OK, So Now What?

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Misplaced optimism really rubs me the wrong way. And after Thursday’s close, the world was absolutely drenched in the stuff. If you watched the coronavirus briefing, as I do each afternoon, you would have rightly assumed it was the last one. There was an enormous “good work, everyone, we’ve learned a lot, take care!” vibe to it, and it seemed clear that the mood was much very one of victory and completion.

This was reflected in the after-hours market as well. Since the ES successfully managed not to crack 2750, it took a rocket ship higher, and it tagged the line I put in place from early in March.

The NASDAQ, which has been even stronger than the ES for the past month, also matched a prior peak on a line I had drawn over a month ago. In both of these cases (ES and NQ), obviously we could slip right above those lines and be on a path to yet another horizontal.

If this happens, the next meaningful Fibonacci level for the ES is at 2930. I’ve tinted the approximate area where the ES is trading now to illustrate where that retracement level is in relation to present price activity.

Looking at the big picture, however, this is still a broken market. The long-term uptrend was completely shattered. I’ll be the first to admit that this counter-trend rally has been far more powerful than I dared imagine, and I am not looking forward to the opening bell tomorrow at all. Not to say that I am insanely positioned. I stopped trading options over a month ago, and my personal account is simply cash. My main trading account, however, is chock full of individual shorts.

The image above is quite deliberate. My view is that the stock market is very much like a person who has been in a horrific accident and has been recovering in the hospital.

When a person has suffered dreadful injuries, you can be encouraging to them, you can cheer them on, and you can offer words of solace. What you cannot do, however, is make everything exactly like it was beforehand. Something big has taken place, and as encouraging as we want to be to the aforementioned patient-on-the-mend, let’s not kid ourselves: what has transpired, and what continues to transpire, is a very big deal, and we cannot simply wish it away.

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