Good morning. S&P500 futures are slightly higher this morning, following a rather negative day for the markets on Wednesday. Will these morning gains stick?
As I covered earlier this week, from a 5 year chart perspective, momentum has clearly turned south. The 2 year chart momentum has also soured. Over the short to medium term, until we see momentum turn up, I think we could be looking at more downside action. Which means todays opening rip will likely get sold at some point today.
Sell the rip, Afternoon swoon, these are all hallmarks of a market moving lower. And that is what I think we will see, with the $SPY likely coming into the $272.50 level and even perhaps... gasp.... $SPY $260, which would mark strong channel support.
However, I do think, when this pull back is done, we will embark on another rally to new record highs.... $SPY $300 anyone?
Of course this pull back will be yet another pullback met with recession talk. Market crashes. Correlations to other pullbacks we've seen with calls for 1929, 2000, 2008, and 1987 similarities.
This is it! This is the top! Sell everything!!
Of course we know the louder these calls become, the more likely this is just another garden variety pull back. Weeds get plucked, and hopefully no Roundup was used, and the market moves on more healthier. It was a relentless rally from $SPY $232 to $SPY $295. Now the market is resetting.
I saw $272.50 for the $SPY because that is a key support area for S&P500 futures.
Could we break below that? Absolutely. And if we do, there is a change we could see $SPY $260 before the price action reverses.
and finally.... Small caps.
The leaders since the election in 2016, have broken key support. During this pull back small caps look the most vulnerable. They will also likely be the first to reverse when this sell-off is over.
And of course continue to watch the morning and afternoon action. Buy the dip rules the rallies. Afternoon swoon is indicative of a market in pull back mode. We've been seeing a lot of the latter, much as we did in October 2018 and January 2018, just before the market sold off sharply.