—-Since many are asking…—-
—–Yesterday morning, we told you that sentiment had turned decidedly bearish and that it was this type of sentiment that leads to good bounces. Just because sentiment turns bearish does not mean markets will bounce. It just sets the conditions for a bounce.—–
—–This morning, futures are strong. There really isn’t any big news to account for it but are sure everyone will come up with a reason. Our take? Not only were markets stretched and extended to the downside but just about all our sentiment indicators had turned bright red.—–
—–Put/calls…without getting too technical, normally, people are optimistic. Normally, call buying is higher than put buying. Calls bet on the upside. Puts bet on the downside. Put buying went to an extreme level in past days…AFTER the drop. When EVERYONE goes one way bearish…—–
—–The national media, who has been spending all their time calling people racist, all of a sudden became mavens on the markets. Do you think they were talking bullish or bearish? When the national media who wouldn’t know a stock from a bond join in the fray talking crashes and recessions and yes, inverted yield curves…—–
—–The downtown Orlando Trump protesters who usually have signs calling for impeachment and claiming racism, had signs this week “TRUMP MARKET CRASH,” TRUMP RECESSION!” When the man on the street is all of a sudden all bearish and talking markets…—–
——Permabears came out of their caves all at once telling us the end of the world is AGAIN at hand. When these permabears show up…—–
—–The DOW was already down 2,000 points in a couple of weeks. When the Dow is already down 2,000 points in a couple of weeks and all these sentiment indicators show up…the conditions are such that good bounces could occur. Again, doesn’t mean it has to but it does mean conditions are such. On top of that, major indices were down to vital support. After coming straight down, a normal place to be defended.—–
—–So, we bounce this morning. Keep in mind, this is all shorter-term stuff. Keep in mind, we are still dealing with tweets. We are still dealing with contractions in important areas around the globe. We are still dealing with what bond markets may be saying. We are still dealing with paper thin trading. We will know a lot more on the strength of any bounce. We will know a lot more if the many areas and many names that just broke support can quickly retake support. For now and we mean, for now, we bounce. If at any time the recent lows do get taken out, get out the fork but looks like that is for another day…we think!——