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If you're wondering if you missed Part 1, you didn't, since for some reason the four hours of writing this morning was lost when I tried to send today's note.  I am working on retrieving it and I will send the text from Part 1 tomorrow.  Annoying but I'm over it and couldn't be more grateful to have the opportunity to write about my research each day.  

I spent the weekend in front of the screens going over 100's of charts to survey the wreckage from last week.  Last week did a lot of damage and moved many indicators and factors on daily charts to oversold conditions.  The market bounced on Friday off the 200 day which was widely talked about so that level now becomes very important support.  On Thursday and Friday I called for a lower high bounce to start soon and didn't feel like making a buy call ahead of a weekend call but I did reduce some exposure by selling the only index downside exposure on Friday based on the low sentiment and plethora of DeMark green Setup 9's.  On 1/24 I wrote how I added the first downside index exposure in quite a while with the SPY, QQQ, IWM April puts ~2% OTM with 5% AUM.  My thought at the time was using puts defined my risk vs shorting a wildly advancing market.  I didn't expect a 10% market drop to occur so fast and get a trade of the year candidate.  

One of the important things I discovered was the breakdown in momentum on the daily charts to oversold also woke up the longer term time frame momentum indicators as they started to reverse too.  Today and tomorrow I will go over where those typically get to when a more significant downside move gets fully washed out.  Those indicators will go lower and it works well with my lower high bounce scenario.   If buying this bounce, which I have no problem with, stay nimble with tight stops and watch weightings. 

This Thursday at 10:30am EST we are doing a market webinar that should last for 45 minutes.  We'll cover a lot of ground with the equity, bond, currency, and commodities markets.  My goal is explain how some of the indicators and factors work within the context with today's markets.  If you have questions or want an opinion of the chart of anything, please email me ahead of Thursday.  I will try to get to as many questions as possible.   It will be recorded and we'll send the webinar details tomorrow and Wednesday.  

Notable:

• US Markets - slight bounce in sentiment, lots of downside DeMark green Setup 9's suggest a bounce is underway.  The S&P hit the 200 day but FANG only touched the 50 day.  
  
• A few global indexes to watch closely
  
• Euro Stoxx 50 still looks messy
  
• A ton of US sector ETF's with most of them having green Setup 9's too - bounce time
  
• Some important bond market thoughts that could be signaling a future recession
  
• S&P Weekly Charts showing some indicators just waking up and that are not oversold
  
• DeMark Screens - Starting to see more downside red Countdown 13's
  

SPX bullish sentiment is at 17% and up from a cycle low of 9%.  I expect a bounce to 40-50% and then fail.  Nasdaq bullish sentiment is at 16% up from 10%

SPX daily was able to register the downside green Setup 9 on Friday but the futures bounced high enough to negate the downside 9 and closed up which wasn't what Tom DeMark expected.  So part of his call is negated.  I expect a lower high bounce with a wave 2/B lower high.  It will register when an 8 day high is made.  

FANG Custom Index only pulled back to the 50 day vs the majority of stocks that went under the 200 day.  Shows the relative strength of these market leaders which is no surprise.  

Bloomberg World had a downside 9.  I expect the same scenario with the lower high bounce

China Shanghai Composite bounced yesterday but there still is a downside red Countdown and that concerns me.  

Euro Stoxx 50 looks broken as it couldn't bounce on it's green Setup 9 and has now a new secondary downside red Countdown on day 3 of 13.  Sell bounces

VNQ Real Estate is on day 12 of 13 and is getting close to exhausted.  Another bond proxy so perhaps we'll get that bond bounce too

Industrials bouncing after green Setup 9

Bond sentiment is at 13% and remains oversold.

The FRED chart of the 2/10 on a long term time frame is interesting since the narrative is that recessions occur with the curve is inverted but these following charts make me believe the curve is going to steepen and perhaps this means a difficult market and economic recession is in the future.  

The monthly chart of the 2/10 with the DeMark indicators shows some interesting exhaustion signals near tops and bottoms.  

Adding to the conviction is the weekly chart with upside and downside exhaustion signals at inflection points

SPX weekly has several indicators that are not comparably oversold as other periods.  

This is the SPX weekly chart with a single line MACD on top that shows how overbought and how it just started to hook down.  This is my point that this indicator will take time to fully correct and if it breaks the 0 line this will be a bear market.  I created this chart in 2007 and now can get dusted off

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