The S&P 500 got off to an impressive start Monday, at one point posting a gain of 48 points. Once again selling conviction picked up producing another ugly set of daily candlesticks.
Early in the session, today’s high exceeded Friday’s, which is what we want to see (compare A to 1 ). Then, the market reversed sharply and dropped below Friday’s low (compare B to 2), which adds to the concerns we had at the end of last week. Price was also rejected near 2700.
As shown in the chart below, the market also recaptured the 61.8% retracement intraday, and then closed well below it (the attempt failed).
We have the same concerning “failed attempt” look on the daily chart of the NASDAQ.
The market needs to show us something that looks like a bottoming formation. Rather than getting that today, we got a concerning reversal near key areas. The data says “inflection point”. It is difficult to make the claim the market is siding with the “big push higher” case given the shorter-term evidence we have in hand as of today’s close. To the contrary, the charts in their present form still say “be careful out there”.
As noted on Twitter and in this week’s video, it is extremely important we remain highly flexible in the current inflection point environment. We can always buy back once the data starts to show some meaningful improvement. Given the market’s still vulnerable look, our cash positions help mitigate the “another sharp leg down” risks that have yet to be cleared. They may be cleared soon, but we have little-to-no evidence in hand at this point. We will continue to take it day by day.