Two messages to meditate on today. The party is over, the first leg down is likely complete. After doing all my calculations and looking at social mood, doing this work for 19 years I’ll say with 80% probability we are entering a new bear market, says Jeff Greenblatt.

In past updates I’ve shown compelling long-term evidence linked back to the 2002 bottom we have experienced the mother of all square outs. Now we’ve seen the technical damage which verifies our initial assumptions. The latest violation is once again on the Dow (DJI) where they took out the 144-day window off the 23344 bottom back in April.

It was Custer's Last Stand.

I could be wrong about this but from everything I’ve seen, we’ve entered something new and different.

What makes this one different? Simple math, dear Watson. A 1% move against a 14,000 Dow is 140 points. A 1% move on a 25,000 chart is 250 points. We’ve never experienced a bear phase with the Dow sitting with such big numbers. Do you remember 500-point swings with such regularity during the financial crisis?

Neither do I. Oh yes, there were big days during the actual waterfall and panic phase but not on a day in and day out basis. Here, we routinely see the Dow up 500, down 500, sometimes in the same day. Money managers routinely come on business media telling the public to buy now. One guy said a correction is a discounting mechanism to allow stocks to go on sale. It’s amazing since many of us have gone through this twice in this century.

You can’t make this stuff up. Look at the CBOE S&P Volatility Index (VIX). Have we seen real fear yet? The recent high in the VIX is 28.84 on the first round with a lower high coming in on Monday. The financial crisis high was in the 89 handle. Think that was a once in a lifetime event that won’t ever happen again? The 2011 VIX peak was 48. This sequence is not even close.

This is a wonderful time for near term and intraday traders who can maneuver in and out of positions quickly. The big boys? Not so much. For those who are looking to buy and hold because stocks appear to be on sale, I wouldn’t be that type of buyer until such time the people on television tell you not to touch stocks with a ten-foot pole.

Nevertheless, this is starting to look like a low could be in place. I have several readings. I’ll show you one. On this SPX chart there is an interesting square out where the prior high in January had a square root of 53.5991 and the current low vibrates at 191 days.

chart

There is a similar tendency in the HGX. What this leg can do is not clear. Markets don’t like uncertainty and America has one of the more important elections in history coming up next week. Nobody knows what that is going to look like. What I can tell you is for the last election in 2016 my broker invoked full margin requirements on all trading so the industry is likely looking at this as a high-risk event.

Here’s the bottom line. Complacency has been the theme of the day, month and year leading into September. Those days are over. It’s no longer business as usual. Through the years I’ve observed people who have made good money in one trend but failed to recognize the change in the weather and gave back a good portion of those gains.

Many neophyte bears who did well in 2008 gave back a lot of the gains in 2009-10. Many who did well through 2007 got crushed in the financial crisis. Even traders who went short for Brexit stayed short and got hurt badly when the market immediately turned back up.

This is the time to keep both hands on the wheel and be on top of your game every single day.

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