SpM Contract high one week ago today. That’s right, Its been exactly 1 week. Today’s low as of this writing is 1809, but we’ll probably get an 1800 print. That’s a whopping 3 percent correction.
1674 would be a 10% correction that bears have been praying for over the 4 months.
On this chart, the bottom of the channel is 1781. We might be there next week if the bears get their teeth into this market finally. They tried in February, but only got a 7% correction, followed by a bloody nose to all the weak shorts as stocks rallied and chased them all out, (chased out by their margin clerks, or their trading software or both)
Moving on to the more narrow Dow futures( June basis) A week ago today we saw 16,574 after the un-enjoyment figures were released for a new record high and kick in the gonads for all the bears who sold the February low at 15,216. 16000 was tested multiple times, and finally faltered, with a low tick so far at 15,539 15, 911 was the low on 3/17, and we tested 15,939 on Feb 20, That’s a big technical level to watch, in my opinion.
15,211 remains the 6-month low and the cherry on top for the sell off earlier in the year during February.
I will say that 16,400 looks to be the top of the trading range , which has stymied bulls since late December. I am not, as many are, ready to call in the top and start moving to cash, canned goods, potable water and silver coins. Given that we are just one week removed from and all time high, its only logical that we do some back filling and profit taking. However stepping out and screaming that the “end is near”, seems drastic to me at best, and just plain melodramatic at worse.
16574 minus today’s low (so far) of 15,939 is 635 points.
I can hear the TV commentators crowing now “OH MY GOD over 600 pts……”. What they NEVER talk about is what that is a PERCENTAGE. Using those numbers, its a 4% correction.
4%. … 10% would take us down to 14,917. We’d be below 15,000 and then they would have something to talk about.
However, if we get that correction, its going to be interesting to see who is talking about stepping in and buying the dip, vs. selling more and heading into their “safe room” or bunker.
I have no idea where this thing is headed. If the 15,200 level gets taken out, I’d be adding to shorts, trying to go with the sell off, to try to catch that trend.
But on the first test , I’b be a buyer. Right now, if you are convinced we are heading there, its a great time to put your $$ where your mouth is and get short. For now, I still think the trend is higher, people are bearish, and this market will continue to climb a wall of worry.
There will be plenty of opportunities for both bull and bears to catch moves in this environment, however.
1) pick your spot, 2) set your stop 3) turn off the machine and check back much later. Intra-day volatility is going to be pretty interesting over the next month and a half.
If you are long via an IRA , all you can do to sleep better at night and lock in your gains, is spend some insurance money on some cheap puts. If the market does take a header, you’re puts will help you.
However, if this is just a head fake and we are going to continue to rally in the face of negative sentiment, then you need to stay long your stocks.
If you think you’ll need the cash in the next 3 -5 years, then be more defensive. If you have a 20 or 30 year time line, use the panics to buy dips. That is my opinion after watching stocks since 1976 when I turned 10yrs old and found out what a stock was and what those numbers on the TV at night meant to real people.
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