S&P 500 Futures – ETH Data
The market (as measured by our S&P 500 index proxy) has been battling to hold the weekly mean and managed to close above it today. I like the current negative sentiment and its interplay with the projected 80-day cycle low. In other words, there is a good context for an intermediate low.
There will always be a negative correlation between confirmation of an intermediate low and our returns. The more confirmation we have that the low is in place, the further we will typically be from the low when we enter. The further we enter away from the low, the greater the risk of a reversal to retest the break higher when we enter. If we are wrong about the low, the further away we enter also exacerbates the loss to our stop. Always bear these issues in mind.
Today’s close leaves price in the familiar teetering position. It not only sits at the weekly mean, but the price also approximates the August monthly low and the highs of the last few trading sessions. So this location is resistant, and I will need to see some upside follow-through to issue a buy signal coincident with a green Navigator Algo arrow. Nevertheless, the price action is encouraging today as was the strong close.
Keep in mind; I am not predicting or expecting the market to move up to new highs. A trading range is the most likely outcome from the break of the 60-week bull microchannel. At the very least, a move up to the top of the down trend line is possible. We will need to see the market eventually conquer that line as well, but first things first.
Risks abound, as they always do. China and a grab for Taiwan remain my biggest concern. But would they do that before they host the Winter Olympics in February? There is no way to quantify such black swan events except to keep your downside guarded should we issue a buy signal tomorrow.
Consider this your heads up, but we have come close to buy signals several times since we went to cash on September 10th. Though we came close, the signals never manifested completely.
Stay tuned,
A.F. Thornton