The monster rally that we had last week that was bullish engulfing and had everyone bullish again calling the bottom, is gone.
The past three days we have seen massive distribution across many of the sectors and the overall market. The market gapped up at the beginning of the week because of Trade news and then this was all but massively sold into for 5 straight days. This is some of the most bearish price action that I have seen in the past few years. Look at the chart below.
You can clearly see that the market is really pressing to see if buyers can hold it up. Back in February I was not surprised to see the volatility spike due to the increase in the rate of change of price into highs, I bought this a couple times on the lows. Once we made it back to highs in September I was a seller there.
Now I have been of my long term accounts and 401k since then and have only bought a couple times holding for no more than 3-5 days. As time has progressed it is very important to note the past price action and data points that we now have and be very open to possibilities that most do not think could happen.
If we have follow through next week to this Bearish Engulfing week, you are looking at targets in the SPX of at least 2500 at the February lows (which is not going to hold), and then 2350. The latter seems more likely considering we have not tested this weekly moving average in quite sometime. Other price support below that is where the Trump euphoria began and that is around 2100 (blue line).
Be very very cautious in the coming weeks, I will try and keep you out of trouble. For now, stay out. We are not going to be long US stocks (except maybe XLU) for the foreseeable future until the 200 day MA has been taken out and then add over 2808.