Don’t be a Hero
By Bennett Tindle February 27, 2020
The move lower in US and global markets over the past week may seem frightening, but if you’ll recall our triangle count from October of last year, it’s exactly what we were expecting then. From 2894 we were projecting a rally into 3300, and more specifically 3314. We printed 3393, just 79 points over our projection and have since begun a motive impulsive 5 wave decline to the downside. Our most recent analysis was highlighting at the very minimum a 4th wave correction on our bullish count, which has since been invalidated. With that in mind, we still don’t see this as the start to a widespread and destructive bear market. In fact, although we are looking to short a retracement to the upside for a likely secondary move lower, we’re viewing this more importantly as a buying opportunity. Tune in below for more on where I see the markets going from here.
We’ve come full circle and are focusing once again on our triangulation count in the US markets… and for good reason! The spread of the coronavirus, and more importantly the spread of FEAR surrounding the coronavirus has resulted in a sharp decline off the highs. Although we see two distinct possibilities from a technical standpoint in the markets, our focus is once again on 4th wave consolidation.
Many have compared the coronavirus to the Flu, which I feel is a fool’s errand. Certainly, we see tens of thousands of people die every year from the Flu, but we don’t see companies closing restaurants, shops, factories and amusement parks as a result of the Flu, do we? At this point the fear of the unknown is likely the key driving force in this market. When all is said and done, we should expect a bottom-line impact to companies’ individual earnings, not to mention Global GDP, but for the time being we simply cannot quantity it. Until we have a clearer picture as to the spread of this virus, we can’t accurately forecast the economic impact it will have. Some industry groups will recover the lost revenue, but as I discussed in the video above many will not. For the time being we are content with trading the moves as they present themselves and will be sure to keep you updated as things progress.
good fundamental comparison with the technical.
You guys are awesome!
Why would you be sitting on cash in this down market? Long Puts on SPX, SPY or almost anything would have yielded amazing returns….even same-day trades. Made more money in the last 3 days to not have to trade for the rest of the year! BUT….will wait again per your analysis until May and then do more long put trades!
Thank you, Bennett. Excellent Presentation.
Please could you also cover the Dow in your videos? The wave 2 pullback possibility (of a higher degree wave 5) has already been ruled out in the Dow.
If we are still in a wave 4, could you explain why you think it’s an unfolding triangle – could we not be in the c wave of an expanded flat? Also, in Wednesday’s video, you calmly said the next move was a wave b move up, and you made no mention of the possibility of the market going a lot further down in wave a. Please always cover counts for both possibilities.
wow very nice analysis!
Bennett, have you considered the model of the cycle 4 complete Dec’18, and the cycle wave 5 structure since as an expanding ending diagonal, now in primary wave 4 down? This appears to me to be cleaner than the “expanding triangle” that (arguably) misplaces the cycle 4 event in Q4 of 2018. Thoughts?
What happens if CV infection rates go exponential over the next several weeks? The “lock down” solutions being deployed would “lock up” the world economy, expectations of business results over the next 9-12 months (usual market discount period) would plummet, and I would expect SPX to crash to perhaps the 2000 level, perhaps lower even. A true black swan, 5 sigma type of event. I would urge extreme caution to all. “Protect yourself at all times.” Probably not going to happen, but the probability of such an outcome is definitely well above zero! Not a good time to have long exposure in my opinion. If you do, have sizeable hedges in place. And short trades here have far more than normal plus EV, in my opinion. Just my $0.02. BTW, monitor the daily new infections data at coronavirus dot app (on the “charts” page, via the menu selector on the upper left).
I just noticed your “unstoppable stock market” click bait. Lol!!! We all hope you haven’t jinxed things there. It may not be stopped yet, but it’s stumbled and scrapped a knee, and may have some real challenge in getting back up and moving forward (up) again soon. We’ll see what the next few days and weeks brings us, and trade it appropriately, but it’s no time to have bullish bias after this kind of severe (in terms of distance sold over time) market movement and the nature of the underlying driver (CV infections and likely economic impacts) and it’s potential to get far, far worse. It’s time to be very neutral at best and very, very nimble. Some might argue that a short term bearish bias is appropriate; I have the monthly trend now for example at a clear “down” state, and of course the weekly trend at “strong down”.