If we get a bounce next week, look for a retrace to around the 3122 level in $SPX. This would be a good time to close out long positions held through the most recent declines. Market moves like we saw over the last week warrant a need to be defensive.
Comment:
Currently now 1% away from the 0.5 retracement.
Comment:
With futures up, there's a good chance we'll reach the 0.5 retracement (~3122). It seems likely that we'll see the rally end there, but given the severity of the decline, it's possible we some extension past that typical counter rally level.
Regardless of the exact levels, we are still very much in a distribution phase, which means it is very unlikely to see a complete reversal and a restart of the advance we saw prior to the correction. As buyers step in thinking that the worst is over, smart money will be looking to sell the remainder of their positions that they were caught holding during the fast declines.
As Jesse Livermore said, "I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.”
Regardless of the exact levels, we are still very much in a distribution phase, which means it is very unlikely to see a complete reversal and a restart of the advance we saw prior to the correction. As buyers step in thinking that the worst is over, smart money will be looking to sell the remainder of their positions that they were caught holding during the fast declines.
As Jesse Livermore said, "I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.”
Comment:
We hit the 0.5 retracement level today and then quickly retreated from there. Now we're likely to see another visit of the low around $2847. If that doesn't hold, we could easily see SPX going to the 1.618 extension around $2507.
The stock market often acts as it was governed by the laws of physics. The move down was fast and went further than one would have expected, so the move back up will likely appear as fast, but unlike the move down, it will meet a great deal of resistance, which for a bouncing ball is gravity, but in this case is fear, uncertainty and doubt.