I’ve been thinking a lot about how to find a bottom in this environment. Technical indicators matter, but something bigger is driving this market right now.
For me, one of the biggest drivers is the commander-in-chief. Understanding how leadership operates is part of the process when trying to identify a bottom. At the same time, markets are extremely sensitive to headlines, which means even routine political developments can move prices quickly.
Some traders prefer to focus strictly on charts and data. That approach has value. But there are qualitative factors that matter too. Past geopolitical events — moments shaped by negotiation dynamics and policy shifts — have shown how leadership decisions ripple through markets. Those same psychological pressures are in play today.
The Pressure Campaign Framework
Here’s how I’m thinking about it: The risk of escalation remains present unless specific geopolitical objectives are met. That creates an environment where pressure continues to build.
The way I see it, pressure remains until markets reach at least correction territory. And right now, we’re not there yet. A correction typically means a 10% decline from recent highs. Since that level hasn’t been reached, the pressure cycle may not be finished.
At the same time, systematic selling continues to push prices lower. When that combines with headline-driven volatility, you get a market that grinds down even without a single dominant catalyst. Understanding that mix of psychology, geopolitics, and automated flows is critical.
The Maximum Capitulation Level
There are two key scenarios to consider: A minimum and a maximum.
At the upper end, a 20% drawdown — bear market territory — would likely represent maximum capitulation. That level would reflect peak pressure and could trigger a meaningful shift in tone or policy direction.
I’m not saying the market has to reach that level. But these thresholds — 10% for a correction and 20% for a bear market — provide a framework for evaluating where pressure may begin to ease.
While leadership psychology is a major factor, technical tools still matter. Fibonacci retracements, for example, help identify levels where buyers may step in or where automated flows could reverse.
This isn’t a typical market environment, and it doesn’t call for typical analysis.
Sometimes the real edge comes from understanding the motivations behind the decisions driving the market — and how those forces interact with the mechanics underneath.
Talk soon,
JD
The Rational Trader
Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!
- Telegram: https://t.me/jamie_dlugosch
- YouTube: https://www.youtube.com/@FiresideTrader
Important Note: No one from the ProsperityPub team or The Rational Trader will ever contact you directly on Telegram.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. New Breakthrough Targets Cash Based on an Insane Edge
I recently went off the grid and stumbled upon a stunning breakthrough that’s poised to defy everything traders think they know about the markets.
I’ll go live with Lance to reveal all the details of this experiment on Saturday at 11 a.m. ET.
Disclaimer: We develop tools and strategies to the best of our ability, but no one can guarantee the future. The 99.7% edge is based on a statistical fact but does not account for timing. In live trades published in real time since Nov. 2025, the strategy has won 87.79% of the time, with the average winner returning 8% in four days or less.
