Rendezvous Coming Soon?
Hello all, the new hottest trend in the market is to attempt to time the bottom. As we all know from history that is extremely hard if not impossible and requires quite a bit of luck. All over fintwit and various other forms of financial media I see traders, investors and market participants alike all posting their opinions on when the carnage is going to end. News flash, nobody knows what the hell is going on. The markets have never faced a situation like this. The closest thing we have ever seen was 2001. Two consecutive life changing events following one another. The dot com bubble bursting followed by the September 11 attacks. This time it’s Covid-19 followed by the war in Ukraine. Looking throughout history, the angle at which markets climbed since the covid crash was unsustainable. People also tend to forget market pullbacks are healthy and necessary. The v-shaped recovery from the covid sent markets into a frenzy essentially sending them straight up. The steeper a trend is the more unsustainable it is. For example take a look at GameStop (Sorry Apes). Hence why this cycles downturn is so aggressive. We will not know when the bottom is in until we see a change in trend. Any technical analyst could see clear as day the trend is still downwards. If you take a look at the chart for QQQ you can see this pattern clear as day. Lower high after lower high.
Judging by the weekly chart, I very scarily say I think we are nearing the bottom soon. Or at least a temporary bottom with some relief (enough to breathe for a bit). I have come to this conclusion because of things like the RSI nearly bottoming out twice in the last few weeks essentially creating what maybe a double bottom. The RSI has been steadily decreasing for some time now approaching the bottom again. On the weekly chart, historically speaking, the RSI indicator has signaled the bottom for market downturns as far back as 1985. Further back then that I do not have the available data to calculate. The only time it broke the “oversold” line was 2008. Even then it broke the line and the market bottomed 2 weeks after. Clearly the 30 point marker on the RSI indicator on the weekly timeframe is an force to be reckoned with. Alongside that we are finally seeing significant volume. Would I like to see a little more? Yes. However, this should do for now. Buyers should start to step up as the Nasdaq nears the 200 day moving average. This is a very important level of support and could potentially mark the bottom. However, I would not think about going long on anything in a market like this until we receive confirming factors that the market has bottomed. For example, 2 consecutive higher highs. As well as the Fed changing their tone and inflation decreasing month over month.
Looking at the Dow Jones the theory above would fit perfectly.
As you can see the RSI indicator is bottoming out and price action is perfectly aligned with pre covid crash highs as well as the 200 day moving average. If we hold this level we could potentially be safe. However do not expect a rampant bull market like the stimulus days. We will not be getting a V-shaped recovery any time soon. At the time of writing this futures are all green. I’m interested to see how this plays out in the coming weeks. Do we hold the line and find a bottom, do we get temporary relief before another flush downwards, or do we just set another lower high and keep dropping. Sincerest apologies for the short and not as detailed newsletter. Time constraints and other events affected my time availability this weekend. Next weekend we are back to regularly scheduled programming. Maybe even with bonus articles and blogs during the week. If I find something interesting and I have the time in the week to blog about it, I will. Also once market conditions stable I will be conducting deep stock analysis consisting of bull and bear cases rather than just weekly newsletters. I am more interested in individual equity research than overall market conditions. However, this is the situation we are in and we must make due.
To conclude, this was the newsletter for the week of June 19th, 2022. Remember in times like this where it feels like the market has passed the point of no return always try and think long term. It’s a lot less stressful like that and your day will probably be better. Like I stated last week, this is a new posting and am not really sure how to structure it. I have no formal writing experience besides school so please bare with me and provide me with some feedback in the comments. Thank you for reading the newsletter/blog. I’m not even sure what to call it. All jokes aside, I really appreciate it.
-Francesco
Ravineview Research Founder
