At 12:57 pm ET on Wednesday, Goldman Sachs called a “recession.” By 2:10 pm, the “recession” was over.
Wall Street does not want you to know about things like “polarity.”
They want you to panic when you read headlines about the stock market.
They want you to pull the old “Sell, Mortimer! Sell!” They want you to lose your mind.
I don’t play that game. We don’t have to lose our minds when things move against us.
(In fact, we can profit during bear markets, too.)
So, how do we get where we want to go?
By ignoring the Wall Street message machine.
But that was hardly the biggest flip-flop I saw during yesterday’s historic turnaround (the third biggest for the S&P since 1950, per our quant analyst, Grant).
That honor goes to a powerful, if underappreciated, signal within the markets: polarity.
If you read yesterday’s newsletter, you’ll know the term. (First timers can bone up at this link…)
Today, we’re going to delve into why this one signal could be the most important thing to watch in today’s market… how it could give you a major advantage over other investors.
Green Arrows
I didn’t know the market was going to bounce like it did on Wednesday.
Maybe one guy did, and he’s the one whose social media post got it going.
I wasn’t surprised by it, though. There was a lot of support for it.
Literally.
Astute readers will remember the Dow futures chart I sent out Wednesday morning. Here’s an updated version:
That’s the Dow bouncing at the exact level where it topped in early 2022.
Here’s the same chart but for Nasdaq:
Same thing.
And here’s the S&P:
It’s like I was saying…
Yes, Trump delayed the tariffs. If you tell me that was the catalyst for the reversal, I won’t argue with you.
But it’s no coincidence the market turned around at EXACTLY those levels.
As I said yesterday, “Where there were more sellers than buyers – at the prior cycle’s peak – there are now (so far) more buyers than sellers.”
I’ve made a lot of fairly accurate calls in my career. It’s not because I can predict the future. It’s because I can read the charts.
And while the future is unknowable (sorry fellow newsletter writers!)… the market is not.
There is a lot of support at key levels on the Dow, the Nasdaq, and the S&P.
We got back to what we’ll call the “scene of the crime,” back to where there was more supply than demand.
Sure enough, the market proved – once again – that there were more buyers than sellers.
And what was resistance has become support.
At least for now.
The Massive Opportunities Are Here
We’re in the midst of one of the fastest and largest volatility spikes in the history of the U.S. stock market.
And with volatility comes opportunity.
Why? Because volatility drives divergence from what we know the long term trends are in the market (the primary trends, for you Dow Theory fanatics).
When people act on pure sentiment and ignore the facts… they create divergence from those trends.
When short sellers amass totally untenable positions in a stock… they create divergence from those trends.
Where do we go from here? Up and to the right.
That’s the long-term trend, and it’s intact. It’s not a straight line higher. It never is. This kind of volatility happens a lot.
But there are tremendous opportunities to take advantage of the extremes we’re still seeing right now as people diverge from that trend.
We’re seeing smart money load up and retail dump at historic levels in a Bitcoin ETF.
This is “polarity” – old resistance turning into new support – in play at the ETF level. So we’re buying.
We’re seeing extreme patterns in crude oil and energy… and in Bitcoin and cryptocurrency…
There are massive opportunities for you here… real trade opportunities we’ve found.
And there will be more to come…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs