All three counter-trend systems, the Reversal Model, the Crash-Reversal Model, and the Institutional Mean-Reversion Model, generated simultaneous buy alerts during the week of 07 April, marking a highly unusual alignment typically associated with exhaustion-based market turning points.
The past stretch of market action produced a level of selling pressure that pushed conditions into deep capitulation territory. These three models are not designed to identify long-term trends as their purpose is more tactical, built to detect bottoming environments shaped by selling climaxes, forced liquidations, and exhaustion events.
Momentum and Trend Structure signalled Extreme Stress
Across the daily time frame, several structural indicators deteriorated sharply:
- Short-term momentum collapsed into deeply oversold territory, with our z-scored momentum estimate falling to extreme levels associated with disorderly selling and liquidation/capitulation phases.
- Trend quality Regime metric turned negative, confirming that the downtrend had lost coherence and that price action had become inefficient and unstable.
These conditions reflect a market where weakness is not merely present but more importantly it becomes self-reinforcing.
Participation reached washout levels
Breadth conditions showed signs of structural strain consistent with broad capitulation:
- More than 80% of stocks across all three major indices declined below their long-term trend measures, demonstrating that selling pressure had become widespread rather than selective.
- Market breadth readings hit extreme lows, consistent with panic-selling phases and systematic de-risking.
This is the type of environment in which markets often reach exhaustion.
Directional Metrics reflected Capitulation dynamics
Measures of directional intensity — which track trend dominance and the potential for reversal inflection points — also reached extreme negative levels. Such readings tend to appear only when downside momentum becomes compressed, crowded, and prone to sudden reversal.
Trend Efficiency confirmed a Selling Climax
Efficiency-based trend metrics across all major indices hit deeply negative extremes, showing that price movement was dominated by disorder, noise, and forced flows rather than organized trend continuation.
At the same time, the Trend Velocity metric reached its most extreme negative reading, a characteristic hallmark of selling climaxes.
Equity Volatility points to a one-sided Extreme Market Positioning
Our Equity Volatility model designed to compare stress levels across major index volatility structures, also reached an extreme. This measure uses a long-term statistical measure to identify when volatility positioning becomes stretched in one direction.
During the week ending 4 April, the reading collapsed to a level not seen since the depths of March 2020, signalling an unusually severe imbalance in volatility pricing between major equity markets.
Such extremes typically occur only when markets are heavily one-sided, liquidity is thin, and positioning has become excessively skewed, conditions that often precede capitulation lows.
This volatility dislocation added further confirmation that the market had reached a selling climax, with risk–reward skewing sharply toward reversal rather than continued downside follow-through.
A Market driven to Exhaustion
Together, these conditions describe a market that had been pressed fully into a capitulation zone. Selling was heavy, unrelenting, and broadly distributed — yet increasingly inefficient. These are the environments in which short positioning tends to crowd, marginal sellers vanish, and even a modest shift in flows can spark powerful reflex rallies.
Summary
The confluence of these three reversal systems firing in the same week is rare. Historically, such alignment has often coincided with the exhaustion phase of major drawdowns. While these signals do not imply the immediate start of a new long-term trend, they do indicate:
- Downside follow-through is typically limited after such extremes
- Reflex rallies become more probable
- The market begins transitioning from forced selling to stabilisation
Continued monitoring of trend coherence, participation repair, and improvement in efficiency metrics will help determine whether this exhaustion phase evolves into a sustained basing process or a sharp counter-trend rebound.