Last Wednesday, I posted the following S&P 500 daily chart as a scenario that I thought would frustrate the majority of traders, as the market has a propensity to do.
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As we know, the market did indeed roll back over late last week, albeit staying above those 1101 lows from August 9th. Accordingly, the number of traders calling to sell every rally as we are now in a bear market has increased dramatically. The rollover on Thursday was swift, and even bears stalking shorts were likely forced to chase, unless they had anticipated it in the face of a huge risk of being squeezed much higher. Note also that longs who had aggressively bought two weeks ago were also frustrated by this scenario, given the violent declines late last week, with many stocks and quite a few sectors making new lows.
The main thing that equities need here is a few days of quiet action, including gold coming down and volatility abating. Unless this is a 1937-esque collapse, I expect the 1260 area to be challenged in the coming weeks, as it was essentially the site of breakdown.
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If we put in another swing low this week, I may be tempted.
Exactly right… high volume key breakdowns/breakouts more often than not will be tested again… 1260 is a high probability play.. IF we get the decrease in volatility that we need…
Don’t look now but the 200 day is starting to slope down…