Gary Nails The Washout Low!
“WASHOUT DAY CALLS THE LOW FOR NOW!”
January 22,2016
By Gary Kaltbaum
garyk.com
@GaryKaltbaum
Fox News Business Contributor
After 2250 Dow points in just 14 days, the market had enough…and it had enough on a classic “washout” day. On Wednesday, we wrote to you three times that we thought it would be an important day. We are now 99% sure (have to keep that 1 % uncertainty) that a good low has been put in for now and that the lows would not be taken out any time soon. (That will be for another day!)
To review, after 1750 dow points down, after massive negativity finally showed up, after even some diehard bulls joined the dark side, the final sellers panicked out in the 500 point drop…after 2250 Dow points. As we said, washouts classically occur on a high volume, vicious down day after a protracted drop…which reverses up, indicating the washout.
We are off the near-term bear camp and in the near-term bull camp. Think August 24th when the market put in a major reversal low. It did retest once and lifted off again until the top in December. We have no clue how exactly this plays out but we are now confident sellers have been exhausted and buyers have the upper hand. Our best guess is a rally/bounce of a few weeks but as always, would rather let the market decide.
We really do not like commenting on others but this morning, we must make note of a mind-boggling call. A certain person at a certain major, major, major investment bank has now made a call to avoid emerging markets and that they should be avoided until 2020. This call comes AFTER the emerging markets ETF (EEM) is down almost 40% in the past 10 months and after being one of the weakest areas of the globe. This sounds just like a certain pundit on a certain business channel who in early 09 told everyone to stay out of the market for the next 5 years. We don’t know what calls like this signify but we do know they are late, late, late, late, late in the game. Beware.
Again, our Wednesday washout call looks to have been timely. We will let the market decide how far and how long any rally/bounce carries. Is it possible THE low is in? Anything is possible especially with maniacal central banks continuing to be at the ready. But for now, just a good low for now.
Lastly, for all our friends up the eastern seaboard, stay safe…and move to Florida! Trying to figure out why I am opening an office up in the northeast! Maybe we’ll just keep it open from March to November.
These so called PUNDITS are not late. They know the game well to put an average investor into a fry pan. I would not believe any one. Trust you charts and your intuition is the best advise like what Gary preach.
The washout process was very interesting, the timing very similar to Jan 08 again of within a day, and with a slight difference…there was a double washout the very next day, both times the low was hit with a strong bounce. I noted that the Semi’s were the very 1st sector to form a support base with the Wednesday washout.
if the 2008 pattern still holds….March is where we should retest 1810 on the S&P with the whole washout repeating, prior to a strong bounce into resistance at the 2000 level in May.
Then comes August…the beginning of the steep slide.
I have to say financials still look like they are in the washout process.