Stock Market Analysis

Monday, February 12, 2018

Bottom Reached?

Welcome to week 3 of February 2018!

The past 2 weeks unfolded exactly as I have predicted it to every single step of the way as the long long long overdue intermediate correction plays out at last. The S&P500 lost 142 points or 5.16% just last week alone and lost a combined MASSIVE 9% over the past 2 weeks alone. 

This is the kind of intermediate correction that has been overdue since 2015.

However, as I mentioned in my report for paid subscribers last week, I also think that this is just about as far down as the market can and should drop. Here was what I said last Thursday:

"However, I do believe that this is as far as the market is going to drop and that Friday might be a big come back day for the bulls."
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And indeed it was so.

The bulls took back a massive 86 points or 3.4% intraday last Friday to take the S&P500 from a deep negative territory back up to closing positive for the day, forming a strong dragon tail formation on strong volume, which usually marks the bottom of such intermediate corrections.

Indeed, even though I do not think that this intermediate correction is done just like that and that last Friday would be the magic pivot point to turn the market back upwards in a grand V shaped reversal, I do think that at least this is where the S&P500 is most likely to trade largely sideways in a volatile pattern until the weekly 30MA catches up again, which could be completed as soon as this week.

This is also February options expiration week and with the tendency of large cap stocks gaining value going into options expiration, this could also provide the possible fuel for the end of this intermediate correction.

Yes, I do not think that this is a market crash!

This is a classic intermediate correction off an an extremely overbought condition, that's all. Its a healthy thing to happen in order to set up better entry prices for investors to come back in and push the market to new highs.

Yes, new highs...

Even though I think we should see a massive market crash towards the end of the year and in 2019, the pieces just aren't in place yet. This is still the classic run up to a market crash, just like what we saw back in 2007. So, enjoy it while it last!

For now, the market remains in short term bear trend within an intermediate neutral trend within the framework of a primary bull trend.

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