Figures. We get the breakout we’ve been looking for and then complete failure to follow through. This is a very difficult tape and one that will be hard to swing trade for some time until there is a firm trend in place.
We could actually get the trend started by the close of this week. But for now, remember – from failed moves come fast moves. And today was a perfect example of that.
Now, there’s still a possibility that equities rally. We’re sitting on S1 for the month (green dotted line) at 131 on SPY. If we’ve learned anything it’s that the market will do the opposite of what the crowd expects it to.
But today’s action was downright bearish. It may be the start of what I explained last night – only it’s starting the cycle down now instead of closer to 1,400 on the ES.
Looking at the dollar, if we indeed swing higher on the dollar here, this would add support to the theory that the secular bear is now resuming in equities. We got very close to the 74.25 level today before a blast higher.
Gold actually looked pretty strong today but you can tell it’s not where money is running for safety any longer. A trade below today’s low sets it up for a move lower and may be the beginning of a move to 1,250 or so.
Are there signs of strength? Sure. Apple held up pretty well today, and the Nasdaq as a whole suffered less pain than the other indices.
But make no mistake – the warning signs are showing up even if this is not the final top. Cycle low is due in equities by August/September and we’re going to need to watch for follow through on any moves from here on.
Protect yourselves with cash or married puts or whatever WHEN there’s follow through. But for now we wait to see if those monthly pivots will do their job.
Stay safe and trade the extremes!