$SPY closed beneath its lower Bollinger Band for the 4th day in a row. This is a sign that the market has moved significantly to the downside, and just like a market that trades above its upper Bollinger Band, a sign that a strong trend is developing.
Since the trend is arguably to the downside, we must adjust from a dip-buying mindset to that of the cut-throat villain whose number one concern is protection of himself and his dwindling assets. In other words, we sell the rips.
This market is quickly developing into one which must be traded with unwavering confidence, borne from battle-hardened experience. The market will bounce. But it will only be a bounce, and the bounce must be sold. Period. While the lows may not be re-visited after the bounce (they likely will be), there will again be lower prices. One can be almost 100% certain that there will be no V-bottom. Volatility begets volatility.
I expect the first $SPY rally to run to around $141 to $142. I would not be surprised to see it run all the way back to the 50 day average before reversing. But it will reverse. The first rally will be a great opportunity to unload anything that one wishes were unloaded during the last rally. After that, I’ll adopt a wait and see approach.
I’m expecting more volatility, ups and downs, and then a slow recovery, rather than a prolonged correction or bear market. Beware though, every bear market starts with a down day, and then a pullback…
All the above is only me speaking from my gut. iBC celeberated its 5th anniversary yesterday. This blog was literally inaugurated during the onset of one of the worst bear markets in modern history. Around here, when we smell bear, we prepare for battle. One can have the best systems, the best evidence, and the best battle plans, but if he doesn’t have the testicular fortitude to pull the trigger, to make the trades that need to be made, then it is all for nothing.Comments »