The crowd is either buying dips or selling rallies when it comes right down to it. This morning, we had an excellent long, day trade on the hourly charts. The Weekly Expected Move low drew the index up – and it even overshot the level a bit. But the rally peaked about 11 am EST, and there has been nothing but selling since. And this is even though the bond market and interest rates are behaving today.
Maybe the WEM low will draw us back up again by the close tomorrow. However, should it not, then tomorrow could be a rough day, though market makers have now had a couple of chances to neutralize their risks.
The S&P 500 is threatening to take out the December monthly low as we go into the close. That would set up a potential negative key reversal on the monthly chart. The next stop for the S&P 500 would then be the 200-day line sitting around 4430. From there, we would look to the October low at 4268. And though that would be ugly, it is still only an 11% correction from the December intraday peak.
So we will continue to keep our powder dry and keep the models 100% in cash. But the downside does seem to be accelerating, and a capitulation could be just around the corner. Stay alert for a swing long signal. It feels like the old days and the corrections we used to experience.
A.F. Thornton