The market looks poised for a bounce back up, perhaps as high as the trendline off the March 2020 low. If it gets to this level or has a material bounce, I will be looking to short a few positions I have on my list. It’s all about COVID again. If anything were to come up to show the vaccines are not working, this market will drop like a rock. So far, thankfully, that is not showing up. However, we are well overdue for selling and perhaps a market correction. So, what we could be seeing is simply a healthy correction in the market. Or it could be something more. When the market tanked in 2008, the beginning selling wasn’t done in September when Lehman went bankrupt. If you look back at charts, it began in June 2008, and long before anyone was really paying attention. So, while we look to the fall as seasonally weak, sometimes the first wave of selling happens in the summer to hint at what will happen in the fall.
My best scenario would be a pop to the March 2020 trendline (around 4350-4370) in the near term, followed by a struggle to regain the trendline and then the market tanks into the end of the year. Will this play out? Who knows, but the gap down today and the power of that trendline has it as a decent possibility. At a minimum I would like to short the gap fill in the S&P if we get it. Let’s see what tomorrow brings! Have a great night!