Obviously, the stock market is obvious

One thing that is extremely obvious about the stock market these days is this - NOTHING!

Yes the pages of this Technical Insights Blog have recently been calling the month of October to be the near term bottom. The problem is very recently we are seeing more and more people paraded on TV to profess the same thing. This is actually a BAD thing! We don't want everyone to think the same way. Now that this month of October bottom scenario is being played out in the media expect it NOT to happen. Remember, the scary thing about the way the stock market works is that the market rarely does what people expect.

We are not going to change our stance and now predict the market to continue the slow bloodshed and go 20% lower in the near term - although this is a very real possibility. But what we are going to do is say DO NOT attempt to get long (or "all in" as they say at the poker table) until the tide has already turned. There will be plenty of chance to ride a substantial rally higher, one that we expect to be caused by a simple lack of sellers, sometime in the very near future.

The problem is we do not want to be all in when everyone else is calling for a bottom. What we do expect sometime in the near future (the more people who publicly call this a bottom the longer the whole process gets drawn out so lets call it 2-4 weeks) is a scary washout. One that will see the same limit down in the futures we recently saw pre-opening but instead of an early reversal higher we see a further extended drop in the markets causing lower trading halt limits to be reached. What we need to watch for is a -10% or possibly -15% day when people will be questioning the foundations of democracy and seriously considering putting ALL their money in the mattress or a shiny new safe (read here the recent increase in safe sales).

Then, and only then, will the market make a sharp recovery. In the meantime if we drift 2% or 3% or 5% lower each day the pain will continue for weeks. Either way we will make a tradeable bottom sometime soon...just don't expect it to be obvious.

HAPPY TRADING!