The S&P Just Fell 6.3% From the Highs. Why I’m Not Ducking for Cover.

Right out the gate, ding ding ding, then the markets followed Wile E. Coyote straight into the chasm!

Price behavior has been skittish for 2 months and I’d all but given up talking about the bear, as this type of price behavior can be seen for long periods of time. My first time observing it was back just prior to the 2008 crash, and for around 2 months we saw this type of skittish behavior, and the writing was on the wall for the prior 2 years for anyone who cared to look, but that is by the by.

I think that always the speed of movement catches people off guard, and for myself, my mindset was actually in bullish mode with some remaining bear hedge type positions open.

The bear hedges were crash protection type trades, deep OTM, 200+ points away at entry and pre crash were over 300+ points away, which in a twist of fate are expiring today (Friday) and coming good to lock in profits. Luck of the draw and nothing else but that, nice to have a little something ticking over and spilling over from crash season.

Last week’s little knee jerk move was all I thought we’d see, as that’s all we’ve seen the last few years, a quick sharp 3-5%’er.

On the bright side the intraday setups are there, and all this corrective move is doing is setting up a score of opportunities for the astute buyer.

Market corrections are huge buying opportunities for longer term investments and ideas. The Warren Buffetts of the world will be looking for good value investment and discount buying opportunities. Most novice traders and investors will panic sell at the worst possible price rather than sit through and look to add in.

One trader, interviewed under his desk, said he was fine.

The time to duck and cover is NOT now, the time to remember you ARE a trader is RIGHT NOW.

Scroll down for yesterday’s crash special in brief, the ranges that finally broke, the breadth, the 2 levels I’m watching on the S&P, and NFP.

The Crash Special – The speed of movement catches people off guard.

I covered yesterday’s sell-off as it happened in a News Edge crash special. The news everyone blamed, the AI build-out under threat from the new Congress and local data-center ballot measures, plus Qualcomm, Arm and Micron, was public by breakfast. The chips sold it before the bell, with SOXX opening 4.70% lower.

The S&P futures did almost nothing with that news overnight. About 95% of their fall came after 09:30, and it came as a steady queue of down bars, not one crash candle.

The futures spent all night standing on thin air. At 09:30 they realized it was over the hangman’s drop, and the lever had just been pulled.

By the close the S&P 500 was 4.36% lower at 7,353.73 and the Nasdaq 100 6.36% lower. The VIX finished up 69.66% at 28.18 with its curve still inverted, while high yield credit held inside a 1% move. Credit has not joined in.

Market Snapshot – Finally out of the ranges.

Over on the snap view I’ve marked off the highest highs to recent lows.

• Naz and S&P are breaking new ground and finally out of the ranges.

• Naz was nibbling at the 10% down and correction territory.

• Russ was already pushing to the 10%’er and is now back in that zone, not “…yet…” breaking new lows but close.

• Uncle Dow is standing very straight in his good suit, not looking down into the abyss. Dow is holding itself proud, still inside the range and holding the lows. One little push on both the Dow and Russ and we could well see a new leg down.

• The world has finally found something AI can’t do: hold its value. Global markets are also selling the AI theme and there could still be a little more blood to bleed on the street.

Sentiment – Remains low.

On the sentiment chart the number of stocks above the 200 moving average remains low, and again making a push for the below 40% of stocks level.

SPX – Close enough to just call it the 7300 level.

On the daily S&P chart I’ve marked off the current move, and the highs to yesterday’s lows are -6.3%. The next level of technical support is the 7294 level, and close enough to just call it the 7300 level, which is the low of the last consolidation zone from back in May-Jul.

I’ve also marked off what 10% off the highs looks like, and that puts it at 7059, and again close enough to just call it 7060, and just below it is the April consolidation lows.

NFP – Help or hinder?

NFP is just before the markets officially open later today, for me as I’m writing this, and the only question on everyone’s mind is, will it help or hinder the moves that are unfolding in front of us?

Meme of the Day:

Trade well,

T2 Markets

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