Weekly Update: Dead Bears are Starting to Stink up the Joint

The last couple months have been challenging if you were bearish on the markets. However, recently it seems one by one, all the bearish analysts and money managers are now issuing their mea culpas, and are quickly embracing the bullish market perspective.

I am no different.

I made the mistake of allowing my analytical bias to remain front and center for too long within this move off the October 2022 lows. Its obvious now that I have the benefit of hindsight. When the ES advanced past 4208.50 in late May and subsequently went straight up, I should have been open to higher levels. Now the SP Futures are within 5% of their all-time highs. This post is not an attempt to justify my past perspectives post May. If I am to be 100% objective, the probabilities do favor bears now more so than any time in the past 10 Months.

Let me explain.

Our decline from the January 2022 highs surprised most market watchers. My scan of perspectives of in January 2022 timeframe yielded most we’re expecting a minor decline, only to the 4300-4400 level. The 3500 level was a surprise to nearly all. Currently most market watchers have remained cautious to outright bearish since October 2022, and are now surprised. Myself included. But we should expect a decline now. The question should be to what magnitude. Bears can dwell on the inverted yield curve, the potential for a recession, the unprecedented interest rate escalation and to what end? The markets continue to advance in the face of unparalleled uncertainty.

Side Note: Do the markets like uncertainty now? LOL

As an Elliottition, I can say we are at the end of a wave count now. That doesn’t mean we can’t extend higher. It also doesn’t mean we won’t hit new all-time highs later in the year. But even in the bullish scenario, we’re at a top. Of what magnitude I cannot say because this retracement will give us the answers we need to come to that conclusion. The various pathways are outlined in the above chart.

However, what drives the market is the prevailing investor sentiment of market participants. Below you will see a chart of investor sentiment.
https://ycharts.com/indicators/us_investor_sentiment_bullish

We have recently hit a high in sentiment where declines soon follow. So, I think it’s prudent to keep in eye on sentiment in conjunction with the market price machinations.

Lastly where as the Nasdaq had led the way up off last years low, I ask is the Nasdaq about to led us in the decline? The Nasdaq looks to have a high probability, low risk set up to the downside.
https://www.tradingview.com/chart/NQ1!/TzjhwpVy-NQ/

Sure, the set-up can be invalidated…but in my opinion, we’re so close to the recent highs that the risk can be controlled with stops. Whereas, this set up could easily yield a 1,000-point decline vs a couple hundred-point advance, determined by one’s risk appetite.
I have issued my mea culpa. It’s time to get back to being objective; and to be 100% objective we should soon expect a tradeable decline with some meat on the bones for the Bears. After which, we can assess the possibility of new all-time highs, or something even more ominous to the downside.