It’s an eerily quiet morning as I’m looking at the “markets” as to see what has transpired overnight. As of this writing the level that I said to “watch” has done precisely what I proposed. Again, as of this writing, there is no real follow through either way, which turns my apprehensive radar to 11.
As I outlined last evening the possibility of the scenario that I argued playing out gains odds the longer we both stay, and fall away from that level I highlighted. So the big question on everyone’s mind, I’m sure (for it’s also on mine) is this: “Then what?” Fair question, so here’s my hypothesis. To wit:
The above is the S&P 500™ Futures represented via daily bar/candles. If, and I must implore, if the scenario plays out in a similar fashion to what I argued the other day, what you see above represents where I believe this market has the potential to realize in short order.
I used the futures for two reasons, the first:
The futures contracts are where “Pros” or “Big Money” as they say, reside. This is where the hedges and others will be made and the swings to where there may, or may not be a floor or ceiling gets represented here best. And if you look at the levels I marked with a 1 or 2, they line up far too squarely with other technical levels that both humans, as well as machines might follow. So this is where I would be focusing for any and most clues, especially when volatility has once again reared its head.
The reasoning is simple: The futures trade overnight, hence, if a level of support or resistance plays out in the overnight, it may in effect precede any, and all exuberance, or fear, in the normal hour markets. This is how you could wake up to “Black Monday” type scenarios, or panic selling into the close may be reversed in the overnight hours leading to what may seem as a euphoric buying frenzy at the open.
It’s been many years since any of these scenarios have even been postulated, never mind, even considered possible, But with the Fed. now in the “pulling money out” mode as compared to “putting money in.” One has to once again be ready for anything.
Will it play out this way? Hint: No one knows. However, with that said here’s the underlying premise coupled with a probable conclusion.
As you look at the above chart remember this…
Everyone, especially the so-called smartest of the smart paraded on media argued the above “cliff dive” was all but assured to not be in the cards. And there it is, and now sits in the #1 position of history as the most points lost – ever – in a single day, coupled with, these same people said that based on what they perceived as “all baked in” any and all QT (quantitative tightening) worries, i.e., “The market knows, it’s prepared, the economy is strong, not an issue, blah, blah, blah.” Or, my now personal favorite, “If you’re holding cash, you’re going to feel pretty stupid” That came from none other than Ray Dalio as he appeared with the fawning mainstream business/financial media press at Davos. Or said differently: If you’re not all in on stocks, you’re stupid.
Then the above happened, and now, it appears he’s changed his mind.
Funny how that happens as soon as The Fed. went from lip service of reducing the balance sheet, to full implementation as Janet walks out the door, is it not?
Then again, what do I know. Just ask the “experts.”
© 2018 Mark St.Cyr