Sometimes it is just plain scary how right one can be. Markets have a way of humbling everyone from time to time. So I almost never brag. Cautiously I take a look at last week’s post, A Bridge Too Far, and see that the S&P 500 did just as we expected. The market continued its correction, the 50 day moving average provided no support at all, and the bounce today failed at just below the 50 day average!
From our previous blog posts you may remember that the $SPX 1345 to 1360 area, we felt, was a critical support resistance area. Sure enough the $SPX battled in late February to break through and then tested and held the lower end of the support area. The rally lasted, but rolled over short of a longer term resistance area around 1440. Now what do we do?!
In our opinion, we do not think the price action is very bullish. If the support cannot hold here, we think the probabilities of a fall back to the 200 day moving average is in play. Roughly another 6% correction. The only way to negate a probable move to the 200 day average is for the bounce here to forcefully take out the 50 day average and have decent follow through for a couple of sessions. Maybe, just maybe a trading range will form with 1350 being the bottom of the range. Our outlook is for the bearish outcome to have the higher probability, a trading range with a lower end of around 1350 to have a lower probability, and a continuation of the rally to new highs above 1420, the least likely outcome. Sorry Champ! Wish we had better news.
Ternion Market Talk 