Be patient and let Mr Market show his Hand!
On Sunday 10 May 2020 1145pm, I emailed Clients my latest post titled 'Be patient and let Mr Market show his Hand!'.
Below is the full transcript of my write up:
Back on 1 March, I set your expectations for the S&P500 Index (SPX) to gravitate towards the lower end of my bearish green Broadening Pattern (2000 - 2200), should SPX's11-year long term trend line be authoritatively breached.
On 23 March, SPX saw an intra-day low 2191 before launching a 6-weeks relief rally.
Then again on 15 & 29 March, I set your expectations for SPX that if its 'relief rally' is already underway, high probability stretched resistance will be at 2934 level (Fibonacci retracement of 61.8%).
On 29 & 8 May, SPX closed at 2939 & 2929 respectively without making further headway.
As of Friday's close (8 May), SPX still has not authoritatively break out from the said 2934 level.
Nor was the selling in the initial part of the past week strong enough to break below its Bollinger Bands (BB) midpoint convincingly. Even the green dotted uptrend channel has been duly respected.
In other words for the past 2 weeks or so, Mr Market just 'whip-creamed' us (or the more professional term 'whipsawed')!
Now for your headsup, if Mr Market does choose to break out of this 2934 level authoritatively into the 78.6% retracement zone, I may be compelled to re-calibrate my current bias of the rally from 'relief rally' to a more lasting bullish posture (no matter how 'negative' the news out there is). #youhearditfrommefirst
On the other hand, if Mr Market does choose to break below the Bollinger Bands (BB) midpoint (which is still my base case), it is just the beginning of a potential reversal of the current relief rally. I will still need an assertive break below SPX 2600 to signal that we all have a good chance of re-accumulating at or lower than the 23 March low!
So the parameters are set but again, let's not jump ahead of ourselves and simply let Mr Market show his hand first.
Btw, keep a lookout for my next post which I will revisit an old friend, Mr Gold Market!
Live Long & Trade Well!
Thank you & rdgs
Thomas Ng, CMT
Principal Trading Representative