Memo from the Chief Economist: Lament of a Bear | David Rosenberg

One can reasonably debate whether the stock market has risen exponentially but there is no arguing that the surge in the S&P 500 these past two years has been nothing short of extraordinary. And it has clearly gone much further than I thought it would, especially in these past twelve months, and so at this point, it is worth the time and effort to discuss and interpret the message from the market.
 

 » Smells of capitulation. «

The bottom line: Tip the hat to the bulls who have, after all, been on the right side of the trade, and provide some rationale behind this powerful surge. This is not some attempt at a mea culpa or a throwing in of any towel, as much as the lament of a bear who has come to grips with the premise that while the market has definitely been exuberant, it may not actually be altogether that irrational. Read on.

Quoted from:
David Rosenberg (December 6, 2024) - Memo from the Chief Economist: Lament of a Bear. 

 

See also:

Tom McClellan (December 6, 2024) - Presidential Cycle Effects with a New President.
Steve Miller (December 5, 2024) - S&P 500 Cycle Analysis - Time and Price Projections Update.

BlackRock Investment Institute (December 4, 2024) - Due to 'Mega Forces': No More Bust, Only Boom. Outlook 2025.

Jeffrey A. Hirsch (December 4, 2024) - December Stock Market Performance in Election Years. 

Tom DeMark (November 18, 2024) - US Stock Market Nearing a Top Similar to 1929.
Lars von Thienen (November 1, 2024) - The 41-Month Kitchin Cycle Topping Patterns in US Stocks.
Richard Smith (October 29, 2024) - Equities Endgame? Spectrum Cycle Analysis of US Indices.

D'onte Goodridge (2024) - Structural Characteristics of Bullish and Bearish Months.

Halloween Trading Strategy Begins Next Week | Jeff Hirsch

Next week provides a special short-term seasonal opportunity, one of the most consistent of the year. The last 4 trading days of October and the first 3 trading days of November have a stellar record the last 30 years. From the tables below:

     S&P 500: Up 25 of last 30 years, average gain 1.96%, median gain 1.61%.
     NASDAQ: Up 25 of last 30 years, average gain 2.43%, median gain 2.29%.

     DJIA: Up 24 of last 30 years, average gain 1.95%, median gain 1.39%.
     Russell 2000: Up 23 of last 30 years, average gain 2.34%, median gain 2.56%.

Many refer to our "Best Six Months Tactical Seasonal Switching Strategy" as the "Halloween Indicator" or "Halloween Strategy" and of course “Sell in May”. These catch phrases highlight our discovery that was first published in 1986 in the 1987 Stock Trader’s Almanac that most of the market’s gains have been made from October 31 to April 30, while the market, on average, tends to go sideways to down from May through October.

Since issuing our Seasonal MACD Buy signal for DJIA, S&P 500, NASDAQ, and Russell 2000, on October 11, 2024, we have been moving into new long trades targeting seasonal strength in various sectors of the market via ETFs and a basket of new stock ideas. The above 7-day span is one specific period of strength during the “Best Months.” Plenty of time remains to take advantage of seasonal strength.

Quoted from:
Jeffrey A. Hirsch (October 24, 2024) - Halloween Trading Strategy Treat Begins Next Week. 

 

 Election-Year Octoberphobia — Jeff Hirsch, October 9, 2024. 

 

 November Performance in “All Years” (1930-2015) and “Election Years” (1932-2012) 

— Jeff Hirsch, November 15, 2016.

 November Market Performance (2001-2021) — Jeff Hirsch,  October 20, 2022.

 

October 28th has, on average since 1950, been the strongest day of the year.
 

 

 S&P 500 average Performance per Day & Day by Day Hit Rate (1928-2024).

 

S&P 500 Seasonal Pattern for Q4 of the Election Year 2024
- Presidential Cycle in line with the Decennial Cycle.
 

The Cycle Composite for 2024 combines the 1-year, 4-year, and 10-year cycles. 

Trends are more important than levels. —  Ned Davis Research, October 15, 2024.

 

 S&P 500 E-mini Futures (daily bars) and current 21-Trading Day Cycle ( ± 3 TD).

 

ooooOoooo

 

Goldman Sachs' technical strategist Scott Rubner indicates that US stocks are entering a favorable trading environment due to capital flow trends. He expects the quiet period for stock repurchases to end on October 25, with listed companies likely to engage in significant buybacks in November and December, estimated at $6 billion per day, accounting for 21.1% of annual buybacks.

As mutual funds, the largest sellers of US stocks, begin to withdraw before Halloween, this may positively impact stock prices. October marks the end of the fiscal year for most mutual funds, potentially leading to sell-offs of underperforming assets for tax reasons. Rubner noted that all 756 mutual funds, valued at $1.853 trillion, end their fiscal year on October 31, 2024. Historically, American households increase stock purchases in November, with capital inflows into mutual funds and ETFs peaking during this month.

 In Q4 2024, the NASDAQ may gain more than double what the S&P gains.

Looking ahead to the US election, Rubner suggests that post-election, market volatility may reset, benefiting various trading strategies. Additionally, strong non-farm payroll growth and shifting inflation expectations are becoming critical market factors, particularly regarding a potential Trump election victory, which may reignite trading interest.

By end of 2024, S&P far above 6,000 —  Scott Rubner, October 15, 2024.

 

See also:
Steve Miller (October 25, 2024) - S&P 500 Cycle Analysis - Time and Price Projections Update (video)

Price Action Patterns & Entries at High and Low of the Day | Cameron Benson

Our focus is on price action trading at key levels: daily high and low, and the previous day's extremes. We examine how price reaches these levels — through Stair-Stepping or Ramping — and its subsequent behavior. The price action patterns include M's, W's, Double Tops/Bottoms, and Pin Hammers at daily highs and lows. 

 

 Stair-Stepping and M Patterns: These indicate potential reversals at daily highs or lows, 

with detailed entries and exits often managed through lower time frames.

Ramping is characterized by parabolic price movements and often leads to swift reversals. Observing tight candle patterns with minimal overlap helps identify strong trends and potential breakouts. We also look for specific patterns like Stair-Stepping and Three Pushes, with Peak Formations signaling possible reversals.

 

 Ramping Behavior: Recognized by tight, parabolic moves followed by rapid reversals. 

The ramp into extremes usually signals significant price shifts.

The following 5 minute charts of the NASDAQ are from last week (September  9-13, 2024). They show Entry and Exit Strategies, using Pin Hammers and Engulfments for Entries, and managing stops based on price action, with adjustments for larger, more volatile bars.

Monday, September  9 (Day 1 of 3 Day Cycle):

 

 Identified an M pattern at the high of the day with a pin hammer and engulfment, suggesting a strong short entry.

Tuesday, September  10 (Day 2):

 

Despite a promising setup, a large entry bar resulted in a stop-out. 

Emphasis on avoiding large entry bars and managing risk.

 

Wednesday, September 11 (Day 3/1): 

 

 Similar to previous days with M patterns and engulfments, also highlighting entry points and risk management.

Thursday (Day 2) and Friday (Day 3), September 12-13:

 

 Charts show patterns like descending triangles and W formations, 

with a focus on understanding price behavior relative to session timings.

 

Successful short-term trading relies on recognizing and acting upon the above presented price action patterns, managing entries and exits based on contextual behavior, and adapting strategies according to the specific market conditions within the 3 Day Cycle.

 

Reference:
Cameron Benson (September 14, 2024) - Price Action High And Low Of The Day (Day Trading Entries)(video) 
Cameron Benson (September 14, 2024) - Price Action High And Low Of The Day (Day Trading Entries)(pdf)
Cameron Benson (June 16, 2024) - The Complete 3 Day Cycle Short-Term Trading System.

Stacey Burke (December 5, 2023) - The Three Day Cycle & Parabolic Trade Setups.
Cameron Benson (August 20, 2023) - Three-Push Reversal Patterns.

 Richard D. Wyckoff (August 30, 2024) - Re-Accumulation & Re-Distribution Range Patterns.

Richard D. Wyckoff (December 21, 2022) - Accumulation & Distribution Schematics.  

Toby Crabel’s Bull Hook Trading Strategy Tested | Ali Casey

As an algo trader, I value patterns for their ease of programming and testing, which allows for the development of robust trading strategies. Today, we'll explore bull and bear hooks, patterns that can vary in details but generally serve to catch traders on the wrong side. Toby Crabel, Joe Ross, and Thomas Bulkowski, among others, have variations of these patterns.

Toby Crabel's original definition of the Bull Hook pattern:

» A Bull Hook occurs on Day 2. A Bull Hook is defined as a day with a higher open than the 

previous day's high followed by a lower close with a narrowing daily range. The next day (Day 1), 

a trade is taken on the initial move off the open, preferably to the upside. «

 

Toby Crabel's original definition of the Bear Hook pattern:

  » Bear Hook is a day in which the open is below the previous day's low and the close 

is above the previous day's close with a narrow range relative to the previous day. As implied by 

the name there is a tendency for the price action following a Bear Hook to move to the downside. «

The Bull Hook pattern has two main forms:

Bull Hook 1: In a downtrend, the pattern is identified when today's bar is an up bar with a smaller range than the previous day and is an inside day (high lower, low higher than the previous bar). We buy with a stop order above the high of this bar.
Bull Hook 2: Here, today's bar is a down bar with a smaller range than the previous day, opening above the previous high and closing below the previous close. This pattern involves just two bars.

For testing, I used TradeStation with S&P 500 e-mini futures data. The backtest for Bull Hook 1 was disappointing, showing a loss with only 15 trades, which seemed unusual given its pullback nature. A deeper analysis suggested that the specific conditions, particularly the inside day and green bar requirements, were limiting trades. By removing some conditions, like the inside day and green bar, and focusing on a simpler pullback strategy, the results improved significantly with about 200 trades and positive performance metrics. For Bull Hook 2, the test also yielded fewer trades than expected, which might be attributed to its breakout nature, not performing well on the S&P 500. Simplifying the conditions here also improved the results somewhat, though it remained less effective. The Bear Hook pattern, when flipped for long trades, performed better but still had a low trade count. Removing some conditions and simplifying it increased the trade count and improved performance. While both Bull Hook patterns had potential, their effectiveness was highly dependent on specific conditions and the number of trades generated. Simplifying the patterns often led to better results.

Reference:
Ali Casey (July 28, 2024) - The Secrets of Toby Crabel’s Bull Hook Trading Strategy Exposed. (video)
 Toby Crabel (1990) - Day Trading With Short Term Price Patterns And Opening Range Breakout.
MyPivots.com (2024) - Scanner for Toby Crabel Price Patterns in the E-mini S&P 500 Futures. 

 

See also:

Thomas Bulkowski (2013) - Hook Reversal, Uptrend.

 Thomas Bulkowski (2013) - Hook Reversal, Downtrend.

Joe Ross (1991) - Trading the Ross Hook.

Slava Loza (2021) - How to Trade the 1-2-3 Reversal and the Ross Hook Patterns.

Thomas Bulkowski on Hook Reversals in an Uptrend and in a Downtrend.

On Range Expansion, Monkey Hammers, FAFO & NFP Weeks | Stacey Burke

» When you get a range expansion, the market is sending you a very loud, clear signal 

that the market is getting ready to move in the direction of that expansion. «     

 —  Paul Tudor Jones 

  

» FAFO [F*** Around and Find Out] is when you try and scalp the high or scalp the low - or jump in because a market is moving - because something is up high or down low. If other time frame traders are driving the move ... be careful - that's called FAFO and is not a specific 90/10 easy money making trading setup. That's called gambling.

If the train has left the station ... find your next best candidate for your session that was on your watchlist. How is price behaving in the timing window - at the levels? No 90/10 easy money best playbook trading setup that you can see that is from your rinse and repeat templates? Then shut it down and walk away - or do what the experts do and hunt for science projects.

Behaviour of the trader - mindset of the trader - best 90/10 easy money playbook trading setup - timings - levels - behaviour of price - execution skills of the trader - behaviour of the trader after the trade is completed. Rin$e and repeat means exactly that ... same setups over and over and over again . «     — Stacey Burke

 

» It's a Non-Farm Payrolls week - don't be surprised to see a four-day template. The day count doesn't change. Wednesday was the reset day, and now we are in the backside of the week. We might get a monkey hammer on Thursday, and Friday setting up a Non-Farm Payrolls bounce trade. «     — Stacey Burke

 

 

Fed Chair Powell's promise to lower rates may trigger market reversals (HERE & HERE & HERE).

See also:

Stacey Burke (September 3, 2024) - Trading Beginning of Month & after Long Holiday Weekend. (video)

Recent Toby Crabel Price Pattern Setups in the E-mini S&P 500 Futures

 S&P 500 E-mini Futures (daily candles) - (1) - (2) - (3) - (4)

(1)   2BNR is the 2 Bar Narrow Range: If the 2-day-range (the higher of the 2 highs less the lower of the 2 lows) is the narrowest 2-day-range in the last 20 trading sessions then we are currently sitting on a 2BNR.
(2)   3BNR is the 3 Bar Narrow Range: If the 3-day-range (the higher of the 3 highs less the lower of the 3 lows) is the narrowest 3-day-range in the last 20 trading sessions then this is true.
(3)   » Next time you see an Outside Day with a down close lower than the previous day, don't get scared, get ready to buy ! «
(4) 4BNR and Inside Day with an Up-Close -  narrowest weekly range of last 7 ... weekly directional change already due? ... or early September?

Reference:
Toby Crabel (1990) - 2-Bar Narrow Range Setup.
Toby Crabel (1990) - The Principle of Contraction/Expansion.
Toby Crabel (1990) - Definition of Price Patterns.
Larry Williams (1998) - Outside Bar Trading Setups.

Larry Williams (1995) - An Outside Look at Inside Days.

D'onte Goodridge (2022) - Interbank Price Delivery Algorithm (IPDA) Data Ranges.

D'onte Goodridge (2023) - Structural Characteristics of Bullish & Bearish Months.

TPR (July 25, 2024) - Cosmic Cluster Days | August 2024.

Martin A. Armstrong (July 14, 2024) - Next weekly directional change during week of August 26.

MyPivots.com (2024) - Scanner for Toby Crabel Price Patterns in the E-mini S&P 500 Futures.

 

Trading Major News Events | D'onte Goodridge

News events typically inject momentum into the market, often prompting traders to anticipate where price might trend in response to the news. Making educated predictions about these movements is a common strategy rooted in technical analysis. Position yourself AFTER major news releases (NFP, CPI, PPI, PMI, FOMC etc.) with either a Pump & Dump or a Dump & Pump trading setup.

Sell Scenario/Setup: Wait for the buy side liquidity pool on the 15 minute timeframe to be raided first. After that, go to the 1 minute timeframe entry above the killzone's opening price. Then, anticipate that price will revert back down to a sell side liquidity level.

 

 

Buy Scenario/Setup: Wait for the sell side liquidity pool on the 15 minute timeframe to be raided first. After that, go to the 1 minute timeframe entry below the killzone's opening price. Then, anticipate that price will revert back up to a buy side liquidity level.

 

When price moves above the opening price of a killzone, it's in a premium. This is where to find ideal sell entries. 

When price moves below the opening price of a killzone, it's in a discount. This is where to find ideal buy entries.

Reference:
D'onte Goodridge (July 14, 2024) - Trading News Events. (video)

 

 Major news July 15–19 (UTC -6).

S&P 500 vs Tri-Annual, Yearly, Quarterly, Monthly, Weekly & Daily Pivot Levels

S&P 500 E-mini Futures (weekly candles) vs Tri-Annual Pivot Levels (for 2022-2024).

Based on spectrum analysis, Sergey Tarassov forcasted a multiyear high in US-stocks sometime 

around August 2024 between the crests of the 40 Month Cycle and the 42 Month Cycle. 

By then the tri-annual R1 level at 6,019 could well be reached. R2 is at 6,928.

 

S&P 500 E-mini Futures (weekly candles) vs Yearly Pivot Levels (for 2024).
Tri-Annual and Yearly Pivot Points and Levels are suitable for long-term investing or swing trading

with a time frame of several months to a year or more.

S&P 500 E-mini Futures (weekly candles) vs Quarterly Pivot Levels (for Q3 July-September 2024).
Quarterly Pivot Points and Levels are suitable for medium-term trading with a time frame of several 

weeks to a few months. They are useful for identifying intermediate support and resistance levels, 

trend continuations, and potential corrections.

.

S&P 500 E-mini Futures (daily candles) vs Monthly Pivot Levels (for (July 2024).
Monthly Pivot Points and Levels are ideal for short-term to medium-term trading 

with a time frame of several days to a few weeks.

S&P 500 E-mini Futures (daily candles) vs Weekly Pivot Levels (for July 07-12, 2024).
Weekly Pivot Points and Levels are suitable for short-term trading with a time frame of one to several

days to a week, to identify short-term support and resistance levels, trend continuations, and potential reversals.

S&P 500 E-mini Futures (4 hour candles) vs Daily Pivot Levels (for July 10, 2024).
Daily Pivot Points and Levels are ideal for short-term and intraday trading with a time frame of several hours to a day in order to identify short-term support and resistance levels, trend reversals, and potential breakouts. Daily Pivots can be used to make quick trading decisions, adjust stop-losses, or set price targets for the current trading session.

 

Pivot Points, Support and Resistance levels are calculated based on previous high, low, and close prices. These levels can identify areas, where price may bounce, reverse or break through, and where to set entry, stop-loss and take-profit orders. This technique is valid on various timeframes. Common types are Floor (Trader) Pivots a.k.a. Standard or Traditional Pivots (= all charts above), Central Pivot Range (CPR), Fibonacci, Woodie, Classic, Camarilla and DeMark Pivot Points, each type having their own calculation method.

 

Reference:
Franklin O. Ochoa Jr. (2010) - Secrets of a Pivot Boss.

See also:

Jeffrey A. Hirsch (July 10, 2024) - Soaring NASDAQ Approaching End of Midyear Rally.