On 5th Nov, $QQQ crashed 6.5%. And as predicted, more people turned bearish that day and piled into puts.
Back on 23rd Oct, I said this wasn’t peak fear yet.
Sure enough, the put/call ratio spiked to 1.03 on 5th Nov.
Here is the tracker link
People tend to get overly negative right at the bottom.
For the market to REALLY capitulate, everybody has to turn bearish first — and one panic day doesn’t get us there.
Now look at the average put/call ratio in our tracker. It’s a much better bottom signal than the daily print. And it still isn’t at peak fear!
Uff!!
Bull markets don’t move like this
Markets usually throw a few tantrums before a recession. The collective swarm intelligence of the market is very good at telling us something is seriously wrong. And it does it with super volatile 4–6% days.
Bull markets, on the other hand, are usually a smooth climb up a wall of worry.
This price action on $QQQ should put us all on alert.
One more flush before Santa
I’m seeing so many people say the stretch after the midterms will be green and bullish.
That’s exactly why I think the market will demand one final capitulation first. Then it can run into a Santa rally to year-end.
If the bounce that started on Friday keeps going and gets to 680–690, I will take shorts there.
The zone I’m watching is 610 to 630. I would say 2/3 chance that it visits there before a proper bullish reprieve.
1/3 chance that the QQQ bottomed already at 647
That’s my view, not a data point. There is a lot of liquidity and action took place in the past over there. Price has a tendency to try and capture it.
One Counter point I would like us keep in mind.
Strong sectors will bottom before QQQ does. Smart money will slowly and surely bottom tick it before the absolute bottom arrives on QQQ.
Sometimes some sectors do not even correct. for eg. Software during the summer months. Look at AMPL, the future of software product development, barely budged over this entire QQQ rout. We got in during the summer months around $7 and now its $17
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