There are two dominant circumstances that make up the destruction theme:
- Since early 2022 there has been an expansive distribution pattern forming in the major indices. This only became obvious recently after the rejection at 4200 which marked the top of the distribution range. Supply overwhelmed demand in a far reaching, expansive manner. To the point that the markets have done nothing but decline since that time, in a manner which suggests that 4195 was the top for 2023.
- The fact that a majority of investors continue to believe that the October low was THE low for this cycle creates a significant vulnerability in the markets moving forward. This becomes all the more evident as the markets draws closer to the October lows while distribution continues, paired with technical deterioration across the indices.
There are numerous pieces to this puzzle that are far too detailed to get into here. Our weekend Turning Points note has gone from 11-12 pages on average each weekend to 16-18 pages recently as I detail all the data pointing to the rejection at 4200 being a severely underestimated, highly significant technical event that virtually guarantees a retest of the October lows, at a minimum, with a high likelihood of new lows in the offing.
Distribution and the refusal to suspend disbelief of certain outcomes have led to consequences in the markets throughout time that are often times destructive, to put it mildly. This is one of those instances.
As I have been detailing since the beginning of February, we have arrived at a point in time where caution is warranted at an absolute minimum.
We have been building short positions throughout February in anticipation of what is to come, taking a more aggressive stance towards the bearish trend ahead.
Be careful out there.
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