This is the contrarian market view I hope to be proven wrong about

You can read anything you need to know about the market action on January 24th online. What I give you here is a silly little scenario you can use to probe how likely you are to fit a narrative you prefer to the facts available to you. In thinking about it we are exploring a contrarian point of view and take it to its logical consequence.

First of all, the main crypto assets, BTC and ETH, saw a significant drop in step with the main indexes, SP500 and NASDAQ100. Their increasing correlation is most likely evidence they respond to news, market sentiment and flows just like traditional assets.

Then it’s this little signal I took a screenshot of from Bloomberg. It’s probably debatable but it takes a certain mental profile to participate in the elections process to win a public office. Not one that I particularly hold in high regard, so when I read this my own bias triggered - I wanted to call “peak crypto” and lol.

Does everybody say Ukraine is Putin’s crisis and only his responsibility to de-escalate? Our in-house contrarian would probably disagree until any evidence of that is provided.

Was yesterday’s drop in SP500 and NQ100 panic triggered by the upcoming FOMC meeting and the announced rate increase in March? The contrarian view would look at those as both well-understood events and question whether it was panic selling at all.

Did the market rally in the final hours and closed green because “confidence” had returned to investors? Options data show a large volume of puts were sold at the bottom and the clued investors will run to attribute the rebound to them.

But a contrarian might consider orderly liquidation was in place yesterday, by someone with enough private information to expect a larger correction in the future and willing to pay a premium for a timely exit. Day traders piled in and had to close at the end of the session (myself included). A rally made for a good story so everybody was happy with the conclusion.

But if “everybody” is happy, the contrarian generally expects them to be wrong as well.

If you cannot point out what had changed yesterday to justify the market reverting course, it’s possible it did not happen and the upside move just appeared to be a rally.

A contrarian view expects more volatility today and new lows before March.