SPX was overbought and no longer is as it makes a thus far normal pullback
From NFTRH 654…
Last week (NFTRH 653): “Who can predict? It’s been over a year now that the thing to be has been bullish, despite the periodic jitters cropping up along the way. This easing of momentum could just resolve in another little blip (FOMC and the havoc it creates among the machines) to refresh, it could resolve into a moderate correction to the 50 day average (again) or the thing could rip the shorts’ faces off tomorrow.”
Yellen apparently jawboned future rate hikes on Tuesday and the market plunged bigly (okay, it micro-blipped down with a Hammer reversal at the EMA 20) and also jawboned the April Payrolls report on Friday, to the joyous effect of a new high to end the week.
Why again will NFTRH not be your earliest guide to the next shorting opportunity?
- Because its writer is psychologically better able to endure losses from the long side of a bearish market than from the short side of a bullish market.
- Because bull market trends grind on and on, while bear markets tend to be, after an initial grind to compromise the trend, much quicker and more violent affairs.
- Because the bears will one day be right, but most of them will be spiritually demoralized if not financially bankrupt by the time the payoff comes.
For these reasons a transition from bullish to bearish would look like this (actual/projected)… Contrarian bullish amid terrorized sentiment & Fed intervention > Bullish w/ the trends and w/ proper sectors > Bullish w/ the trends & market rotations w/ risk management (current) > Initial bearish signals like loss of momentum, wobbling trends or manic spike & blow off amid a structural sentiment backdrop opposite to Q1 2020’s sheer terror > Raise cash further > Depending on technicals, look for shorting opportunities to either hedge or net short.
With the caveat that market leaders like SOX and NDX need to avoid breakdowns (they are close) here is the SPX chart from above, updated to this moment. As yet, it’s just a moderate correction to the SMA 50. This after it ripped the shorts’ faces off, also as anticipated as a possibility.
Got to hand it to the 2021 stock market. It’s an annoying bugger with all its rotations and sentiment blips. I’ll be happy to raise more cash and even short if/when indicated. That second thing is not yet indicated.
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