Preface: I am not calling a bottom. Maybe it is, maybe it isn’t.
I know that everyone is waiting for that big 1 day capitulation but maybe we are so focused on that event that we’ve failed to see the larger picture. Maybe today was the day? Above is a weekly chart, now we didn’t have a single huge capitulation reversal but maybe we’re destined for something larger this time. Maybe we are going to have a week of capitulation followed by a massive one week reversal….maybe we are going to have a MONTH of capitulation I don’t know but what I do know is if we haven’t hit the bottom we have to be getting close.
The chart tells me that this pattern is a text book capitulation pattern. RSI tells me we’ve never been so oversold ever ever ever and that any and every recovery from that condition has been a huge rally (the smallest amounting to a 22% move from bottom to top.). High volume peaks with large price discounts….seems like a good spot for a bottom to me.
What I also noticed is that there is a LOT of value to be had, people are tossing out shares like they are on fire! Do a search for large cap/mega cap companies that have a dividend yield over 5%, go through those and see which ones are in trouble if there is a huge recession and which ones are well capitalized etc….. PRETEND YOU ARE A BUY/HOLD LONG TERM INVESTOR….I know it hurts but do it.
The fact is this is the money we’ve been waiting to attract. VALUE INVESTORS ARE THE FLOOR, its not traders and recently it hasn’t been short sellers so who is left on the sidelines? Who is going to define the floor? It’s got to be the value investors (or the government 
. So when the market is looking like value is back in play the end has to be close.
I AM NOT TELLING YOU TO GO OUT AND BUY THE MARKET THAT EVERYTHING IS ALL CLEAR!!!!! I AM NOT SAYING THE BOTTOM IS IN…..IT MIGHT BE BUT NO ONE REALLY KNOWS FOR SURE.
What I do want you to do is look at this chart and consider what is going on rationally and technically and come to your own conclusion. We aren’t here to tell you what to do we’re just here to give insight and personal perspective/opinions. The market will do what the market will do regardless what anyone thinks and its up to you to try and ride the waves it makes.
Cheers
Agreed, talk about TA! This is the stuff we need to look at, not just how parabolic the move is or what wave of what sub wave we are in.
Dan, thanks for your comment.
We need to be aware of technicals on all different timeframes. Technical analysis on mutlple timeframes is extremely valueble. For a long term chart that I have shown to end up being the bottom it first has to turn on a tick chart then a 1min then a 5 min then a 10min etc…. The weekly can’t change it’s appearance until the smaller charts under it have. Don’t dismiss the requirement for the market to breakout of its parabolic downturn. This is one of the early signs that the market is making progress to the upside.
It is key to identify long term patterns and trends and then watch the smaller time frames to determine if/when the expected move is starting to happen. Your risk will determine when you enter. If you wait for a weekly chart to give you the all clear you may miss out on some spectacular gains. The smaller the timeframe the higher the risk. I like to make day trades using 1min and 5min charts. However if I am waiting for a longer term pattern or trend to play out (weekly) then I won’t even consider holding into the next day until I see postive progress on at least the 15min chart.
As for the elliot wave patterns, they are a form of analysis. They basically try and capture what are in essence human emotions. I personally don’t like them much as it seems too easy to just add a of b of c of i of ii of iii of 1 of 2 of whatever if things don’t go the way you have guessed but that’s not to say they can’t be of value. I prefer to lump the essence of elliot waves into a few simple phases that the market takes but not worry about the number and letters and subwaves and what not. The worst thing you can ever do is dismiss a tool because maybe that is what works for you. Personally I find more value in price action and volume indicators but that could well be that I am just not good enough with elliot waves to profit from them. Every trader needs to find a method that works for them, after all if Elliot waves didn’t work at all then people would probaly stop using them.
Cheers =)
If anyone is interested in the simplified market phases rather than trying to keep track of what wave we are in please send me an email at thestockjock@stocktock.com. “IF” there is enough interest I will put up a post with a chart just showing the various “phases” and the rationale behind them. It is basically what elliot waves are built off which is essentially trying to chart human emotions. Anyhow if there is enough interest I’ll put it up.
Cheers
Wow. Very nice. Thank you.
Great post Jock,
Thanks
Craig,
I agree with your hypothesis, this could be a short term bottom. I believe it is at least a tradeable temp. bottom. If you are short, what the heck are you waiting for to cover. This volume spike this morning looked like capitulation so why play against the odds. This marked is oversold like I have never seen it before, odds favor long trades, all we can do is play against the odds. If we gap lower and confirm in the morning and vix does not calm down, im out. Slightly risky exit strategy, but when has trading been safe lately.
Hi Kelly,
Just to be clear on a couple of things.
1. This is not Craigs post, not that it matters but just so you are aware there are several contributors here at StockTock. The authors are noted at the tops of the posts. Not that it really matters as they are all good quality contributions but I thought I should point that out.
2. This is not a bottom call…..this is a bottom question. There still needs to be constructive action on the smaller time frame charts to confirm a possible bottom (near term). We need to see things like higher highs and higher lows and some breaking of trendlines and resistance lines. The near term bottom could be in but we won’t really know but it is something to be considered. Tthis could be a near term bottom but it could also be that next week we drop another 10% on higher volume yet and that ends up being the bottom. It would seem that we are getting close and you should now focus on shorter time frames for constructive actions.