200 DMA Failure Confirms Bear Market

Now that the indexes have broken out of the last major down channel (drawn in blue), the 200 day moving average (in purple) is the next major resistance. The S&P 500 has failed to hold above the 200 DMA three times since Oct 2018. Holding above the 200 DMA is the real test of being in a bull market or not--bull markets hold over the 200 DMA for extended periods while bear markets are rejected at the 200 DMA. Having another major market turn at the 200 DMA, (especially without having retested Dec lows or even built any significant resistance points on the way up) is going to look very BAD in my opinion. But the market is so over extended now I don't see how it can rally over the 200 day MA and hold.

So the market moves up, whistling bullishly, oblivious to the bear market confirmation it has primed itself for. This rally has been impossible to short, but going long now would be similarly doomed. So short at the next break under the 200 day MA, and watch as the market collapses.

Trade active:

The market is almost to the 200 DMA at about 2741. The set up for the best short in since last December is almost here--less than 10 points now. Hopefully we'll get a daily close over the 200 SMA, giving a very clear short entry on a daily close under it.

Comment:

Looks like I might not get a close above the 200 day MA. Nice intraday double top happening now though... if the weakness holds into the close I'll short. Stop has to allow for some movement as it might make a run at over the 200 later (or even bounce around the 200 for a few days). So stop will be if the index closes over the 200 day MA for 5 days in a row.

Comment:

By the way, the 200 day MA is now 2742.

Comment:

So far the action today is not weak enough to short into. This looks like a consolidation, not a break down. We'll see how it closes, but so far I'd still wait to see if we continue up to close over the 200 day ma.

Trade active:

Breakdown started. Expect this to fall for weeks, with intermittent small rebounds even as it continues to trend down.

Comment:

All this good news today and yet futures show the S&P 500 hasn't moved over its 200 DMA. The day is young but this looks like a perfect setup to make a double top / lower high from highs last week.

It's gotta break over the 200 DMA and hold for a number of days to stop this trade out.

Comment:

Ran up on news to finally hit the 200 day MA. But RSI divergences everywhere from the daily charts down to the 5 minute chart--means declining momentum.

Comment:

Rejected at the the 200 DMA as expected--in just a couple daily bars after breaking over the average, similar to the previous moves. We gapped down to open below the 200 DMA this morning, which turns turns yesterday's gap up into an island reversal.

Comment:

We are not going to close back over the 200 DMA for a long, long time.

Comment:

Hopeful bulls pushing the S&P back up to the 200 DMA (which is now about 2744) intraday. That's a good intraday short entry in my opinion. Or wait until the end of the day to see a close below the 200 DMA if you want to be conservative.

Comment:

The bulls don't believe rallies ever end. They've closed the gap and are fighting to close back over the 200 DMA. This will be an interesting close.

Comment:

Yesterday closed right at the 200 DMA... over night in the futures market it tanked well below then rebounded into the open to new highs--total chaos. This is a market move for the record books, both the Dec decline and the unstoppable rally all this year so far. I guess the S&P 500 is headed to 2800? But why would it stop there? Why not new highs?

I'll probably close this trade by the close if there's no stunning turn lower. This is not topping action. 200 DMA looks broken out, retested, and now headed higher.

Trade closed: stop reached:

Closed. See you at 2800.