We've seen these cycles play out over and over again throughout many decades.
But how do we profit from it all?
Well, for me, I like to use seasonal tendencies to help put the current market environment into context.
It's not about today and tomorrow, and it's not about next year. Where are we right now?
Our Cycle Composite does a good job of helping us put together a road map for this market's cycle.
On the left side of this chart we have the 2021 seasonal trends and on the right we have the 2022 trends.
Last year's composite includes every year since 1950, every post election year since 1950 and every year ending in 1, to include the decennial cycle. Look how closely last year's actual results mirrored the composite:
More Charts than Football? Or the other way around?
I definitely got a healthy dose of both.
And this one for me definitely stands out.
The way I learned it from Ralph Acampora many years ago was, "DON'T FIGHT PAPA DOW"
So here's the Papa Dow he was referring to. I included the key levels we've been focused on since the 2018 correction. They've really helped and I think they continue to.
But for today, let's focus on the fact that prices are both below overhead supply and above support from the summer lows.
From any sort of intermediate-term perspective, this is what we call "No Man's Land":
We got just a little bit of Dollar weakness starting in mid-July and stocks ripped higher. Thousands of points added to the Dow, Ethereum doubled and the average stock on the Nasdaq rallied over 40%.
We saw one of the most historic short-squeezes in history. And all it took was just a little bit of Dollar weakness. It wasn't even that much.
But then once that Dollar strength came back last month, the bid in stocks and crypto disappeared.
Here's a zoomed out look at the negative correlation between stocks and the Dollar:
Remember when the stock market peaked in February 2021?
That's when the New highs list peaked. That's when the Nasdaq Advance-Decline line peaked. That's when Chinese Internet Peaked. That's when Biotech peaked. That's when all the ARKK funds peaked.
February 2021 is when everyone had a SPAC.
Remember SPACs?
This group of "Special Purpose Acquisition Companies" was a poster-child for the excess environment of Q1 2021.
These SPACs were the biggest pieces of hot garbage on the market. And everyone wanted them.
And then the market peaked and their prices came tumbling down.
Now here we are, 18-months later. And they've just decided to delist the SPAC ETF $SPAK.