Below is an updated view of the daily multi-index chart marked up with red candles projecting the open (futures as of 6:45 Eastern Time). The market is dropping right to our first key bull/bear support parameter, which means that despite the bearish blow horns we are likely to hear today, support is intact. The channels are being pierced, but lateral support is the key, not the channels.
Even if the market holds this support as I think it may, this appears to be a scout for future bear activity. This is and has been a bearish market. The question is whether there is a bounce before the next failure or is the market is going to fail here and bring on a higher confidence ‘short the bounces’ regimen and likely bear cycle/market? Either way, the ‘intermediate bear trend’ scenario, which we have been nurturing for months, gets stronger by the day.
If current support fails, the next stop is, using SPX as an example, the 1875 area (which is a test of the major lows from October 2014 and August 2015). So the question is whether it will bounce here (projected shorting area, for those inclined is at 2050 to 2065) or bounce from major support (at what would be a bear market decision point) at the 1875 area. That would be a firmer ‘short the bounce’ support level. As noted, I would feel better about shorting bounces after real technical damage, which becomes readily obvious across markets. Looking ahead, one could project 2000 +/- as a future spot to short with more confidence if it is turned to resistance as opposed to today’s support.
Patience (and cash) in the short-term is good until direction comes, and it will shortly. All this talk of shorting is for those who would do so. Cash is the best alternative in a market like this. For those who would make bearish bets, the market is showing its cards, slowly but surely and putting more validation to our SPX “Dunce Cap” top every week.