Another Leg Up Needed After PullbackAssuming the current market correction is a scaled down version of the 2000-2009 correction, we likely have one more leg up to complete the pattern. The RSI hit a bottom at the end of the A wave down in 2002 and 2022. Since this time the RSI had been producing higher lows with the exception of one cross in May 2006 and August 2023. This appears to fall in line with the internal B wave inside of the corrective up wave. If 2000-2009 is a template, the current market still needs to see the RSI moving average (white line) at the bottom cross below yellow trendline. This initial cross will likely occur near the final market top, assuming the market has not topped yet. This cross below should also coincide with a slight market pullback. All of this is expected in the yellow circle at the bottom of the chart.
While companies are thrashing low-balled earnings estimates, and profiting more thanks to higher prices, this will not continue. The consumer debt bubble is set to burst. High debt will significantly stop consumer spending on non-necessities. Others will go bankrupt. The debt holders will get crushed which in turn will hurt banks and companies. A massive correction is coming thanks to extra low interest rates for way too long. The correction will be significant and fast. The recovery on the other side will rebalance the market and lead to legitimate valuations down the road again. However, many companies, people, and countries will need to collapse first.
Patience and prudence is the keep to getting through the next 1-2 years.
