The Dow Jones Industrials opened the new week down -500 points on a futures-driven beat-down (S&P Futures opened down -50 points). This move piggybacks the setup going into last week’s FOMC rate announcement. This (in my opinion) is the pros doing their thing, post-FOMC, and so the game here is to figure out what they are targeting to the downside on this forced move lower.
The headlines blame this overnight beat-down on a counter-move by the communist Chinese to allow the Yuan to depreciate above 7 on the exchange ratio to the Dollar for the first time in a decade. This is China’s retaliatory move to counteract President Trump’s devastating (to them) import tariff strategy (which is Great for US). Key US exporters are leading today’s decline, of course, but if you are in the market to buy some cheap Chinese import junk, then the good news is your prices just dropped a bit. Ultimately, however, the Chinese will lose this battle as America holds all the economic ‘Trump’ cards. The Chinese continue to absorb the costs and effects of the transition, while the US continues to strengthens its economic base with increased domestic manufacturing. It’s a brilliant strategy and is being executed flawlessly.
It was inevitable that the collapsing Bush(2)-Clinton-Obama era strategy to weaken America, which is now coming unwound with a Make America Great Again economic squeeze, would eventually create some panic in their circle of accomplices/associates (and bribe suppliers). The global socialist strategy of impeaching/removing the outsider/disruptor (Trump) appears to have failed miserably, and so now we are seeing screeches and wild flagellations as the old ‘new word order’ (thanks Bush I) continues to come unwound. Good riddance, I say, but choking off this abomination won’t come easy and these people will stop at nothing in their attempts to maintain a rapidly-slipping grasp on their horrific vision of global socialism/communism–> where a tiny cabal of global overlords prospers (them) while everyone else (us) suffers.
So, let’s take another look at where we are, technically, after losing bullish support in all three timeframes…
Stops and Targets shows a Bear 4 rating for the S&P 500 Futures and 2,955.50 is long-term resistance.
Next S&T major target lower is 2,732.75, which is nearly 5% lower as I write.
So, here is how the pros likely will trade this decline (in my opinion)…
The key numbers going forward will be the previous day’s low and high. In a decline, the first counter-trend buy will come on a cross back above the previous daily bar low. That might be unlikely to happen today (2,913.50 was Friday’s low), but if not today, then it will eventually happen on a subsequent day. A cross back above the previous day’s low (in a downtrend) is where the most aggressive bears will start to cover at least partial profits.
If/when we get a day where a rally crosses back above the previous day’s high, then the most aggressive bears will be getting completely out of short positions and the momentum bulls will jump in on the trend change to double up buying volume.
So, remember to watch the current short-term range envelope numbers for those eventual crossovers for a clue when the reversal starts. Reread the first sentence of this paragraph and remember that–it’s very important from this configuration!
This ‘feels’ like a forced/planned correction to me since there were no unanimous spotter signals triggered at the top, but it’s fully-bearish here until it ain’t and the previous day’s low is the first line that must be crossed to potentially start to flip the momentum.
Remember also that our Weekly Bar Paradigm ‘hard deck’ is currently sitting at 2,732.75, so that’s the edge of the wiggle room for a significant correction before this pullback/decline potentially turns into something much more ominous.
The previous bullish trend change numbers after the last major pullback were at: 2,845.25 (intermediate), 2,767.75 (short-term), and 2,722.50 (long-term). Those are the full trend reversal/breakout retest targets lower.
A big fist bump here to all my bearish friends who caught this downdraft entry from the setup in my last post at 3,001.50! Keep an eye on the short-term (daily bar) range envelope as explained above.