I think SPY needs to pull out the bear spray and get those nasty, filthy bears outa here.
But alas, just as AMZN’s stock fell short post split, they fell short on delivering the bear spray in time to salvage the market from complete and total ravaging!
So let’s recap this hot mess. I have been away in the wilderness for the past week so this post is more to help me get re-oriented to the market because it seems a lot has happened.
(In classic Steve fashion, its a long post. Key points are summarized at the end for you TL;DR peeps out there ;) ).
Recap:
Tanking. That’s it. Its tanking. And like, its tanking at an alarming rate. If you remember my post “Timelines and Targets” which I believe I posted about 3 weeks ago now, this week was supposed to be 371 target. And then from there I anticipated a bounce and then within 2 weeks, time series said we would be testing 362.
We tested all of those targets this week. Every. Single. One of them. And like, don’t get me wrong. I am ecstatic at how accurate my time series targets have been, but man! WTF! Like this is too fast! Like so fast that I essentially missed these big moves because they are just being rocketed past.
It seems the 362 target was the target where SPY decided to put the breaks on and that is kind of where we are now. It also happened to be the last target I had planned for because I hadn’t done further analysis past 362, thinking that would still be another 2 weeks away and that I would re-analyze at that point.
SPY’s close price is currently sitting at -3.41 (manually calculated; see chart below) and roughly just below -2 on my Z-Score indicator (which looks at high and low averages). Insane!
SPY is consolidating and the consolidation looks somewhat similar to a diamond bottom (see chart above).
SPY remains oversold from a Z-Score perspective and on the RSI, especially on the 4 hour chart which has yet to remove itself from the oversold region.
So what is happening?
Looking at the data, its obvious that the market is in full fledge panic mode. SPY has been unable to hold any semblance of bullish sentiment. Any gap up or any buying is immediately rejected. Bullishness is met with equal bearishness. My bullish break and bearish break targets are no longer effective, because as soon as SPY breaks a the bullish break, its immediately rejected back down. The market is accelerating its trajectory faster than I had mapped it at 3 weeks ago, and its just in full fledge free fall mode right now.
I will add, none of this is normal. This is panic at its zenith. And while I have been stubborn and adamant that this is not similar to the 2008 financial crisis (it still isn’t yet), we are actually getting there.
Essentially, if SPY decides to continue to tank at this rate and we hit -4 SDs, we will have seen the same type of selling that happened during the 08 crisis and collapse. This should be somewhat concerning to most of us because the effects will be fairly devastating to the market.
What price is -4? As of right now, -4 SDs would be achieved if SPY closed at or below $350.
VIX
For you VIX lovers, I will briefly discuss it here:
VIX is finding hard rejection in the 2 to 2.5 SD range. We also see that it is doing lower peaks on the Z-Score, recently being rejected right off 2 SDs and after today’s close, VIX is resting at 1.66 SDs. This also kind of looks like a double top on VIX, which you can see happened recently and was followed by quite a bit of selling on the VIX and a bounce on SPY. So that is somewhat promising.
A drop to 1.5 SDs would equate to a VIX price of 30.55. If VIX were to drop all the way to 1 SD, which would, in theory, be a nice bounce on SPY, we would expect to see a price of 27.58.
So what to expect?
Million dollar question. And to be honest, I honestly am not really in the best position to answer this because I myself am a little floored by how quickly this market is tanking. But let’s take a look at what we know and what we can determine from what we know:
- SPY remains severely oversold all around, both in Z-Score and in RSI on pretty much most time frames
- The market is in absolute panic mode and is unable to sustain any bullish sentiment for longer than half a day
- SPY is consolidating and forming a diamond bottom. Generally, these lead to at least modest break outs to the upside followed by a rejection back down.
- Since VIX did a lower high, we can expect VIX to drop below 1.5 SDs and aim towards 1 SD before it finds its next bounce back up. I think a conservative SD for VIX would be around 1.35, which would equate to a price of 29.50 on the VIX.
- SPY attempted to gain bullish momentum today but this was rejected at the end of the day. SPY remained range bound between my projected high and projected low without breaking either of these levels. Thus, I can’t say that today was bearish or bullish. It was, realistically, neither.
- SAS has projected a trading range next week of 376 to 353.
So that is what we know, so what can we logically conclude from what we know?
- More selling will come. I have re-run time series and we can be looking for the 350s and eventually the 330s. I am going to not give you target dates because clearly SPY makes its own timelines. But juts know, that 350s all the way to the 330s are in the projections for the future.
- We need a bounce. Will we get one? It depends. Any bounce will be limited though. We won’t see 400s again, for sure. A bounce to 385 would be welcomed. But I would even accept a bounce to 380 to just bring SPY away from being so dreadfully oversold. A bounce to 385 would bring SPY back to roughly -2.5 SDs.
What should you do?
Please take this with a grain of salt. I don’t want to tell anyone what to do. But this is more what I am planning to do. But honestly, do your own thing! I am by no means a trading guru.
- IN my last post, my words of wisdom were don’t swing long. Probably still that. Seriously. As tempting as it is, it still isn’t smart because the market is panicking. If this was slow and sustained selling that was following anticipated timelines, yes, swinging long is safe. But its not. This is frenzied selling that is characteristic of panic and not following anticipated timelines. Its extremely risky to swing long.
- Its probably best to keep at least a small short position open at all times. I had done this for the longest time with SDS and SPXS. But I completely exited in the 380s and never reaffirmed my position. As such, I ended up missing my time series targets. And these were my own targets! I knew they were coming and I just wanted that “perfect” entry on a bounce. But that bounce never came!
- Watch those 350s. If SPY breaks down to the 350s and closes there soon (like next week), chances are we are itching closer to that -4 SD. -4 = 2008 level selling.
What I would like to see
- Consolidation. I don’t even want any dramatic bounces. Just range bound for the next couple of months will be enough to prevent this dramatic panic and complete market collapse. I mean a bounce would be nice, but at this point I just want some semblance of market stability. Life is scary enough right now, the market instability, which is the backbone of our retirement and, for fellow day traders, how we pay our bills, its not at all comforting.
I think that sums up all of my thoughts and analysis. Its kind of messy, sorry for the format, just trying to gauge a sense of the market right now. Its chaotic and frenzied right now, so its extremely hard to make sense of it all. If I see some more clear indication of direction I will update accordingly. But as of right now, these are my thoughts.
Key points to take away:
- SPY is forming diamond bottom on 1 hour, watch for potential breakout to the upside for a relief bounce.
- RSI is oversold on most major time frames
- Trading range mapped out by SAS for next week is 353 – 376
- SPY is sitting below -3 SDs, a close of 350 or less will be -4 and would officially lead us to 2008 level selling.
- Any bounce will be limited. I tend to agree with SAS mapping here and think that a bounce would be capped at 376, MAYBE if we get a halting of panic selling, 380. But it will require the market to really ease a lot of anxiety and I just don’t think it will be ready to do that next week. But who knows.
- Its probably best to keep at least a small short position open, ideally with shares like SDS or SPXS to prevent theta decay and having to exit your position at a designated time.
That’s it!
Thanks for reading and feel free to leave your comments, questions and critiques below!
But alas, just as AMZN’s stock fell short post split, they fell short on delivering the bear spray in time to salvage the market from complete and total ravaging!
So let’s recap this hot mess. I have been away in the wilderness for the past week so this post is more to help me get re-oriented to the market because it seems a lot has happened.
(In classic Steve fashion, its a long post. Key points are summarized at the end for you TL;DR peeps out there ;) ).
Recap:
Tanking. That’s it. Its tanking. And like, its tanking at an alarming rate. If you remember my post “Timelines and Targets” which I believe I posted about 3 weeks ago now, this week was supposed to be 371 target. And then from there I anticipated a bounce and then within 2 weeks, time series said we would be testing 362.
We tested all of those targets this week. Every. Single. One of them. And like, don’t get me wrong. I am ecstatic at how accurate my time series targets have been, but man! WTF! Like this is too fast! Like so fast that I essentially missed these big moves because they are just being rocketed past.
It seems the 362 target was the target where SPY decided to put the breaks on and that is kind of where we are now. It also happened to be the last target I had planned for because I hadn’t done further analysis past 362, thinking that would still be another 2 weeks away and that I would re-analyze at that point.
SPY’s close price is currently sitting at -3.41 (manually calculated; see chart below) and roughly just below -2 on my Z-Score indicator (which looks at high and low averages). Insane!
SPY is consolidating and the consolidation looks somewhat similar to a diamond bottom (see chart above).
SPY remains oversold from a Z-Score perspective and on the RSI, especially on the 4 hour chart which has yet to remove itself from the oversold region.
So what is happening?
Looking at the data, its obvious that the market is in full fledge panic mode. SPY has been unable to hold any semblance of bullish sentiment. Any gap up or any buying is immediately rejected. Bullishness is met with equal bearishness. My bullish break and bearish break targets are no longer effective, because as soon as SPY breaks a the bullish break, its immediately rejected back down. The market is accelerating its trajectory faster than I had mapped it at 3 weeks ago, and its just in full fledge free fall mode right now.
I will add, none of this is normal. This is panic at its zenith. And while I have been stubborn and adamant that this is not similar to the 2008 financial crisis (it still isn’t yet), we are actually getting there.
Essentially, if SPY decides to continue to tank at this rate and we hit -4 SDs, we will have seen the same type of selling that happened during the 08 crisis and collapse. This should be somewhat concerning to most of us because the effects will be fairly devastating to the market.
What price is -4? As of right now, -4 SDs would be achieved if SPY closed at or below $350.
VIX
For you VIX lovers, I will briefly discuss it here:
VIX is finding hard rejection in the 2 to 2.5 SD range. We also see that it is doing lower peaks on the Z-Score, recently being rejected right off 2 SDs and after today’s close, VIX is resting at 1.66 SDs. This also kind of looks like a double top on VIX, which you can see happened recently and was followed by quite a bit of selling on the VIX and a bounce on SPY. So that is somewhat promising.
A drop to 1.5 SDs would equate to a VIX price of 30.55. If VIX were to drop all the way to 1 SD, which would, in theory, be a nice bounce on SPY, we would expect to see a price of 27.58.
So what to expect?
Million dollar question. And to be honest, I honestly am not really in the best position to answer this because I myself am a little floored by how quickly this market is tanking. But let’s take a look at what we know and what we can determine from what we know:
- SPY remains severely oversold all around, both in Z-Score and in RSI on pretty much most time frames
- The market is in absolute panic mode and is unable to sustain any bullish sentiment for longer than half a day
- SPY is consolidating and forming a diamond bottom. Generally, these lead to at least modest break outs to the upside followed by a rejection back down.
- Since VIX did a lower high, we can expect VIX to drop below 1.5 SDs and aim towards 1 SD before it finds its next bounce back up. I think a conservative SD for VIX would be around 1.35, which would equate to a price of 29.50 on the VIX.
- SPY attempted to gain bullish momentum today but this was rejected at the end of the day. SPY remained range bound between my projected high and projected low without breaking either of these levels. Thus, I can’t say that today was bearish or bullish. It was, realistically, neither.
- SAS has projected a trading range next week of 376 to 353.
So that is what we know, so what can we logically conclude from what we know?
- More selling will come. I have re-run time series and we can be looking for the 350s and eventually the 330s. I am going to not give you target dates because clearly SPY makes its own timelines. But juts know, that 350s all the way to the 330s are in the projections for the future.
- We need a bounce. Will we get one? It depends. Any bounce will be limited though. We won’t see 400s again, for sure. A bounce to 385 would be welcomed. But I would even accept a bounce to 380 to just bring SPY away from being so dreadfully oversold. A bounce to 385 would bring SPY back to roughly -2.5 SDs.
What should you do?
Please take this with a grain of salt. I don’t want to tell anyone what to do. But this is more what I am planning to do. But honestly, do your own thing! I am by no means a trading guru.
- IN my last post, my words of wisdom were don’t swing long. Probably still that. Seriously. As tempting as it is, it still isn’t smart because the market is panicking. If this was slow and sustained selling that was following anticipated timelines, yes, swinging long is safe. But its not. This is frenzied selling that is characteristic of panic and not following anticipated timelines. Its extremely risky to swing long.
- Its probably best to keep at least a small short position open at all times. I had done this for the longest time with SDS and SPXS. But I completely exited in the 380s and never reaffirmed my position. As such, I ended up missing my time series targets. And these were my own targets! I knew they were coming and I just wanted that “perfect” entry on a bounce. But that bounce never came!
- Watch those 350s. If SPY breaks down to the 350s and closes there soon (like next week), chances are we are itching closer to that -4 SD. -4 = 2008 level selling.
What I would like to see
- Consolidation. I don’t even want any dramatic bounces. Just range bound for the next couple of months will be enough to prevent this dramatic panic and complete market collapse. I mean a bounce would be nice, but at this point I just want some semblance of market stability. Life is scary enough right now, the market instability, which is the backbone of our retirement and, for fellow day traders, how we pay our bills, its not at all comforting.
I think that sums up all of my thoughts and analysis. Its kind of messy, sorry for the format, just trying to gauge a sense of the market right now. Its chaotic and frenzied right now, so its extremely hard to make sense of it all. If I see some more clear indication of direction I will update accordingly. But as of right now, these are my thoughts.
Key points to take away:
- SPY is forming diamond bottom on 1 hour, watch for potential breakout to the upside for a relief bounce.
- RSI is oversold on most major time frames
- Trading range mapped out by SAS for next week is 353 – 376
- SPY is sitting below -3 SDs, a close of 350 or less will be -4 and would officially lead us to 2008 level selling.
- Any bounce will be limited. I tend to agree with SAS mapping here and think that a bounce would be capped at 376, MAYBE if we get a halting of panic selling, 380. But it will require the market to really ease a lot of anxiety and I just don’t think it will be ready to do that next week. But who knows.
- Its probably best to keep at least a small short position open, ideally with shares like SDS or SPXS to prevent theta decay and having to exit your position at a designated time.
That’s it!
Thanks for reading and feel free to leave your comments, questions and critiques below!
Premium indicators and content have launched! Get access at: www.patreon.com/steversteves
