40 Years of Bear Market Bottoms in One Predictable Pattern
Every Trader and Investor Must Be Aware of Major Risks
The stock market is bouncing from the extreme oversold conditions identified during the weekend. While the rally continued today, we must determine if this move is finally sustainable or if the trend of “Inverse U turns” that dominated March will persist. Current price action suggests indecision; in fact, it suggests a potential reversal, with a gap below that is likely to act as a magnet in the very short term.
It remains to be seen if the market will maintain the momentum from yesterday. Last night, I posted the Central Monthly Levels for April, which are the key levels where price switches from bullish (above) to bearish (below). Paid subscribers already recognize how precisely these monthly levels acted as resistance today not only for the SPX, and SPY, but for NDX, QQQ, META, NVDA, GLD, DIA, IWM, AVGO, BITCOIN, and many others as well… The stock market moves in a mathematic way, for that reason these modeled levels work so well.
Indecisive Price Action Once Again
Tracking a broad set of securities helps identify relative strength and rotations across different sectors and individual names. High-profile tickers like SMH, TSLA, AMD, GOOG, and AAPL are currently reclaiming key levels, suggesting that potential opportunities are forming. Our primary levels for managing risk are listed below.
We will study the essential level that must hold tomorrow as support to consider bullish continuation, or just to confirm if a gap fill is imminent if they are breached. The charts for Volatility, NVDA, and XOM as a key oil player are also posted in the market update.
Measuring Major Risks
As disciplined traders focused on risk-reward, we must revisit our risk scenarios. For this current move, as noted yesterday, there is a bearish monthly setup that must be considered to navigate April effectively. Today, we will analyze the market’s symmetric behavior during major tops. Based on patterns observed over the last 40 years, we will assess how the market behaves when a significant top is formed.
To put it simply, today’s publication provides the specific pattern used to measure the ultimate destination of a bear market. A bold statement? No, the charts will speak for themselves. This isn't gut feeling; it’s data used in December 2024 to anticipate the destination for a bear market in 2025, the bottom was $35 away from my $4,800 target.
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We will assess the implications of the current structure, while reinforcing my thesis from last weekend regarding my worst case scenario.
Let’s begin.