As mentioned last weekend, we are in the middle of a Volume Tunnel Buy Signal (I will discuss the specifics of this signal below). This is a generally a very powerful, reliable signal.
Even though it is important to remember we are simply in a protracted bear market rally, likely back to the late 2021, early 2022 highs, or at least within spitting distance as we were last month, we are still in a very, very serious bear market that will be punishing to nearly all asset holders before it is through, with the worst down leg yet to be played out. This bear market rally we have been in since last October has been fueled by the speculative fever of the post-”pandemic” casino-mania the world has been in, with asset prices fueled by government spending, further fueled by the mania, etc., in this violent, upward feedback loop which hasn’t been seen since the late 1920s. However, unlike the run-up to the ate 2021 / early 2022 top, we have actual interest rates now, and a fed balance sheet run off that is serious.
This current Volume Tunnel Buy signal here may signal the final run up of this entire bear market rally. This is also confirmed by several other technical factors, one of which is what we are seeing in the weekly cycles, with the dominant cycle being a 5 to 7-week cycle which calls for a top in the week ended September 8 or September 15:
As mentioned previously, even though we are in a short-term buy signal, if, at any time, during any given day, we see new lows on the Big Board exceed 4%, we go flat, or hedged or short.
In addition to the 4% New Lows Rule, you would abort a Volume Tunnel signal if you got a Bailout sell Signal during the day to go the other way. I’ll discuss the Bailout System in a future letter for paying subscribers.
There also exists the Volume Tunnel daily failure signal which will be detailed now along with the rules for a Volume Tunnel signal.
Volume Tunnel
Volume Tunnel is, in effect, a signal who can track its genesis back to the early tape reader days. When I got started in this business, I worked as a margin clerk of a brokerage firm with a huge “board room,” wherein sat dozens of brokers working phones, with everyone’s desk and everyone facing the electronic ticker tapes running high on the wall in the front of the room, In front of the desks were chairs where members of the public - old “tape rats,” would sit, and often be wiling to share what they did and their hard-won knowledge with a young inquirer who was respectful enough.
To get a Volume Tunnel signal, we first need to see a “volume bar.” To understand what constitutes a volume bar, you should refer to the write-up I have prepared at: