Wow, what a day!
I know some of us forgot that markets don't always go up. As I have been warning you for quite some time, they can go down very violently after these low-volume rallies. I think the worst thing about yesterday's sell-off is that there wasn't any particular bad news and, in fact, we're being promised vaccines by Election Day (what a coincidence) and whether they work or not is certainly not the point from the same people who gave us hydroxychloroquine and suggested we drink bleach and inject sunlight into our bodies.
Remember from last week that 3,420 is our support line on the S&P and that's 20% above our must hold line at 2,850 (see "Toppy Tuesday – As Usual"). We're not there yet, with the S&P bouncing off 3,420 yesterday but, if that breaks – there isn't any real support on /ES (S&P 500 Futures) until we hit the 50-day moving average at 3,300. That makes shorting /ES below the 3,400 line a high-probability play where we can keep tight stops above it and hopefully catch a ride down to 3,300, which would pay $50 per point, per contract or $5,000 per contract.
What we have, so far, is just a minor correction and, if we hold that 20% line, we're still in a very bullish market. What matters now is how much of a bounce we get from yesterday's drop, which began at 3,590 on Wednesday (see "Record High Wednesday – Up, Up and More Up"), which is 5% over the 20% line which is what we call a "normal overshoot" in our 5% Rule™, which also tells us that we can expect at least a 20% bounce (of the drop) off 3,420 so it's a 170-point drop so a 34-point bounce (weak) takes us to 3,455 and another 34 points (strong) would be 3,479 so those are the lines we'll be watching this morning.
A failure of the weak bounce on the first day after a drop is a very bearish sign and, by day two, which is all the way to Tuesday now with the Holiday Weekend, would also be a bearish sign while clearing the strong bounce line on the first day indicates a V-shaped recovery and that would mean it was the drop that was the outlier, not the rally. See how easy that is?
So easy, in fact, that the same shorting lines we used on Tuesday were in play yesterday as I said to our Members in our Live Trading Chat Room at 10:46:
Still our shorting lines:
- Dow 28,750
- S&P 3,500
- Nasdaq 12,000
- Russell 1,585
The Dow bottomed out at 28,150 for a gain of $3,000 per contract, the S&P bottomed out at 3,440 for a gain of $3,000 per contract, the Nasdaq collapsed to 11,600 for a gain of $8,000 per contract and the Russell bottomed out at 1,540 for a gain of $2,250 per contract. We also had our long play on Gasoline (/RB) that we featured in Wednesday's Live Trading Webinar and that was good for $1,200 per contract as well – exactly the pop we were looking for!
We did have 1.4M new jobs added in August so that's good and, officially, the Unemployment Rate is down to 8.4% from 15% in April so about 1/2 of the laid-off workers are back on the job after 4 months but there was a lot of temporary hiriing for the Census and a lot of discouraged workers. On the whole, there are 11.5M fewer jobs today than there were in February. 29M people were receiving State or Federal assistance as of last month.
“We are in the hole by millions, and the longer we stay in that hole, the more people will suffer,” said Martha Gimbel, economist at Schmidt Futures, a philanthropic initiative.
Some companies that reopened in late spring and early summer hired back a portion of their furloughed workers but aren’t seeing enough demand to bring employment back to precrisis levels. Many businesses must operate under government-mandated capacity restrictions and consumers remain cautious about venturing out, reducing employers’ need for new workers. In fact, another reason there was no way Trump would allow school openings to be delayed was that it would cause 4M teachers to be laid off and that would make him look bad – so he is risking their lives and the lives of all of our children and grandchildren to give us this 1.4M gain.
4 more years!?!??????
Have a great holiday,
– Phil
The kingdom is ransacked
The jewels all taken backThey put up a poster saying: "We earn more than you
We're working for the clampdown
We will teach our twisted speech
To the young believers
We will train our blue-eyed men
To be young believers"The men at the factory are old and cunning
You don't owe nothing, boy, get runnin'
It's the best years of your life they want to stealIn these days of evil Presidentes
Working for the clampdown
But lately one or two has fully paid their due
For working for the clampdownNo man born with a living soul
Can be working for the clampdown
Kick over the wall, cause governments to fall
How can you refuse it?
Let fury have the hour, anger can be power
Do you know that you can use it? – Clash
