Just following up on my prior posts from this morning (here and here). If there is a large short on the market that needs to come off, there should be a big rally ahead of us, probably in response to the CPI print tomorrow morning.
Problem is, I sort of feel like that is coming off now. It’s hard to explain. It’s the “feeling” of the candles. They’re sort of bouncing right now, like they’re floating on water. But we’re not actually going up in price.
And in fact, the Russell remains hemmed in this range between long-term prior highs:
When I saw the pre-COVID high serve as support this morning, I expected a much bigger initial rally. And this is already “floating.” Meaning, someone’s covering, but someone else is glad to take those shorts from them. So unless we actually get above the 2018 high, I’m right back to where I was yesterday: open to monster selloff again.
And similarly with the S&P. Without getting above the green C, there is little stopping this from being a 1-2 to the downside:
And on Apple, a similar story. We’re now above these parallel rails, which I thought would serve as resistance (and did, briefly). Staying above them like this, risks a move to the orange box. And yet, this is also the ideal setup for a bull trap. Working above the trend line, then collapsing.
I can see us doing either one. The Whitehouse has prepared us for the worst, suggesting they expect the print to be very high. Will that make everybody go into tomorrow short? Too short? I don’t know. What if they do (go in too short), but the print isn’t too high? So, at any rate, I can’t be of too much help here. If you can figure out which move will harm the most number of people here, let me know lol.
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