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How Does The Market Tell You A Rally Is Back Full Force
Risk On sits in arguably a very comfy position at this moment. Fed Heads are in a blackout after literally jawboning as much dovishness as possible in the last two weeks or so before the quiet period. The economic data is very limited before the next Fed Meeting on December 17-18. In other words - in the absence of Fed talk, a high volume of economic data, and bad or nerve rattling earnings results . . . . Risk On could easily ignore everything and skip along singing “Everything is Awesome!!!!” right up to the point where Powell starts talking in the presser after the meeting.
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That is possible. Things could also go the other way. We simply do not know and guessing is not the solution. Let’s look at some recent selloffs for the QQQ when it fell below the 10 Week EMA (one could argue somewhat similar to 50 Day EMA).
If you look above in the Yellow Circles - there is at least one clear pattern. Note how the Distribution lead into the selloff (Volume rising on down weeks the Red Volume Bars getting bigger) . . . . . and then there is a big Green Volume Weekly Bar that ultimately follows it up. This is the conviction demonstrated by actual Volume (and the impact on Accumulation/Distribution) that gets the rally back on track or kicks off a new rally or both.
As shown above, IBD is raising its exposure a bit again and notes the 5% rule as the primary reason. They are saying since stocks bounced 5% or more from the local bottom, then that means they “essentially resumed” their uptrend though Volume has not backed it up.
End of the day we all need to accept the market really hasn’t gone anywhere since early October:
Thoughts and observations:
The July/August of 2024 correction was yes indeed in part tied to “doubts about AI” and the market did pick it back up and rally . . . . couple huge differences between then and now A) back then we did see a Big Green Volume Bar come in to back it up, and B) back then tech credit spreads were tightening/neutral and now tech credit spreads are widening . . . . . . . . yes the Volume follow through could come next week no doubt but tech credit spreads widening now and ORCL/CRWV/META are huge issues in my view . . .
Earlier in 2025 the meltdown was highly correlated with the introduction of global tariffs by the world’s largest importer . . . . but even then we did see the conviction demonstrated with Volume and Accumulation . . . . . not seeing that as of yet . . . .
I’m more interested and convinced in the short to intermediate term if the market proves it to me with Volume and Accumulation, if Leading Stocks emerge as clear cut winners setting new highs consistently, and if we run into some trouble BUT the market absorbs it and continues on higher . . . .
The Right Here and Right Now is very tricky to me perhaps others have it all figured out as there is this little Goldilocks “Everything Is Awesome” window of time here AND with Gamma swinging both ways the more you go in one direction the more you go in one direction . . . . . but that does go both ways . . .
Hence we have Longs and Shorts . . . .
