Odds Favor The Sideways Pattern For Weeks Now Will Give Way To The Downside
I know it seems like we haven't gone anywhere because we're still in the slow-moving expanding triangle pattern, which can be almost as frustrating as whip-saws. When we get into topping patterns like this, the movement is slower because they're the opposite of bottoming patterns, which are "V" shaped. As I tell you in today's video update, which should begin playing automatically at the bottom of the page, they take time and move in a "rounded" way -- it's not about instant gratification.
But that's going to change very soon. My charts show that a channel has appeared that is very similar -- if not identical -- to what spurred the kind of market downturn that happened from February to the March lows.
I've gotten several e-mails about how long this takes to play out -- the longer that it takes for the market to top, the more bearish the scenario is. It's because we're going to travel through the channel. I think that by May 1, the S&P 500 (SPX) will be at 819.75. By May 8, it should be below 809, and by May 15, it should be below SPX 790.
The market's going to zig-zag a bit, but we're going to travel in the downward channel I've identified downward channel in about five weeks.
I've had to change my forecast from a bullish summer rally because, as I've said before, it all depends on the rate of speed of the downtrend.
I've also been asked about my conviction level for this pattern. Many of you remember how strongly I pounded the table to get out of your shorts in March because I was convinced the market was moving up. Well, I believe that the coming downward movement is more reliable than the pattern that led me to cover our shorts.
This pattern has even higher odds and more reliability than the reversal I saw in March, but playing it is a real emotional roller-coaster. You need to keep yourself in check, and you do that through your position size.
When you're properly positioned, the market movement that makes you anxious. But, if you're not prepared for it, the fluctuation in your account makes you emotional. Your profit and loss (P and L) causes the emotional toll.
So, let's go over a few key sectors right now that support my conviction, and I'll check back with you later today and/or tomorrow about new trades that I'm watching.
Starting today, we're going to get more aggressive. I want everyone to be on the same page about where we are in the pattern and how I expect it to play it. In addition to a look at our open positions, I expect to have our new plays together soon.
We're still in the very beginning stages, but the decline should accelerate rapidly in the coming days. It can be scary if you're not in position to profit from it, but you need not fear the market drop if you're in trades that will gain from it, like the ones I'm targeting.
