A few early notes from Gary!
Early yesterday, we told you conditions were in place for a potential washout day. We can never predict one is going to occur but we certainly can know when one can possibly occur. These washouts come from massive pessimism showing up AFTER a huge drop. We had both! By the close, we got the washout as positive divergences showed up all over the place…as the NASDAQ types and small caps lead the way by a wide margin. Pessimism as well as pessimistic numbers were at extremes we have not seen in a very long while.
Our best guess is that a low of some sort is being put in…around the lows of yesterday and into the close. Keep in mind, this is occurring not out of strength but out of the fact the Dow dropped 2250 points in 14 days. Relief rallies do happen in bear markets.
Futures have been all over the map throughout the night, first up 150 and then down 100 but now get some lift as one of the lemmings (Draghi) announces they will make bigger moves soon. (We had no idea that would happen!) Keep in mind these are short term thoughts. (the trees) The bigger picture (the forest) does not change. We continue to believe we are in a bear market for stocks with more legs to the downside to come. It is normal to have rallies that last a few days and as long as a few weeks.
As far as any upside, think “jagged!” Synonyms for “jagged” are: ragged,rough,uneven,irregular,sawtooth!
Draghi comments have only created a stronger dollar, think the futures will be sold into until the low of yesterday is re-tested.
Gary, I always felt we were in a secular bear market since 2000 but may have ended it with the break out in 2013 to new highs. Considering with what is going on now I am wondering if we are still in the secular bear and getting ready to go down to the 1500-1600 level of the breakout or lower … or are we currently in a cyclical bear within a new secular bull. HIstory has generally showed these secular bear and bulls go in 15-18 year cycles.
I can’t imagine people actually wanted to short after a 2000 point drop.
If today is sold off with Draghi hinting at more stimulus judgment day has arrived.
It’s early, but I can see the volatility indicator has formed a base to go higher.