S&P Rejected at Resistance: Near-term Cascading Crash Likely!
The US stock market has done an amazing job of absorbing bad news lately. Hopes that the Fed would continue to lower rates have buoyed stocks despite rather bad news in the US-China trade war. Friday reached a new apex in the trade war as Donald Trump "ordered" companies to leave China after China retaliated with more tariffs on US goods.
The price action in stocks has been sideways in a massive range. I like to think of these ranges as gathering energy for the next move. When the market breaks one way or another, the move tends to be more aggressive, fast and unforgiving. I think it is safe to say that the trendline drawn on the futures charts above will hold for some time. A solid rejection at resistance has occurred after being rangebound for weeks. Do take note that these trendlines do not exist on the regular SPX chart because it only shows normal trading hours data. In my opinion, the overnight data matters immensely and anyone looking at only the $SPX is missing half of the picture.
Given the current fundamental news, I am forecasting the the market will break the near-term support at 2825 and make a move down to at least 2730. The VIX is also at a very low level (20) given the recent volatility and I have a strong belief that it will be re-rated into the 30s before this sell-off is over. The market will oscillate wildly as it always does in down-markets, but I think we can safely be short here for a bit of a cascading crash.
Short the market here at 2855:
Target 1: 2730
Target 2: 2640
A stop should be used at any break of the trendline drawn above.
The price action in stocks has been sideways in a massive range. I like to think of these ranges as gathering energy for the next move. When the market breaks one way or another, the move tends to be more aggressive, fast and unforgiving. I think it is safe to say that the trendline drawn on the futures charts above will hold for some time. A solid rejection at resistance has occurred after being rangebound for weeks. Do take note that these trendlines do not exist on the regular SPX chart because it only shows normal trading hours data. In my opinion, the overnight data matters immensely and anyone looking at only the $SPX is missing half of the picture.
Given the current fundamental news, I am forecasting the the market will break the near-term support at 2825 and make a move down to at least 2730. The VIX is also at a very low level (20) given the recent volatility and I have a strong belief that it will be re-rated into the 30s before this sell-off is over. The market will oscillate wildly as it always does in down-markets, but I think we can safely be short here for a bit of a cascading crash.
Short the market here at 2855:
Target 1: 2730
Target 2: 2640
A stop should be used at any break of the trendline drawn above.
Trade active:
Short @ the open. Trump gave us a gift this morning by lying about progress in the trade war to pump the market. This one should get sold and sold hard.
Trade closed: stop reached:
And just like that, we blow through the resistance trendline. I am stopped out.