US stocks have rallied to a very natural intermediate term high and have begun to correct from upside extended technical conditions. While the common drumbeat is that we are now seeing the start of a renewed decline to much lower lows in a major degree bear market, my position is that we have likely seen the price lows for the correction and will now see a decline to support as part of an ongoing sideways corrective pattern.
In previous reports and updates I said that we needed to watch for signs of a "Breadth Thrust", a technical response which has typically been associated with durable price lows and/or the start of new bull phases. We have seen some such technical indications and I'll be highlighting these in this report.
It's important to keep in mind that while there is a lot of risk in the world...geopolitical, economic, societal...there is no reason to automatically assume that the maturation of any of these risks into concrete eventualities must a priori lead to a further decline in stock prices. IF we were discussing an actual market mechanism, we might reasonably anticipate such a relationship. However, as I have been saying for the last two years, ever since the pandemic crash and bailout, we have no reason at all to assume that market dynamics are in effect and every reason to doubt that they are. The simple version is that corporate executive compensation is tied to stock price. In an era of ever more immediate and perfected knowledge fed into artificial intelligence algorithmic platforms, the manipulation of price into a trading range is more than attainable. Right now corporations are launching buyback programs even as individual investors remain hunkered down on the sidelines in full bear mode.
Let's note that price recently got well above levels that were seen in the third week of January and in spite of recent selling is now at levels seen in early February. Effectively, very little has happened on a net basis in spite of the brouhaha about crashes and disasters. For the average person there is certainly a lot of pain and more to come. For Wall Street...maybe not so much....CONTINUE READING: