The panic felt on Friday over a 1.3% drop was surprising, given that the markets were still up on the week. What will investors do when they face a real plunge of 5-10% or more? On Apr 14, 2000, SPX dropped 100 points in a day — a drop to get excited about!
While things started out pretty well, by the end of the Friday’s session the drop felt tired and back in control — if it was ever out of control. USDJPY fell to the .382 retrace of its last rise, fleshing out a rising channel bottom.
ES busted the crazy-steep purple channel, but never broke the rising white channel midline until last night — only to bounce back.
SPX found support at the latest .618 — near the purple midline and a channel bottom — but will probably benefit from a slightly lower bounce.
Bottom line — I’m certainly not turning bullish, but the potential for a bounce here shouldn’t be ignored. Keep an eye on the yen — the driver of the whole mess. If it can hold 102.98, we should be off to the races.
UPDATE: 1:55 PM
102.98 has held so far, even as SPX/ES managed to put in another lower leg as expected. Aside from the highly leveraged go-go names that are over-represented in the hedge fund world, this decline still feels rather “managed.”
I’ll take a stab at some downside targets. continued for members…
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