For the sake of brevity, plus having to go to an impromptu meeting with one of my customers this morning, I shall keep this posting to two charts with a warning.
Sven Henrich of Northman Trader loves to make the point that gaps to the upside always fill, but rarely have they in recent years filled to the downside. In this author’s opinion, the upcoming recession will do just that and the average investor should be terrified.
Yesterday’s trading action was indicative of the smart money quietly exiting again during earning season to leave retail as the bag-holders. Note the large sell off right before the market close in the chart below.
The volume and violence of those 1 minute bars indicate someone or someones large liquidated positions and exited the markets in a hurry.
The two year chart for the S&P 500 below reflects my fear of what could happen in the next 60 days, with the downside gap filling during a 5% plus correction day (or worse).
Not a pretty picture, especially if it happens during a time when the market is still above or just above the current 200 day moving average.
The final gap everyone should worry about is the pandemic Powell gap or when ZIRP went into warp speed along with the fiscal spending insanity from the Federal government.
If the S&P 500 ever closes below 3,000 in the next 6 to 9 months, look out for a massive monetary tidal wave because the deflationary impulse will create the final, aka, great hyperinflation that many of us still warn is a realistic possibility from an empire that is in decline.
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[…] Thus leaving us with the charts to determine if this is the start of something or just a garden variety liquidation of holdings, aka, distribution as was discussed in these pages early this morning. […]