Was That the Low?
We have quite a few indicators lining up for an interim Market Bottom at hand here as we roll into October and the 3rd quarter window dressing period winds down.
We particularly point to the Carl Icahn reference as we are big believers in human behavioral finance and psychology. Carl was talking his short book aggressively by releasing a video warning right near the end of the 3rd quarter. Dennis Gartmann we find to be a great contrarian indicator, he was aggressively short the market so we knew with those two indicators along with the rest we must be nearing a key low.
The drop to 1870 was not random, as we pointed out during the week to SRP members we showed a chart that indicated wave 5 down from 2020-1870 of 150 points was roughly a Fibonacci 61% retracement of the big wave 3 of 224 points or so prior (To those 1867 lows on August 24th).
Here is the chart we sent mid week fwiw: This shows at minimum either a full bottom for a possible Wave 4 cycle low from the May 2015 highs , or an Intermediate A wave low with a likely B wave rally now as high as 2080 possible (If we get past 1967, more on that below)
Another clue to watch is the 34 month moving average line on monthly charts, this halted the decline at 1867 and again this week at 1870. We find this a key metric to watch going forward as well. 34 is a Fibonacci number by the way..
So we have all the ingredients for an interim low, but not yet calling a firm Bear cycle low just yet. Its possible we can get down to 1730’s by next spring if we get
another leg down, so hold off on popping the champagne corks just now. That said, a move to 2080 is possible but first we must take out that 34 day EMA line as you see below: Otherwise this is another pop before a drop right?
The Biotech index did as we projected last weekend, it came back and re-tested the August 24th lows, we called that spot on:
The Enery sector is leading short term here off the bottom, can they sustain? An important technical test comes up early this week at the 34 day MA line for the XLE ETF. We are long OIL at the SRP service by the way for a bear cycle low trying to form (Along with Gold)
And readers of our forecasts know we are bullish on Gold since July lows and are positioned accordingly. We saw a big move up in Gold stocks on Friday as well as Gold. We have it going to 1300 per ounce in US Dollar terms in the first 6-9 months of 2016, likely a leading asset class frankly.
The biotechs really were a harbinger in hindsight of the market top in May this year as they had exploded as we all know. Certainly we benefited with our research reports on CMVLF, ZIOP, XON, QURE, CNCE, CHRS, BLUE and the list goes on. All of them though got their due crash in the end, but out of the ashes the Phoenix will rise… we see lots of great budding companies at much better entry points than weeks or a few months ago even.
We have also discussed the geocosmic signatures that we warned about weeks ago as coming up in September, and that with the end of quarter washout, window dressing, margin calls and insane volatility did a lot of retail investors in. We certainly did not escape all the carnage either, nobody we know did entirely. That said, we positioned with Oil and Gold in the last many weeks for longer term upside. We think commodities may be bottoming…
Importantly Silver spiked late in the week and can be a sign of better liquidity ahead and or inflation, which is good for stocks really. Sugar also spiked up, a sign of inflation and growth they say.
So what to do? Watch the 1967 resistance zone on the SP 500, we need to take that area out convincingly and then we think 2080 is on the radar between now and Christmas. Otherwise, must still be in the “show me the money” state of mind, poke your money into a few positions but dont go “all in” just yet.
Interestingly we will add that in the most recent Investment Advisor survey we got a historically rare reading of 35% Bearish and 24% Bullish. This almost never occurs where there are that many more bears than bulls, always a good sign that its time to find some stocks.
Its always ugly chart wise at the bottom of cycles, but the stock opportunities sure can be pretty.