What goes up, must come down. But how much down is left? Quite a bit actually. We’re now at an area where buyers may start to appear. However, I am in no rush to buy equities – especially leveraged ones. Nibble here, nibble there is fine, but will remain cash heavy for the time being. The market needs to establish a new equilibrium, and “fair value” based on the information at hand. Until that happens, bias needs to be put to the side and set patience as the most important. Soon enough we will get a massive rally from a capitulation which may mark a potential bottom; however, will probably be a sell event and need a bottom test or at the very least, a higher low.
I have said plenty of times that trading lower first vs trading higher is always more beneficial for bulls. This is no different. If we trade higher from here then some amazing news needs to occur to support it. Generally, any consolidation or inside day that stays below Thursday/Friday gap (Friday’s IBH) is still bearish.
Trading lower follows the same pattern. Gap down, trend lower, pop, sell, wait for capitulation, bid, move stop quickly, etc. That worked well on Friday with the 5220’s, 5180-60 and even 5140’s.
The expected move for Monday is massive at 175pts and takes us down towards a prior balance and 20% down on the S&P. I think the first area to pay attention to will be 5035-40. This was the last higher low after the 3 year breakout. Failing to hold that, opens for that back test that never happened starting at the 4960’s and would include the April ’24 higher lows. Below there, and we explore the actual breakout, I would have my eyes in the 4880-4810. The weekly expected move which is 300pts takes us to fully test the 3-year breakout.
Not much else to honestly say as we need to see how Sunday opens and especially RTH on Monday. I am in no rush and will let the market find a bottom before I do. I have my areas of interest and will explore it when we get there.