A Nefarious Plan

Alright, I’ll be straight with you. Forget about technical analysis, we are way beyond the laws of physics at this point. It’s not so much that gravity has finally taken hold to reel market sentiment back within the realms of normality. Instead Darth Covid the 19th has unleashed a black hole of fear which threatens to suck up anything of value in its vicinity. Of course where most see only death and destruction a few select smell the sweet whiff of opportunity.

Before we get to all that, let’s first review the carnage. Yes it’s true that this has been the fastest stock market correction in the history of the S&P 500. It only took us 6 days to wipe out 10% off the peak which stood at SPX 3393.52 just a week ago.

It’s also true that the VIX has pushed deeply into bearish territory and even worse, IVTS currently stands at a whopping 1.31. I have never ever seen such a reading and will have to run some numbers to put it into a more long term context.

What else? US 2-year yields are literally swirling the toilet, which should almost guarantee some sort of Fed action being announced shortly. However, guess what – Covid-19 called and said that you can’t print yourself out of a global epidemic.

But wait, there is more! US 10-year yields plunged below 1.2% for the first time in history. Like in EVER!

BTW, the two previous charts are courtesy of Holger Zschaepitz – follow him on twitter @Schuldensuhner.

So in summary, it looks like we’re most definitely not in Kansas anymore!

On the plus side we have now extended to the only possible bounce zone I would put any stock into as it correlates both weekly and monthly support. Admittedly it’s not much to hang our hats on but it’s the last stop until about ES 2400. Yikes…

A Nefarious Plan

As you all know the Market Mole always enjoys the smell of panic and chaos in the morning. I’ve been around the block a few times and I haven’t seen juicy red candles like this since all the way back in 2007/2008. I had a bit more hair back then but I’ve also learned a few valuable lessons on the way.

One of which is that I recognize full scale capitulation when I see it.

As you recall I placed a lottery long on Wednesday and it quickly ended up on the boneyard of failed dip buying attempts. Yesterday’s VWAP bounce entry also blew up in my face. Clearly Ms. Market clearly was trying to tell me something – unfortunately I couldn’t hear what exactly she was saying over all the screams of pain and agony.

Anyway, given how far we’ve come it also means that perhaps – just perhaps – third time is going to be a charm. I just placed an exploratory long position with an ISL < ES 2874. Frankly – if that one fails then we are looking at a complete market melt-down followed by the zombie apocalypse.

Words To The Unwise

Of course you are right – on a medium to long term the writing is clearly on the wall. A series of failed picture perfect long entry attempts only serves to support the notion that a decade long bull market finally has come to an end. What we are facing moving forward is a more volatile and bi-directional market place. And if you think that I am pessimistic – heck, that WAS the optimistic scenario!

The pessimistic one is a quick bounce followed by a continued slide into who-knows-where. The P&F above puts this week’s wipe-out into a sobering perspective but it also points at a bearish price objective of SPX 2570. I really hope it is mistaken, otherwise we are in deep trouble, folks.