The market did what it does best. It caused the most pain for the most people. The Elliott Wavers saw an A-B-C up. The cycle guys saw a broken trendline. The momentum guys saw the moving averages rolling over. The fundamental guys heard Goldman calling for $1,000 gold.
That is the only way for a move like this to occur, and it was historic.
Everybody was on one side of the trade, and any bulls that were left had to endure sleepless night after sleepless night. Based on the number of panic emails I received last night, the market had taken emotions to the extremes and that is how a powerful low is formed. This is a game changer, and it is a game changer because the dollar has plummeted below its multiyear trendline. Nothing goes in a straight line, but the dollar has had a stranglehold on numerous assets for the last 3 years and that grip might finally be loosening.
I will have more thoughts tonight, but typically it takes three days or so for a move like this to work through the system of margin calls and momo chasers, and then we will reevaluate. I was looking for a pop, but nobody could have predicted this. Both the bullish and bearish scenarios are still on the table, and I will remain objective in watching for both. The worst thing to do on a day like today is to turn into a permabull. If you were holding the model positions above then congratulations, you just made it through the worst the market can throw at you mentally and psychologically. There will be plenty of opportunities and pitfalls going forward, and we will remain diligent and objective.
Good trading all.
Steve Chapman, TRI
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