11 Minute Read

Tackle Today: Of Market Bottoms, Price Action & Time

June 1, 2022

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«It’s a bottom, but is it THE bottom?»

Traders,

Last week’s 6.6% gain in the S&P 500 snapped a seven-week losing streak. Bulls celebrated the victory over the weekend and are returning in high hopes that the low holds.

The fact that we just made a bottom is indisputable. Reversal formations litter the landscape, and we’re actually 9% off the lows from tip to tip. But there’s a grand canyon of difference between “a” low and “the” low. And by “the” low, I mean the end of the bear market.

It takes two things in combination to ultimately signal last week’s push to $380.54 on the S&P 500 was THE low: time and price. Today I want to look at time. Tomorrow’s message will look at price.

Time: The more time passes after making a low, the more assured you can become that it was “the” low.

Take the March 2020 crash, for instance. SPY bottomed on March 23rd, 2020, at $218.26. One day after the low, you would not and could not have known that it was the end of the bear. But then a week passed. And then a month. And now, a whole year has gone by without returning to the low print of $218.26. What started as “a” low grew into “the” low.

All it took was time.

Last week saw prices sink to $380.54. Will that mark “the” bottom of this bear? Ask again in a few months, and time will have told us the answer.

If you find that unsatisfying, you might find the second item helpful: price. We’ll explore that tomorrow.

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Video of the Day: How to Identify a Trigger Point on Breakouts and Retracements

In this video, Coach Matt Justice takes a deep dive into the way to identify trigger levels on a breakout and retracement, and how to properly set them up.


Chart of the Day: False Bottoms and Failed Rallies

Chart of the Day: False Bottoms and Failed Rallies (source: Bloomberg, Ycharts)
Source: Bloomberg, Ycharts

The 2000-20003 bear market saw the Dow Jones Industrial Average bounce over 10% on six separate occasions. Each marked a low in the downtrend. But only the last one spelled the final bottom.


Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

The Coaches Show Replay

If you missed last night’s episode with Coaches Tyler Craig and Frank Martin where they talked about Bear Market Rally or would like to watch it again, check it out here.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.

Trade Masters 7:00 PM EST

Every Wednesday at 7 PM EST join us on the Trade Masters where two Coaches go head-to-head to see who can find the best trading setup.


Trading Justice Podcast: Each week your hosts guide you on a journey of financial education.

Trading Justice 478: Interview with Derrick Oldensmith

In episode 478 of the Trading Justice podcast, Derrick Oldensmith (DerricktheTrader on YouTube) joins Coach Tim to discuss prop trading, reading the tape, the proper mindset of trading, and more. Derrick Oldensmith is a veteran trader, educator, and coach in trading, investing, and stock markets.

Before that, Coaches Mark and Matt Justice take a journey through the market skyline as they discuss the current market reversal and what is needed for confidence to come back the bulls.


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