The past three trading days could not have worked out better. There was the perfect rejection of that resistance level of 4160 noted in my last post after being stuck in a very tight range and a great follow through once breaking down through support at 4080. The Friday close at the 3900 handle was equally enthralling. As most here noted, it is always good to be self-aware of your own excitement, because that is when things seem to turn. However, I’m going to lay out the remainder of my trade targets because it is just starting to get good.
I laid out my analog in the past showing the comparison between this market and previous bear markets. I actually added a few more into my analysis to try to be a bit more thorough (specifically 1968, 1981 and 2018). Each chart below notes 5 major inflection points.
There is the market top (1), the first drawdown low (2), next lower high (3), next lower low (4), and “final” inflection high (5) before really falling down. I use final in quotes because after that point there is some divergence in subsequent activity among the charts. There are certainly some additional lower tradeable inflection points in some of these markets while not in others. The big picture is that after point 5 they have large drops before finding a market bottom after a few months. And the last picture shows 2022, picture perfectly walking the path of past bear markets.
NOTE from Tim: After going through this entire post (which I greatly appreciate) I wrote to Xerxes and told him it was too danged good to be free, and to seek his permission to put most of it behind the paywall so that only paying members of Slope could see it. He immediately said yes, which I appreciate. So, for all paying members, here ya go!
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