our risk.  Trade safe.

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