When markets are propped up for an extended period of time, the risk doesn’t go away. In fact, the postponement increases the tension such that the unwinding — the eventual return to stasis — is often more violent than would otherwise have been the case.
With the US elections only a week away, we have to wonder what the unwinding will look like this time. Combined with a changing of the guard in carry trade leadership, the next week should be quite interesting.
We got a taste on Friday, when SPX nailed each of our downside targets — just, with a 14-pt rally thrown in the mix.
SPX appears to have broken down. The obvious levels to watch are the red .618 at 2130, the white midline at 2126, and then the red .786 and .886 at 2123 and 2119.
Kudos to anyone who had the nerve to hang on to our initial short position. We remain short from 2139.23 on Oct 27 [see: Distress Call.]
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