Subscriber content. To subscribe to the Daily Market Brief please visit Market Services on NorthmanTrader.com. The Daily Market Brief is an in-depth market analysis published each trading day by Sven Henrich before US market open.

The Daily Market Brief keeps investors and traders abreast of the latest market critical technical and macro developments as well as market directional strategy.

We are making some past Daily Market Briefs public so you can get a sense of how we approach markets analytically. This particular brief below was published on June 17, 2022 during times of high market stress and fear during the 2022 bear market.

Our outlook was for a coming bear market rally.

For context here’s a chart of $SPX with the time frame circled:

To sign up to our subscription services please see Market Services.

Quick update on charts and outlook.

Nothing’s changed. $SPX dropped 4.5% below the May lows, but everyone’s psychology is probably impacted as the move was so dramatic in the past 10 days as $SPX dropped over 12% in that time frame. It’s been violent and relentless. Indeed we’re seeing some of the most extreme readings either ever or not seen since major lows. For example: A 12% drop on 10 days has come at points of major lows: March 2020, August 2011, and March 2009.

August 2011 was not THE low but it lead to major bounces that ultimately got retested by a new low in October of that year which then was the bottom. This remains my main premise: Major bear market rally and then perhaps new lows in the fall if inflation, yields and Junk don’t show major improvement.

To get a sense of how unprecedented this action is in the here and now:

More than 90% of stocks in the S&P 500 declined today.

It’s the 5th time in the past 7 days.

Since 1928, there have been exactly 0 precedents. This is the most overwhelming display of selling in history.

— Jason Goepfert (@jasongoepfert) June 16, 2022

So yes, we’re dealing with some wild stuff here.

Overnight our stops are holding ahead of OPEX:

Whether the bounce holds or not I can’t say, but we will stick to process, especially in light of the charts.
$NYSE at massive support:

My bear market rally reconnect and rebalancing outlook has only gotten stronger as $NDX is now nearly 25% below its weekly 50MA with a rate of change not seen since the GFC:

$BPSPX nearly filling the Covid gap:

$BPNDX in the gutter:

And still zero evidence of a true bear market rally:

3600-3800. That was Mella’s first real test target zone back in January:

The May lows gave us 3800, the June lows now into 3600. And her view was always a bounce from there and then possibly a run toward 2800:

So yes, I like the idea of this.

Especially in context of this:

Will we still make new lows again today? It’s possible of course and we may still that move toward the weekly 200MA on either $NDX or $SPX or both.

When you have unprecedented liquidations like we just have seen the prospect of more or margin calls etc can create further imbalances, but it also suggests that the mis-positioning on any change in the trifecta equation could result in a awe-inspiring counter rally.

Lo and behold $TNX is reversing:

$JNK never made new lows:

And dollar also reversed:

I repeat: Nothing’s changed in the set ups except the market just went through a historic drubbing and freakout setting up for more extreme signals.

And through it all $NDX for example remains its positive weekly divergence:

And yes, this could also set up for a low of the year if indeed inflation is rolling over hard which I actually think it well may as the economy shrinking massively fast and supply chain issues are rapidly disappearing.

So strategy remains the same. We’re aiming to position for a massive counter rally, whether that then sets up for a bear market rally to be sold or a true low for the year remains to be determined.

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.