[Unlocked Member Slack Post from Samantha]

Breadth Capitulation?

It’s become sport on FinTwit to call a bottom – I’ve even played along: here, here and here. I won all three bets even though I have admitted, repeatedly, that I am MUCH better at calling tops than bottoms – as I can spy meaningful breadth divergences in advance better than most. Having said that, I also will know a bottom after we get it ;-).
Here’s how I look at market timing tops and bottoms – from which I have made my career:
  1. Tops are processes, bottoms are events. Example: bottom of Mar 2009 or Mar 2020. Fed intervened. “Fed Put” was found.
  2. Tops are events, bottoms are processes. Example: gold, pretty much throughout history. Bitcoin has rolling parabolas so this could apply. Oil for sure. But even individual stocks on major earnings or event news.
My point: we had A LOT OF GROWTH SECTORS TOP back in Feb 2021 and they need A LOT OF TIME TO BOTTOM now. Yes, eager buyers may show up to buy what’s on sale, but they aren’t picking a bottom; they are trying to make it. Let them.
Stocks and Sectors in a protracted downtrend need TIME to set up, TIME to retest their lows, TIME to earn our trust again. As I’ve said before: Market remains Guilty Until Proven Innocent. Let it prove itself to you.
I have posted similar charts for clients to this one by SentimentTrader on the devastation under the surface in my #intermarket-tells channel over the past many months. In fact, I called this rotation out of growth sectors early and often as well as every pullback in indices. It’s what I do. I’m a MARKET TIMER. You don’t come to me for fundamental analysis or quant education per se. I’m not focused purely on sentiment or just technicals. I use Macro as my backdrop; Intermarket Analysis as my “Tell” and Pattern Recognition for trade set ups.
As such, we still haven’t shown clearly yet that we have capitulated, so buying an oversold condition because it’s oversold is not my idea of a safe bet and that’s the only kind of calls I want to make for my clients.

While Waiting For A Bottom To Confirm

IF this game was about picking a bottom, I would say we have two choices, either we have a) an event of Fed intervention (none is expected, quite in fact the opposite) or b) all of my indicators align like they have so many times in the past to identify a true Low-Risk-Entry (LRE). Neither is in front of us.
Clients have access to all of my #intermarket-tells and also see I have none aligning right now on a swing or trend time-frame. I much prefer to identify basing patterns that have shown themselves to ‘stop going down’. That’s my preferred approach: highest probability, highest accuracy.
Doesn’t mean we can’t chase intraday/overnight/few days, but I find chases result in low-probability over-trading – without a defined TREND direction to back them up. With that, my advice is go small and short-duration but if you stay too busy with the small stuff, it increases odds that the big ideas will get away.
For me, this time is better spent understanding this new Fed pivot and growing geopolitical risks and economic harbingers. That may be too ‘macro’ for many, but so much has changed that I don’t want to be complacent for you. And honestly, no matter your sophistication in the markets, I think it’s a solid big idea to focus on market and economic health, realistic forward returns and how to adjust your trading/investing time-frames and analysis to the new market game.
It’s not the gamification-filled market new traders made it into past two years. There are bold traders made every day, but to grow old in this game, there is a journey of education that needs to be fed. Take this time to really learn where your strengths and weaknesses lie – in analysis, in trade execution, in humility – and imagine a much slower market ahead and how you will position for maximum returns and enjoyment.
/Weekend Thoughts by Samantha

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