Downtrends make a series of lower lows. Thus, each time a low is violated,
the present day starts to look more and more like a long-term downtrend
versus a wide range of consolidation that we have today.
Everyone is watching the same basic charts, which means stops tend to be
set near the same levels, which can trigger somewhat of an air pocket or
cascading effect near those levels. Often after all the stop orders are
triggered, the market can find a bid (all TBD). Thus, under our
approach, we do not use hard stops and we do not choose the most
obvious levels as “time to act” triggers. We also take into account the
possibility that key levels are often violated for a short period of time (a
few hours or a day or two) only to be followed by a rally.
We have a very specific game plan based on numerous logical levels,
allowing us to prudently balance and account for a wide range of possible
outcomes, from wildly bearish to wildly bullish.
As of Tuesday’s close (markets were closed Wednesday), the S&P 500 was
above all four major 2018 lows. That may change in the coming days and weeks,
but it has not changed yet. It is important that we let logic, rather than
emotions and red screens, dictate our actions during periods of high stress
and anxiety.
As shown via the table below, the S&P 500 would have to fall 168
points on Wednesday to make a significant lower low below the February 9,
2018 low of 2532. A drop of 168 points is possible and we are prepared for
all outcomes over the coming sessions. We are not making any assumptions
about whether or not areas of possible support will hold or be taken out -
they are simply reference points. We will to stick to our well-constructed
and prudent plan while remaining cool, calm, and collected.