The title lets you know where this article is going. For such a routine correction in the US stock market, the Psych/Sentiment backdrop has gotten way out of whack. Do some analysis on Rydex Bull/Bear fund allocations among investors and you will find a historic knee jerk reaction into bear funds over bull funds (by those who still use Rydex funds).
Go do a Google Trends search on ‘stock market crash’ or ‘bear market’ and you get the following results, showing a big rise in interest among the public.
SPX is still in the inflection point I was looking at yesterday morning and closed yesterday at declining resistance from 2096 and slightly over the 50 hour MA at 1945. SPX has broken well above both at the open. The setup for today should be as follows.
On a fill of the opening gap at 1948.86 and sustained trade below there I’d be looking for new lows, which should confirm on a break below Tuesday’s low at 1903.07
On a break above the ES monthly pivot at 1969 (resistance at globex high), approximately at 1971/2 SPX, and conversion of that level to support I’d be looking for a move to the 2030-40 area, confirming on a break over the current rally high at 1993.48. SPX 60min chart:
It’s very, very easy – effortless, actually – to be a bear on a day like Tuesday when the Dow closed down nearly 500 points. Days like that are a kick, and one Sloper pointed out something that hadn’t even occurred to me (even though he was mentioning a part of my personal history): that September 1 2015 was my best day ever, while September 1 2010 was my worst day ever. So – – at least 9/1 doesn’t have a completely awful meaning for me anymore!
Being a bear last Friday is a lot tougher, because the market is roaring higher, and it’s very easy to let six years of bear torture push one to paralysis. However, I shorted all kinds of tickers late last week, and they started to behave themselves Monday and really blossomed (or wilted, as the case may be) yesterday. Of course, today (Wednesday) is more akin to late last week – – – everyone is buying like mad, driven principally by the federal statute that decrees the market must be the exact opposite of whatever Gartman predicts.
After the now-famous WSJ post, it seemed as if a bottom had just been called in gold…
It seemed that the elements were in place for a contrarian rally if not bull market bottom. Along with negative gold items routinely appearing in the financial media and a Commitment of Traders structure that had become very bullish, gold sentiment was bleak by indicators we track in NFTRH.
My how a 6% rally with an accompanying stock market down spike have changed things…
Here’s today’s swing-trading watch-list:
Short Amazon.com (AMZN)