(3/22) We’ve seen too many bear traps to chase shorts. NQ looks like it would be done at 5309 and SP at 2332-34, and those were old targets that we just gave up. Only seasonal weakness has us thinking something bigger could happen but news isn’t really there although overbought conditions are. Dollar looks a bit lower overnight and gold a bit higher. Lots of markets are unraveling but we’re not going to panic. Sometimes the knee-jerk reaction at overdone situations is the worst thing to do.
JUNE E-MINI S & P 500
S&P ANALYSIS FOR WEDNESDAY: (3/22) The impulsiveness of the move down is distressing. We don’t regret buying key numbers but they didn’t hold today. Surprised by today’s dump in the S & P beyond 2359. We had thought a congestion pattern was working and a push lower to 2359 wasn’t shocking but below there opens up a few cans of worms. We can count 5 waves down at 2338.50-2340 but if the market gets a weak bounce that stalls under 2347.50 or 2353.25, we could quickly go to 2334 and then 2318-20. If the market really has 10 day to fall, something bigger could be happening. We have seen too many fund rescues to get too beared up and the news is just disappointment around tax cuts taking longer to get to the table.
OVERALL: Seasonally late March is often lower for stocks and we had started to give up on a deeper break and had been looking for 80 points on the S & P for a while and we are not bearish enough to get back to that just yet but a close under 2300 would open up the door to something much bigger.
Seasonals and the larger cycle are weaker into the end of March and given today’s action, we will not look for new highs until May and a correction is healthy. We had the first 1% correction in 110 days. The last correction we had took 10-11 days and that would bleed into early April if it matches.
We’ve learned that when you miss these big-day moves lower, you tend to want to get too trigger happy with shorts and it doesn’t work, and the bargain hunters are coming in already. Cycles are volatile into Monday so I suspect that we’ll get large congestion pattern and fundamentals aren’t that toxic that everyone is going to head for the exits—although the overbought conditions will invite profit-taking.
CYCLES OVERVIEW: Congestive and higher into Thursday March 23; lower March 24 into March 26-27.