After two years of relentless upside, February has finally provided that long elusive pull back for the market. The cracks were forming last week, with an almost too obvious head and shoulders topping pattern forming. I pointed it out a few times last week.
Yellen's last FED meeting has marked the top of this bull market... for now...
It's hard to believe just how far prices have fallen. If you stepped away just for the past few trading sessions and come back to $SPY $250's, you have to be wondering what the heck just happened.
However from a longer term time frame, the downside action looks less panicked.
and even over the two year time frame, it is a similar picture:
and despite the large drop the last two sessions the $SPY is still trading higher than it was back in November.
Put that into perspective with the incessant bearish calls, those who have been calling for this type of move to occur every month for the last 8 years. It's been some 280 days of bullish action, followed by 2 sessions of sharp correction. Clearly this bull market got real. And like any market, it got well ahead of itself.
And while its been great being bullish during this massive rally to record highs, just because you haven't been calling for this market to collapse every day since the bull market began in 2009, doesn't mean you can't participate on the move lower. Some great trades for downside were to be had.
A pull back like we've seen the last two sessions will get those top callers and crash callers puffing out their chests again. But the reality is the market goes up far more than it goes down. And when the dust settles on this most recent pull back, I think it will be just another base for this market to move higher from.
The good part about a market correction is prices are moving again. And price movement = opportunity.
The question most people are asking is, has the market finally topped? It the top in?
I did find it curious that the DOW fell 666 points on Friday. Remember the low of the S&P500 was 666. Also the head and shoulders Nasdaq top was quite emphatic.
However I don't think this market is done quite yet. The Central Banks opened the Pandora's box in 2008/2009. And every sharp pull back for the market has ended up being a tremendous buying opportunity. This most recent pull back has come quick and has been relentless. However I think the outcome will be just the same. Any type of market panic will induce a more Dovish response from the Central banks. The market is that 8 year old that still sucks its thumb and uses a pacifier. Rest assured, the Central Banks will make sure it remains happy.