Yesterday the SPY opened near record-high levels and if it had held those initial gains it would have closed at a new all-time high. But it did not. The market sold off giving up most of the previous day’s gains.
The major indexes, the Dow, the Nasdaq, and the SPY are all holding up just fine. But the small caps, tracked by the Russell 2000, are hurting.
More than 70% of stocks are trading below their 50-day moving average, and over 60% are below their 200-day moving average. There’s not too much more downside left.
Today is the triple witching day, with lots of options and futures contracts expiring. I expect some added volatility as a result. But my theory remains intact. There are no flashing warning signs of overbought or oversold. The market’s seasonality remains the best guide. Price action follows the path of least resistance.
As long as the Russell 2000 closes above its critical support level the path of least resistance is up.
I’m still bullish but have a plan to be wrong. This is once again a time to manage your risk. Never let one position get too oversized. Never place a bet you can’t afford to be wrong about.