The S&P 500 has broken through the 3800 level, and it now looks as if we are in complete meltdown mode. Whether or not we can bounce from here is a completely different question, but at this point, it certainly looks as if any rally will be sold into. With the 10 year note yielding over 3.25% during the session, the S&P 500 had no chance. It looks as if we are ready to go much lower. At this point, the market looks likely to go to the 3700 level, perhaps even further than that.
Rallies at this point in time should offer plenty of opportunities to short this market, with most eyes watching the 4000 level due to the fact that it is a large, round, psychologically significant figure. Keep in mind that there are occasional bounces in bear markets like this, but I think those bounces are to be stepped on like a bug. The interest rate markets are screaming a recession is on its way, therefore it’s likely that we are going to continue to see panic in the market, and it looks as if we are finally seeing things break. Now that they are, where we end up is a bit of a guessing game.
If we do rally, it could be a brutal bear market rally, because we do get those from time to time. However, you are out of your mind if you think that something is going to change without the Federal Reserve stepping in. There will be the occasional “hopium” rally, but that is going to be short-lived. We have already seen that attempted a couple of times, but it’s probably worth noting that we are a little overextended at this point. I fade anything that looks like a rally that showed signs of exhaustion, but the way we have been falling apart, I don’t necessarily know that we are going to get it anytime soon. Regardless, I won’t be a buyer until we can break above 4200, which is going to take a Herculean effort to say the least, and perhaps the Federal Reserve coming out and suggesting that they are no longer tight with monetary policy. I would not hold my breath for that move, because inflation is so out of control in the United States.
