Sell the Bounce: Beware the September Front-Run
The S&P 500 has rallied impressively to levels similar to those of last summer. Meanwhile, while On Balance Volume tracked price for most of 2020-2021 OBV has continually fallen for 2022.
1. The volume is not supporting the rally, and so this rally is doomed to fail.
2. We entered through the top of a linear regression channel calculated since the beginning of 2022. An exit through the bottom of the channel preceded the big run from June till now. A foray above the top is a similar warning sign that the rally may be exhausted within the overall downtrend.
3. The S&P 500 has moved almost within 250 points of the last rally (late March) which itself was 250 points below the early January high. If the downtrend is to continue, the breaking point is likely near.
4. September and October are historically bearish months.
5. The S&P 500 does historically poorly during the fall of midterm elections after the midpoint of August (see 2018 most recently).
6. Stop loss above 4400 (as that would mean breaking the pattern of lower proportionately lower highs).
7. Seasonal patterns have been front run this year by about two weeks (expected April bullishness got front run by two weeks, as did the May selloff and the historical late June bottom).
1. The volume is not supporting the rally, and so this rally is doomed to fail.
2. We entered through the top of a linear regression channel calculated since the beginning of 2022. An exit through the bottom of the channel preceded the big run from June till now. A foray above the top is a similar warning sign that the rally may be exhausted within the overall downtrend.
3. The S&P 500 has moved almost within 250 points of the last rally (late March) which itself was 250 points below the early January high. If the downtrend is to continue, the breaking point is likely near.
4. September and October are historically bearish months.
5. The S&P 500 does historically poorly during the fall of midterm elections after the midpoint of August (see 2018 most recently).
6. Stop loss above 4400 (as that would mean breaking the pattern of lower proportionately lower highs).
7. Seasonal patterns have been front run this year by about two weeks (expected April bullishness got front run by two weeks, as did the May selloff and the historical late June bottom).
Trade closed manually:
Closed at 3925. We've bounced off 3850 twice, and the Fed meeting on Wed adds some element of unpredictability. We're closing this to lock in the 400 point gain ahead of the big news.
