1/21/16 THE CHARTIST
The path of least resistance, near term, should be to the upside. For all intents and purposes, the August lows have held, albeit for the time being. Another strong indication that the lows are in for a while was Wednesday’s sensational late session rallies in both the Nasdaq and Russell 2000.
When the bearish sentiment gets this low, the market has a habit of moving in the opposite direction.
The stock market is considered to be a leading indicator and often looks ahead a good six months to a year. A glance at the charts of the major averages tells us, in no uncertain terms, that a recession is coming. However, the stock market has been wrong before, so who do you believe? That’s an easy answer for us because we have always worked under the assumption that the market is always right.
What we have now from a technical standpoint is a thoroughly sold out market. We’re betting on a rally, but until we see evidence to the contrary, we are working under the assumption that it will be a rally within the confines of an ongoing bear market.
