As recently as yesterday afternoon, my persistent hand-wringing about the bounce was in Full Wring mode, and I figured we might be only 40% done with the bounce. I laid out in a premium post over the weekend that we might be in for more teeth-clinching for the VIX to work its way from almost 30 (last week) to maybe half that value.
Let’s just put on our fantasy caps for a minute and suppose that 1400-point rise on the Dow from Thursday’s low to yesterday’s high was sufficient to relieve the oversold nature of the market and that, unbeknownst to us, the nature of the market has changed so severely that the selling has already resumed. With those rosy glasses on our heads, let’s talk about how each of these indexes might continue to get walloped.
We begin with the NASDAQ Composite. This has broken through two Fib levels already, and it managed to almost rally back to the lower of those on Monday. A failure of the third (just below last week’s low) would accelerate the selling.
The Dow 30 rallied back to what could be a formidable resistance line.
The NASDAQ 100 cracked one level and almost perfected tagged the one beneath, but one good day of selling would violate the second Fib and push us into a new, lower range.
The S&P 100 rallied up to its broken Fib (purposely shown as red here) and is starting to sink away from there.
The much, much longer-term Fibs drawn on the small cap index show we’re still range-bound between two major Fibs, and even if we don’t break the blue one, that’s still a decent amount of drop.
The very important semiconductor index has an absolute mountain of overhead supply that will suppress price increases, and Monday’s peak was satisfactorily close enough to the dashed red line to declare it a completed retracement.
The S&P 500 setup is very similar to that of the S&P 100, with the red resistance line being crucial.
The Dow Transportation Index is frankly so absolutely broken that it indicates an extremely weak economy is dead ahead.
Lastly, the Dow Utility index has been breaking down sharply from its peak, and if it can break the green trendline defining the lower bound of that wedge, it’ll just be another feather in the bearish cap.
I am spread out among 14 bearish options positions and 2 short positions, but I still have about 28% of my buying power left. It’ll be terribly interesting to see what happens with Powell tomorrow, and if history is any guide, no matter what the reaction is to the announcement (which will probably be a non-event), it’s what follows his press conference and the trading into the evening that really count.
