Bottom Testers Being Tested

We have been anticipating a test of the February lows and the SMA 200, and boy did it come like a freight train this week with Trump/China as an excuse (though in my opinion, not necessarily the reason). During the initial plunge in February when I covered shorts and bought the SMA 200 we also noted a gap around SPX 2640 that could easily be filled within the context of a future ‘retest’.

Here’s the chart from that post. Do we get a nice, neat re-touch of the SMA 200 (the Dow is on a similar test) and live happily ever after? Well, I have not covered a single short yet. In fact I added a couple yesterday in the persons of former and frequent long position INTC, along with TSLA just because I hated its daily chart. Back on SPX, a gap fill down in the 2400s would be an A-B-C correction as originally anticipated. Then who knows? Maybe the market can see about the two upper gaps later in the year.

spx

While SPX could conceivably hold here (at the SMA 200) it has a couple of issues with respect to the neat SMA 200 & happily ever after scenario…

  1. Volume does not yet seem to indicate capitulation (on SPX, SPY and several other indexes/ETFs I looked at) and…
  2. The margin man is notorious for making plans all weekend in search of bulls who may be out over their skis.

I’d love to see a Monday AM flush to fill the gap but whatever, the market always fails to consult me on what I love, like or don’t want to see for that matter.

Have a good weekend.

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