We have long been anticipating a market rally (including most sectors/markets) of some kind during Q4, with the decline from the October 29th high being the decider about how powerful and enduring the rally could be.
In short, a deeper decline from here could really clean the market out for a long bullish resolution. A hold of Friday’s lows as the correction bottom could revert us right back to the year-end party theme, but not much more, after sentiment was reset to over-bearish, but not extreme (e.g. last April).
You know these guys always want to party.
But they are not as discriminating as I am about what would make a really good party. For me, it would be a decline to the pattern top, the SMA 200 (orange, rising) and a 38% Fib retrace, to scare ’em all out. Today SPX is poking up through the SMA 50. In my opinion, a party now would feel good for a while, but will be more limited – in time and price appreciation – than if we got a huge clean out, like April, prior to a big time rally.
This could also bring about the precious metals theme that sees a test of the highs (or break to new highs) sooner rather than later. They have been leaders of the broad rally, after all. So it could also end in one of the favored scenarios, which is that a many months long correction (e.g. 2004-2005) could see tradable ups and downs before finally ending sometime well out in 2026.
For a better trade I’d prefer the equivalent of GDX low/mid 50s be tested. But if the whole mess does break positive here, the trade in the PMs may not be so powerful either.
I am spitballing here with potentials as the info comes in. Trying to define what’s going on as it evolves.
