Today marked the best day for the market since the financial crisis.
I barely remember it. I was still in college.
For some indexes, it was even the best day since the dot-com bust.
I definitely don’t remember that.
Some old souls will tell you someone like me doesn’t have the experience to navigate through an environment like this.
But I think I’m better equipped for it than they are.
I haven’t been broken by past bear cycles. I don’t get psyched out by them. I’m not jaded and I’m not afraid. I just follow the data.
I’ve been the guy sayingbearish things all year while the rest of them were whistling through the graveyard.
I’ve been protecting my capital. I’ve been selling.
I’ve been saying, “we are in keep money mode.”
I’ve navigated this market like I’ve been on Wall Street longer than any of those old souls.
Now, I think it’s time to shift course back to “get money mode.” Shoutout Junior Mafia.
It’s time to get all bulled-up again. We’re at absolute washout levels. We are historically oversold.
Short-term breadth thrusts are firing.
I’ve been pounding the table about the “worst days since,” and I’ve also been coaching about what it means.
The worst days tend to cluster around the best days. For that reason, we knew a historic face-ripping rally was right around the corner.
We are not the least bit surprised by today’s record-breaking market performance. We’ve been waiting for it.
We’ve been talking about playing this bounce when it comes, and it’s finally here. I’m going live right after the Morning Show tomorrow to discuss how I’m trading it.
But there is important context around all this.
Let’s use the Nasdaq 100 Index as an example. Here it is, marked up with its best days on record.
Today marked the third-largest single-day gain in the history of this tech-heavy index.
But notice where the last two took place.
NDX was up 18.7% in a day back in January 2001. It took place in the course of a 30% rally, but the index fell another 75% before the bear market low was in. And it took more than a year and a half of selling to get there.
Then we saw it again during the financial crisis. The index was up 12.6% in a single day in October of 2008. The market eventually fell another 25% to the bear market lows in March 2009.
My point is twofold.
I think we are embarking on a historic leg higher, and I think this is true for risk assets around the world. I think you can get in right now for a trade…
However, I think it is all happening within the context of a new bear market. I think this rally will turn out to be counter-trend in nature.
I do NOT think the market fires off these lows to new all-time highs and just leaves this mess behind.
I think this bottom will be more like the 2022 bottom and less like 2020. I think it will take time. I think there is too much damage to market internals and to the primary trends.
So, I plan to be patient over longer timeframes.
But I also plan to press the gas on shorter ones. I think this bounce is so tradable. It’s the one we’ve been waiting for. We don’t need any further confirmation than today’s action.
We’re back in rally mode, at least for the next few weeks.
Then, I think we’re in wait-and-see mode.
It’s important to keep an open mind. I think there is a point to be made about cycles being more abbreviated these days than in the past.
I don’t ascribe to the simple-minded idea that it will never be different. This is a dynamic market. It’s growing and evolving in front of us.
So I’m open to a V-bottom, but it’s not my base case.
I think we have a very tradable bounce ahead of us. And then we need to reassess the situation.
That’s as far out as I’m thinking right now.
I did a lot of buying today. And I plan to do a lot of selling again in the future.
