Market Analysis

The Comeback Kid

Sometimes technicals work so brilliantly it just has to be pointed out. A big rally was going to come. After all we’ve had the most oversold readings ever on some measures and the most oversold reading since 2008 on some others. The question was from where.

Nobody can tell you where a market bottoms, especially in crash situations, but one can greatly improve one’s odds of being aware of key support levels of confluence and then test these levels for potential counter rally entries.

Markets just hit massive confluence support these past few days and this support has held despite heavy pounding by sellers resulting in this massive counter rally that emerged today. And this rally was so strong and cued off of this support with such vengeance that we may now have a solid (at least temporary) bottom in place that can lead to further market strength making markets the comeback kid. Way overdue some may say but nevertheless there it is:


Don’t think it was a coincidence. No, the bounce zone was advertised in advance.

This weekend I offered two key charts in Fear.

One was of $SPX:

And I said: “Should the wheels come off Sunday night into Monday the next immediate large support zones are the 2016 summers highs and the 2015 highs around 2,200 and 2,130 which implies another 3%-7% immediate risk lower with the megaphone trend line currently sitting at 2100”.

The question was 1: Would this support zone get hit and 2. Would the support zone hold or would markets proceed to lower risk zones still. Simple as that.

Technical analysis is not about predicting the future it’s about improving your odds on deciding where to get aggressively engaged in or not knowing the risk profile.

Indeed on Sunday night $ES dropped to 2173, and $SPX cash hit the 2190 area several times including cash hours on Monday.

So not only did the support zone get tagged, it has now produced a massive bounce precisely off of it:

Simple. Clean. Technical perfection with an advanced lens of why this area may be very important to markets.

Indeed in the same article this weekend I said:

“The combination of these 4 factors offer amazing technical confluence. Knowing this market is massively oversold it lends credence to the historical & technical arguments I made this week for a month end rally still to emerge. After all the financial system has a lot at stake to try to minimize the damage of an absolutely disastrous quarter.”

The 4 factors I was referring to was in reference to two versions of the $NYSE chart. One of the original charts:

This support was critical. The Monday drop of markets into $SPX support challenged that support, but it has now been successfully defended:


Not magic, just very clean and simple technicals. And a financial system that has a lot at stake to try to minimize the damage of an absolutely disastrous quarter 😉

Is this now the bottom? Who can tell, but it’s been a massive long trade opportunity that still has a lot more potential in it. Even the 1929 Redux leaves room for a massive counter rally to play out.

Remember, markets don’t trade in a straight line, markets are a journey. And for now markets are the comeback kid.

For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

All content is provided as information only and should not be taken as investment or trading advice. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. For further details please refer to the disclaimer.

Categories: Market Analysis

Tagged as:

7 replies »

  1. However, todays massive up day looks in the charts like all the other massive days over the past weeks. One small step in a total destruction.

  2. A massive move up, when just yesterday limit-down was triggered on futures…
    In terms of contributors to today’s rally, how much was due to natural market forces vs contrived massive intervention?

  3. I sincerely believe that the FED watches your work – through some disrelated subscriber. When Mella puts down the ‘good bye bulls’ level, they do whatever it takes to prevent its occurance.

  4. …Put another way – your bead on the Fed makes your analyses beyond the beyond in terms of accuracy.

  5. The fun part is that I made a chart replicating the Dow Jones drops from 1929 percentage wise, and the first bottom in the Dow Jones (2020 version) would have been around 18600 points before rebounding to 22500, and then slowly dropping to around 4,100 over the next two years. We’ll have to see how well history repeats itself, but considering there’s now “infinite cash”, I doubt we’ll get that low.

  6. So they’ve agreed on the $2tn package this morning, what is the good news now that can push this higher now? QE Infinity will obviously help, but US cases are still rising every day, highest in the world currently +12k. The US cases will be on top of China by Friday or over the weekend at the latest. 50/50 to me, certainly seems like a case of ‘sell the news’

Leave a Reply to CNXSoftCancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.