Weekly Update: The Low Is In
Good evening, and welcome to this week’s edition of Stealth Trades!
In all likelihood, the low of the bear market is in.
After an EXTREMELY volatile week, which saw daily swings of 8-10%, the Nasdaq finished with a 7.51% gain.
Over the last couple weeks, I have been holding emergency webinars to address current conditions surrounding tariffs and outline what I was looking for to signal an end to the selloff.
And on Wednesday, we got it.
Look at the daily chart below…
I have drawn an arrow pointing to Wednesday.
In a single day, the stock market gained 12% and closed within spitting distance of the highs.
Historically, this has been the sign that the bear market is over.
Go back and look at 2020 and 2022. On both occasions, you will see a day – at the low – that experienced huge buying. In each instance, the market gained 7% or more, closed near the highs, and experienced well above average trading volume.
That is what we saw on Wednesday.
This is a sign that big institutions are piling back in. It means that negative news and the fear of it has been fully priced in.
Wednesday’s surge was caused by Trump’s announcement that he would be pausing all international tariffs with the exception of China.
In the two days following this event, we saw China not only refuse to back down but also increase their tariffs on US goods.
This was the market’s greatest fear. Yet, on the realization of this scenario, stocks failed to sink lower and come anywhere close to Monday’s lows.
This, to me, signals that the bloodbath is over. I would be shocked if the market broke this week’s low any time soon.
I am not saying it will be smooth sailing from here. It may take several months before the market makes new highs. But I am not looking for stocks to buy.
Short-term shocks surrounding inflation, rate cuts, and the ongoing trade war with China will no doubt result in a higher volatility environment than what we experienced over the last few years. Tweets and Truth Social posts will still cause quick reactions in the equity market.
But if you have been looking for a sign to get back in, this… at least for me… is it.
Best wishes for your trading,
