ES Morning Update April 30th 2020


Yesterdays FOMC meeting didn't disappoint as it did indeed close green, and up nicely. It looked to me like it put a squeeze on the bears as some decent volume came into the market. Is that the capitulation volume needed for a nice pullback to start, or will we need more days like that?

Only time will tell of course, but that FP on the SPY is still out there lingering and if the market continues this pattern of one day strong advance, one day small pullback, then it could be hit by early next week. We saw the up day on Monday, then the down day on Tuesday, back up on Wednesday and now we are going back down this morning. The put to call ratio closed at .7535 yesterday and clearly suggesting less and less traders are bearish here.

It could certainly go lower before the market rolls over but it's getting down into the area where the upside is limited. The FP of 305.17 on the SPY is about 3060 on the SPX, and every bull out there now is looking for the 3000 level to be hit and pierced to short at, so it begs to wonder that if everyone is eyeballing a certain zone, will it be hit? My thoughts are that the market will have to plow through it up to the next high level to squeeze out all the shorts that are wait to jump on board.

Or it could just fall shy of hitting that 3000+ zone and make the short miss out and force them to chase it down. Most shorts will just wait and stay in cash as it first drops because they assume it will bounce soon and get back up to the area they want to short at. Bulls will buy the dip on the move down of course as they assume the same thing.

This pattern of "buying the dips" works until it doesn't, and usually the bears have capitulated at that point. Here's how I see this playing out, the pullback today ends at some point, like intraday or Friday morning. Then another move up happens into the close tomorrow to keep all the bulls long and bears out. It should be high enough to scare the shorts to stay in cash and not short over the weekend.

And the bulls should stay long looking for 3000+ to happen on Monday, but instead that "lower high" rally into the close on Friday was just a B wave up and a nasty C wave down starts on Monday that keeps all the bulls trapped and the bears wishing they would have shorted it. That's just speculation on how it could play out of course, as nothing is certain.

It might get pushed out into early next week before that scenario plays out, but as soon as the bulls fail to make a "higher high" on some bounce day that should market the end. That high on the SPY is 2954.86 and 23,764.77 on the DOW. Bulls are on borrowed time in my humble opinion. God Bless.


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