Corrections Happen During Bull Markets

Let's address that first one: Sentiment.

Back in February, I was pointing out how Sentiment was a headwind and investor optimism was getting frothy.

It took 3 months for sentiment to come back to normal levels. In fact, sentiment went from a headwind for this market, to a potential tailwind.

So sentiment is certainly no longer an issue that is holding this market back, like it was back in February.

The second thing is the churning taking place underneath the surface.

Sure there were big selloffs in names like Apple or LULU and others along the way. But for the most part, the corrections we've seen this year have come sideways through time. For 3-5 months at a time in a lot of cases.

You can see it from intermarket perspective as well.

These 3 plotted above tend to do well in healthy bullish environments. They tend to struggle to make any progress when markets are correcting.

This one above is a good visual of what's been happening to the majority of stocks this year.

Here's another one:

In healthy environments, Consumer Discretionary regularly outperforms Consumer Staples.

That has NOT been happening for most of this year, on both a market-cap weighted and equally-weighted basis.

This is just another of the many characteristics of messy markets that we've seen the past few months.

It's not like a pressed a button and made this happen.

It wasn't my fault.

It's just how markets behave.

The S&P500 went nowhere for months. The Dow went nowhere for months. The Nasdaq went nowhere for months.

Technology, the largest component of the S&P500 and Nasdaq went no where for months.

Small-cap indexes have gone nowhere all year.

The median stock came into this week flat for the year.

It's just math.

I always say that 99% of arguments on twitter end immediately if both parties just recognized they were referring to different time horizons.

I get labelled a permabull because we've been so bullish of stocks since way back in 2022.

It's been a bull market, why wouldn't I be bullish stocks?

Then I get labeled a permabear because the weight of the evidence suggested back in February that the market needed a break.

Someone even called me dogmatic.

I found that hilarious, because anyone who knows me will tell you that it's the exact opposite, almost to a fault.

If I'm dogmatic about anything, it's that I'm dogmatic about keeping an open mind.

And that's where incorporating multiple timeframes really helps.

Other disciplines don't have that advantage.

But when you study price behavior and the behavior of investors (what we call Technical Analysis), the multiple timeframes approach is very much available to you.

So first we start by looking at things from a longer-term structural perspective. This is always the first thing we do, in any environment.

Then anything we do tactically, falls within the context of those bigger picture trends.

For example, over the past several months, we've had opportunities from the short side, we've had plenty of opportunities to collect income in messy ranges whenever volatility spiked, and we've had times to be patient and do very little.

We've also been buying stocks, particularly Chinese names and metals stocks, among others. See Trade Ideas.

Markets need time for frothy sentiment to come back to reality.

And that's what we've seen since February.

But to be clear, sentiment is no longer a headwind.

Also, there has been no evidence at all that a new bear market is beginning. Quite the opposite actually.

Mathematically you cannot have a bear market, or a major market correction of any kind, without the prices of stocks falling. You can find this data by looking at the new lows list, which has been mostly non-existent all year.

And I'm not even talking about new 52-week lows. Very specifically, looking at 1-month and 3-month lows, not much has happened there during this entire correction. At least not yet.

If you start to see the new lows list popping, then we'll likely be having a much different conversation.

But that has not happened.

So when does this longer-term bull market resume?

Maybe it already has.

We saw new all-time highs yesterday in the S&P500, Nasdaq Composite, NYSE Composite, Dow Jones Industrial Average and Russell3000, among others.

The reason we do all this analysis is to decide how we want to be spending our time.

Should we be spending our time looking for stocks to buy?

Should we be spending our time looking for stocks to sell?

Or should we spend our time looking for delta neutral positions, betting on sideways rangebound behavior?

There is a time and a place for everything.

Last night was our LIVE Conference Call for Premium Members of ASC.

We went over exactly how we want to approach this market, which stocks we want to buy, and which areas we want to avoid.

During Election years like this, the market tends to get going in May heading into the strong summer months.

Is this year like all those others?

Or will this year be different?

Check out the full video and download all the charts:

Last Night's Agenda:

• Bull Market Resuming?
• Analyzing The Correction
• Short Squeeze Candidates
• Dollar/Rates/Commodities
• Stocks In the Business of Rocks
• Global Perspective
• Financials & Industrial Stocks
• Tech & Growth Stocks To Buy Now

There are more opportunities from the long side today than there have been in quite a while. Probably the most amount of new setups since October.

Now is the time.

If you're not already a Premium Member of ASC, you can sign up here and access last night's video call, all the trade ideas, and the rest of the research that All Star Charts provides daily to Premium Subscribers.

Click here to join us in a more official capacity RISK FREE.

See you in there!

JC