The good news is that the market is nervous about any number of monsters under the bed. There is the real estate meltdown in China, a spike in interest rates, Bidenflation, mandatory vaccine-induced labor shortages, artificial fights over the debt ceiling in Congress, and the like. But rather than follow-through to the downside yesterday, the market balanced as we anticipated.
We don’t get to hide under the covers, so we have to work our way to the closet and open the door, just in case another monster is in there. Our mission is to go where others fear to tread.
The market already knows about the monsters mentioned above – but is being indecisive. Are we pausing to go lower? Are we putting the finishing touches on the 80-day cycle low? We don’t have to know quite yet, but I still slightly favor the latter over the former.
Last night, the market pushed higher right into our buy trigger, but we came back into the two-day range at this writing. Value was overlapping to higher yesterday, and the low was weak as it touched down very close to a volume POC and an overnight low. Carry the low (4344.25) forward as your long/short threshold this morning.
Conquering the overnight high at 4389 with follow-through and acceptance trips the Navigator Algorithm buy signal, but wait for my confirming alert. We would need a couple of hours above the level to convince me.
Then, I would love to see the market conquer the bottom of the gap at 4406.25 to do the happy dance. If we breach the lower threshold, look for a move right to the swing low at 4293.75, and then we will see what happens. Traders have accumulated a lot of short positions, so watch for the bear trap and short-covering rip higher.
I don’t know how they do it, but the market-makers are keeping the market up and around the WEM low at 4472.75 for tomorrow’s weekly options expiration, but the level has acted as resistance thus far.
It’s the last trading day of the month and quarter. That could easily add to the indecisive action.
A.F. Thornton