The purpose of this update is to define
exactly where we are on the market clock, because if we know where we are,
broadly speaking we will know where we are going.
Before
going any further I want to point out that so far we have tracked this nascent
market crash well, first looking for the market to cave in last Summer, in the Preparing for
the Crash series, calling for the Biotech sector to plunge before
Christmas in Biotech Inverse
ETFs update – Perfect Entry Point for New Shorts, for China to
crater at the end of December in the China update
and more recently calling for a waterfall decline in the US stock market right
at the start of the year in Broad US Stockmarket
Still Perched Atop a Cliff
Last week the market plunged to arrive at
the last ditch support level in the 1800 – 1850 zone on the S&P500 index
that we had earlier defined as marking the lower boundary of the giant
Head-and-Shoulders top. Once this level is breached, the full-on crash starts.
Because it arrived at this support level in an even more oversold state than it
was at the depths of the plunge last August, and because Smart Money has become
bullish, it made it unlikely that it would break down and crash just yet, and
sure enough the market has started to bounce, which means that the danger has
probably abated, for now. The stabilization of the market here is expected to
generate a short covering bounce, regardless of the rotten fundamentals, and as
it unfolds the “reasons” for it will be presented in the mainstream financial
media as “Market responds to stimulus talk” etc. The big question now is how far this bounce is likely to
get, and that is what we are going to attempt to determine here, because it is
crucial for the purpose of piling on short positions at the optimum juncture at
the best prices in the future.
