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A Storm May Be Approaching and The Red Flags Are Flying High

A Storm May Be Approaching and The Red Flags Are Flying High

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S&P 500 (SPY)

Stocks finished slightly lower, and well of their intraday lows. The S&P 500 was down about 90 basis point today but managed to rally back to down only 20bps. Today’s price action doesn’t mean we are out of the woods by any stretch of the imagination.  I am a bit more concerned tonight than I was before the day started.

Those who have been reading this blog long enough can immediately see on the chart below what is bothering me. For those that are new, it is that large gap lower opening we had today. By days end that gap was filled. The general rule for gaps: once filled, the previous trend continues in this case that is lower. I do think that the S&P 500 has the potential to fall to around 2,690 over the short-term, and perhaps as low as 2,630. It would be between a 5 to 7% drop from the recent highs.

S&P 500, spy

Russell 2000

The Russell managed to finish well off its lows. However, as one can see from the chart, the Russell struggled all day around the 1,520 region.  The 1,450 area on the Russell is a genuine possibility in the coming days.


So now, we will need to wait and see what happens next. It is not to say that the bullish outlook for the year is over. That is not the case at all; this is about the next few days and weeks.

Today’s commentary may be my shortest write-up ever. But it is Friday, and that means we have all weekend to lament about the potential pullback that is looming on the horizon.


Photo From Flickr

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