all right

update on what's happening to the

markets and how we can take advantage of

the recent price action so starting of

the s p 500 the last couple of days we

have seen a shift in sentiment from

really bearish to now beginning to be

kind of bullish all right so first if

you take a look at the daily candles you

can see that

we had a bit of capitulation right where

the markets fell

pretty steeply remember that in order to

form a bottom the markets normally have

to drop

in a parabolic fashion which means the

market drops 90 degrees usually

uh on a downtrend markets

fall on a 45 degree angle and then it

drops 90 degrees and then it reverses

back up

so this could be a potential bottom now

is it the bottom of the year

no one can predict 400 certainty until

it proves itself but

this could be a potential bottom for the

year and i use the word again potential

it's like you're meeting someone right

could be a potential girlfriend meets

all the criteria but will she say yes

when i ask to marry me well i don't know

until it actually happens right so why

do i say that this could be a potential

bottom number one again if you take a

look at the price action

you do see

a bit of a steep drop here which is a

good sign we want a steep drop we want

capitulation people panic markets tend

to bottom at the point of maximum

pessimism when people freak out that's

when it bottoms

and it actually hit

uh close to a 20 mark so it like almost

went into a bear market and then it

reversed back up right so we had that

bit of a reversal in the last couple of

days now if you take a look on the

weekly candles

um last week we closed

with what is known as a bullish

pinbar candle right bullish pin bar now

some of you are thinking but adam is red

how can it be a bullish pin bar now if

you've learned candlestick patterns you

know that

for bullish pin bar you just need a

small candle body for long lower shadow

the color of the body doesn't matter can

be a red or white body doesn't matter

what matters is the shape so when you

get this

uh small body and long tail

we call that a bullish pin bar and a

bullish pinbar is a potential

reversal pattern

now again it's not a guarantee

what i'd like to see is that this week

we're able to close another bullish

candle by friday so if we can close

right now it's a bullish candle but you

know anything could happen it could

reverse to a bearish candle right so if

this could close by friday

above the high of this candle

that would be a very very powerful

signal of

it being the actual bottom but not yet

let's see if that happens now let's go

back to the daily candles

so on the daily candles you can see we

had three pretty strong bullish days

that have kind of like shifted at least

the short term sentiment from really

bearish to now a bullish sentiment right

in fact if you take a look at ibd

investors business daily which is a very

uh followed

site for

momentum trading you can see that

they've actually

um

um indicated that the markets in a

confirmed uptrend and this is from

william o'neill's research so yes it is

a confirmed uptrend

in the short term but again

is this the bottom will it recover to

all-time highs remains to be seen

now for that to happen it has to

obviously break through some levels of

resistance so let's take a look at what

are the potential

resistance levels that we need to watch

when this happens right so again

if you listen to most people most people

will tell you that hey

this is a bear market rally right so

what's a bear market rally what they're

saying is that we're in a freaking

bear market right we're in a bear market

right so this is just a dead cat bounce

it's a bear market rally don't be too

happy because it's gonna come back down

again right so is this a dead cat bounce

is this a bear market rally well

you don't know until

it happens right so remember that every

successful market reversal always starts

with everyone thinking that it's a bear

market rally when everyone thinks it's a

suckers rally now you guys remember this

very famous

uh psychology chart right on market

psychology i'm sure you've seen this

online where the different emotions that

the market goes through in the market

cycle where you've got this boom cycle

the bus cycle it bottoms and then it

starts a new bull run and remember that

every bull run

always starts with the majority of

people

in disbelief

that are very skeptical and you know

most people say this is a

suckers rally this is a bear market

rally don't trust it don't trust it or

everyone says that right until by the

time they find out it's real it's real

but at times they think it's real or

they know it's real prices would already

have gone up so much

and stocks would be so overpriced by

then for you to jump in so again as an

investor

i know by the time you want to wait for

confirmation that it's really real it's

often too late right you have to start

investing even when people are having a

lot of fear uncertainty in the markets

that's how you still buy when it's under

value

so let's go back to the uh daily candles

on the s p and let's take a look at

potential resistance levels that i'm

watching right

so right now we are bouncing off these

lows and i would say the first level of

resistance that we need to watch for is

tada

this 20 moving average this red dotted

line so you can see that this acted as a

bit of a resistance earlier already hit

that resistance and came down so now

this red dotted line the twin ema could

be resistance again now at the same time

this coincides with the 61.8 percent

fibonacci level so we're definitely

watching this level at four one three

seven so in other words let's see if the

market can break

above this resistance or will it be

hit will it hit the resistance and come

back down again right so again for those

of you who are looking to hitch your

trades or hit your portfolio

you could look at this level right so

the moment you see that

there's kind of like a bearish reversal

candle pattern at this resistance level

you could put in some short hedges so in

our options class we look at we are

using you know bare put option spreads

when we buy a put over there and we sell

a put on there and we could take profit

if it comes back down again so we are

watching that level okay now if it

breaks above that level

where's the next potential resistance if

it breaks

this level well the next resistance

would probably

probably

be

the 50 moving average on our daily

candles and this roughly is at about you

know four

three two

[Music]

four three two zero about that level

right so this is a 50 moving average and

again if it breaks above that it may hit

this resistance and you know could it

come back down be a [ __ ] bounce we

are watching these levels right here so

again this could also be a level where

one could hit your portfolio enter some

short positions bad put option spreads

to hitch

reversal back down but again remember

that when you put in these hedges

uh and the market indeed breaks out

and you know goes to all-time highs then

you will lose money on those hedges so

when you use hedges

you gotta have stop losses i prefer to

use options because when i use options

the risk is limited right if it does go

up i lose very little on the options but

if it does go back down i make a lot of

money on those

bare foot spread options would then

which would then hitch some of the short

term

unrealized losses of my long investments

or long trades

so personally do i think that this is

the bottom or do i think that this is a

bear market rally is going to go back

down again from another bottom honestly

i'm still 50 50 right now i'm still 50

50 right now but i will say this even if

this is not the bottom

i think the bottom is gonna be pretty

close so even if it does go up and come

back down again i think we're gonna make

another bottom really really close and i

still believe that the second half of

the year

is gonna be really bullish and we're

gonna end this year

uh not as bad as where we are right now

or even we could still end up positive

some of you are thinking are you nuts

how could we end up positive when we we

started so badly this year well

you never know and again it ain't over

till the fat lady sings and here's some

interesting history

as you guys know i'm more of a historian

than a technician right so i live to

look at history to learn from history

now

if you take a look at the last 40 years

back to 1980

and we look at the s p 500 now what's

interesting is that

during a year the market can drop a lot

or go out a lot but ultimately

it will close somewhere and there are

many years where the market drops

by more than 20

like where we are right now in fact the

s ps

dropped almost 20 right

but by the end of the year it closed

back up positive or it closed back up

say down five percent or down 10

a lot better than the lows of the year

and this happens pretty frequently so

let's take a look at

um the last 40 years of snp data to show

that you know it could happen you never

know right so

now

so these

triangular green thingies is it green i

don't it's green maybe color blind right

so these represent the intra year

lows that means how low it went during

the year

and these

uh green bars represent how the snp

actually closed for that year

by the end of december right so you can

see that there were many many years

where

intra-year

the market went down

to near 20 right so for example in 1980

you can see it dropped off like 18

but by the end of the year it closed up

over 30

right so this red dotted line represents

the 20

level right so that ended really bullish

how about in 1981 1981 again almost

dropped 20 like where we are now

but by the end of the year it ended down

only

minus five percent so there was a big

rebound

during the second part of the year right

how about 1982 well 1982 market went

down again uh intra year low of about 18

but ended up the year

over 20

what other years came close to this 20

drawdown that we have

uh 1990 right 1990 you can see

same

right it went down close to 20

but

by the end of the year it rebounded so

that it only ended the year down like

probably this is like down three percent

something something like that right

how about 1998 same thing intra year

down 20 percent but by the end of the

year it ended up

right like close to 30 that's amazing

right what else oh forgot about this

year right 1987 right that was a big

black market crash right 1987 this was

crazy right during that year the market

dropped down

more than 30 percent

in trial but by the end of the year it

closed up like five percent

and that was nuts right really crazy

right

okay now how about

over here the year uh 19 well the year

2000 so this was the dot-com crash right

dot

com

crash

so the dot-com crash was one where it

ended the year just as bad or worse

right so you can see for this one

uh 2001

intra-year low was minus 30 percent but

it ended the year down 11 well it still

ended up better all right still a little

bit better right

year 2000 intra-year low was minus 35

but ended the year not so bad down 20

so there was still a rebound towards the

end of the year although it still ended

down kind of like double digits right

and that was during the dot-com crash

how about

the great financial crisis the subprime

crisis so that was in 2008-2009 so 2008

my god intra-year drop was freaking

minus 50 percent okay

and it ended the year not as bad but

still pretty bad ended the year down

kind of like 38

so this was the great

uh gfc the great financial crisis

now what's next um how about 2009 during

the financial crisis right in trial it

dropped

uh kind of like almost 30

but ended the year up

like 28 percent so 2009 ended the year

way above

where it was in the middle of the year

right

how about 2011 2011 same thing

intra-year snp dropped 20 but end of the

year still positive you can see it

happens pretty often it's not not that

rare right how about 2018 2018 again

intra year it hit the 20 mark

but ended the year only down

percent huge rebound towards the

uh second half right

uh we talked about this already yeah and

of course 2020 the kovic crash

intra-year the market dropped

uh 35

but ended the year up

kind of like 18

over there

so looking back at history you can see

that with the exception of one year

during the dot-com crash and one year

during the great financial crisis

apart from those two exceptions for the

rest of the years when the market was

down 20 or more

it ended the year

up or not as down right now some people

are comparing hey but could adam could

this year be

like the dot-com crash or the great

financial crisis i've said many times i

seriously doubt it because

the economic and financial conditions

today are very different from the

dot-com crash and the great financial

crisis

now during the dot-com crash

recall that at the time the

um

10-year yield right the 10-year yield

was higher than the

earnings yield on the s p 500. simply

what that means was that during that

time

stocks were more expensive than bonds

so it makes sense for people to sell

bonds or rather sell stocks and rotate

into bonds so stocks had a long way down

to go

but in today's case that's not the case

right in today's case we find that the

earnings seal on the s p 500 is 5

whereas the 10-year yield is 3

so in other words stocks are still cheap

relative to bonds so it's a very

different condition and at the time

during the dot-com crash many of the

technology stocks a lot of them were way

over inflated way over value and many of

them were not making money right whereas

if you look at a lot of the mega

mega tech stocks today microsoft and

amazon and google and facebook they are

making a lot of money they are extremely

profitable and they are not that

expensive in fact a lot of them are

undervalued right now

so it's a very very different condition

right

how about the great financial crisis

that's really different because

now what mainly caused the great

financial crisis was that a lot of

financial institutions like banks

almost went bust

why because a lot of the assets they

held those mortgage-backed assets became

worthless

when the real estate market collapsed

and during that time banks were highly

leveraged

uh individuals their balance sheets were

highly leveraged in other words they had

a lot of debt now that's not the case

today today banks are very well

capitalized they've got a lot of

um they've got very strong balance

sheets as well as the consumer the us

consumer still has a strong balance

sheet so it's a very very very different

time right so to summarize this video

what i'm saying is this what i'm saying

is that yes the s p has dropped 20

uh

right now after five months of the year

people are freaking out the nasdaq has

dropped you know over you know 30 people

are freaking out okay

and yeah people i know who are selling

who are saying it's gonna get worse

right but what i'm telling you is that

based on history now is the worst

freaking time to sell

it's the worst freaking time to sell

because

odds are

that the second half

all right

is going to be extremely bullish based

on what we've learned from history and

we may even end up the year positive

or even if it's negative it will not be

as negative as where it is today

right so again am i saying that this is

the bottom maybe

but even if it isn't the bottom i think

the bottom is pretty close we could have

a bit of a bounce do a second one and

then eventually it's going to go back up

so ultimately how do you use this

knowledge as an investor or as a trader

right very simple first of all from an

investment perspective you guys know

what in my community i have continuously

been buying stocks almost every day i've

been buying stocks buying stocks buying

stocks why because they are undervalued

but i buy stocks of great companies that

are really undervalued in fact

if you just read yesterday warren

buffett reported that he just invested a

3 billion in paramount and

3 billion in citigroup right now bear in

mind that banks are very cyclical

companies which means banks they do

really badly in the recession now think

about it if the majority of people are

saying that the recession is coming a

recession is coming why is warren

buffett buying a freaking bang if the

recession is coming

right few reasons number one he don't

think a resurgence is going right or

number two he thinks the recession is

coming he don't give a [ __ ]

okay

either one right but seriously speaking

if you look at

the best investors in the world

they do not make their investment

decisions based on predicting

the economy because no one can predict

the economy not even the fed chairman

can predict inflation or long-term

interest rates or the reason no one can

predict it right and the greatest

investors in the world never make

decisions by predicting where the

market's going to go in the short term

they don't they simply look at

the business behind the stock

as long as it's a great companies making

money generates free cash flow

growing consistently and is undervalued

they keep buying and that's what i've

been doing so

you know i always say that shorter

market predictions is anyone's guess you

know anyone's guess whether it's going

to be recession or how deep it's going

to be

so for from an investment perspective

i'm still buying stocks and you guys my

community you know what i've been buying

every day because my alerts aren't going

out to you guys now from a trading

perspective from a short-term trading

perspective

based on this short-term bullishness i

am looking to take some bullish

short-term trades maybe later if i see

some compelling trades but with very

tight stock losses obviously right and

of course using options i will exit

manually

once i see a change in the short term

trend

at the same time if i see

the market hitting levels of resistance

i may take some short term swing trades

as well by going short on the index

using bad put spread options so again if

you want to learn how to invest in the

best companies in the world

right learn you can learn how to do it

that's what we teach in our value

momentum investing course you want to

learn how to trade swing trade whether

trading loan or trading short that's

what we teach in our stock trading

courses as well as our options

courses and options master class so

again i always say this that we can't

you know we can't change the world but

we can change ourselves we can you know

don't wish for the world to change or

the world to be better you know focus on

making yourself better so that no matter

what happens in a market in the short

term of the economy you know how to deal

with it you know how to profit from it

and you know how to keep growing

your wealth and investments

so may the markets be with you and i'll

see you guys in the next video

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markets be with you