SPX500 / ES - An Ill-timed Bear is a Dead BearThis past week's trading was a good refresher course on what bear markets actually trade like. As opposed to dips during bull runs that suck to short and aren't so scary to go long on because price action continually rips back and makes highs, bear markets will take out a consecutive series of downside lows while terminating virtually each and every rally.
At some point during a good bear market, however, you get that kind of manipulation that comes fast and strong to the upside, bringing in buyers and stopping out and liquidating late bears and greedy bears.
An easy example of this was formed in a miniature on the 1 minute charts of FedEx FDX on Thursday:
It's a risk that all bear market short sellers and put buyers should keep in mind.
When it comes to Nasdaq and SPX, it's important to keep an eye on the clock. We just had an entirely bearish week. And a heavily bearish week prior. With a peculiar form of meltdown on FOMC day after the Fed did what everyone and their dog knew for at least a month they would do: hike 75 bps.
And in response, everything quickly took a run at the June low, and yet for SPX and Nasdaq and the SPY and QQQ ETFs they did not take the June low and even rallied off the June low.
It's like support was found and a double bottom has been made.
But note that Dow did take the June low and also spent some time purging under the pre-COVID highs as well:
SPX and Nasdaq, like last week, finished the week with a fairly strong bounce. The question now, is, do they turn around and take the June lows before the end of the month?
I'd estimate the chances at 65-35 No-Yes, personally.
Consider that this is the final week of trading, a full five days, to form the monthly candle. Consider also that Friday Sept. 30 is also quarterly options expiry. Consider also that timing is more important than price.
A situation we could easily be set up for is a run back towards 4,000 to close month end, forming a monthly pinbar.
Don't think it can happen? It happened in May after making new lows:
On the weekly, it's more painful:
Broken down into the daily, you see that you had a 400 point bounce over the course of 6 trading days:
And on the 4H, there wasn't a whole lot of chance to escape for bears:
And then it turned around and made the June lows, which still stand as the low of the year, if you aren't the Dow.
In my opinion, the truth is that we are going to see SPX 3,400 and NASDAQ 9,xxx in October, and probably a rather ugly month, but rather than a market wipeout, things will likely turn around again after the November Midterm elections are over.
But before we get to that bloody month, you have a week of trading left to paint some hard-to-trade candles, and at least October 3 and 4 where it can still be bullish as the high of the month gets painted before we descend into the near-COVID high abyss under 3,600.
So, what to do? If you decide to go long, it's a scalp, not a hold into a reversal. If you want to keep going short, you need to keep your risk down, or prepare to hold a major move in the opposite direction.
Unless you're patient/liquid enough to keep shorting on the way up.
Of course, just like last week's call, it may just turn around and die, die, die.
SPX500 / ES - It's Still a Bull. Now, Good Luck Riding It
In trading, it's not so hard to predict the future, but it is hard to figure it out down to the day and the hour, so you have to have some expectations about what can unfold in both directions and a plan for what to do when things unfold contrary to your expectations.
Don't get drug into the chaos on social media about recession this and inflation that and Europe this and terminal Fed fund rates that. The U.S. equities market absolutely won't collapse until one, or all, of four conditions are achieved:
1. Everything breaks
2. War
3. Natural disaster
4. Chinese Communist Party falls
The U.S. equities market remaining strong is critical for the Western Communist Party to maintain social stability until technocracy can be installed in the form of Central Bank Digital Currencies and Social Credit under the pretext of a conflict-backed energy and economic crisis.
They need to create a crisis they can save you from, but the window of opportunity to do that is still a ways away. In the meantime, they need to maintain their stability until the opportunity is ripe.
Your western governments have spent years training Marxist-Leninism in Shanghai and Beijing with the Chinese Communist Party. They love the evil Party's ways, because they and the Party have a similar nature. Don't think your governments want to help you and save you.
They believe in Marxism, and Marxism believes in redistribution of wealth, which is a polite way of saying that they'll ruin your life and take your stuff.
If you want a bright future, get rid of this communist and socialist stuff from your minds and hearts and start walking an upright path.
It's the only hope.
