The Battleground Ahead of Us

I must admit…

I read news headlines, and subject lines of other newsletters when they arrive in my inbox, the same way I glance at car accidents on the side of the road. That is, with a hand covering my eyes, except for a small slit – just wide enough to manage a glance. In both situations, I want to be aware of what’s on the radar… but I don’t want to be affected by the details.

The car accidents are sometimes too gory for me to stomach.

And the headlines always seem to contradict each other… only muddying the waters of my own analysis.

This is what I saw today…

“Calling an End to the Correction.”

and

“Selloff just underway.”

And of course, neither author knows for sure. That’s why I’ve never put much emphasis on popular sentiment. And, it’s why my own analysis, much of which is technical in nature, never involves what I call “doubling down on thesis.” After all, theory is one thing… making real, profitable trades is another.

That’s why I’m a trader. I’m not a fortune-teller, prognosticator or forecaster.

That’s also why I can’t tell you with bold certainty whether the correction is, or isn’t, over. To me, that’s not necessary to make money in the markets. Instead, I weigh the evidence and plan for a handful of possible scenarios.

On Tuesday, I shared this chart with Cycle 9 Alert subscribers. It plots out the battleground ahead, allowing us to anticipate and prepare for whatever the market throws our way.

See larger image

I identified the zone between 1,575 and 1,535, on the S&P 500, as a zone of support. This zone represented a pullback of between 6% and 8% from recent highs.

I then warned that a break below 1,535 would be cause for heightened concern and defensive, or bearish, trading strategies. Of course, I reminded readers that the market has to drop by 20% – to 1,340 – before this could be called a bear market. We’re still far above that level at this point.

On the bullish side, I explained I’d need to see prices close above 1,600 to call this dip done… and that we wouldn’t get the all clear signal until the S&P 500 closes firmly above 1,650.

This analysis was sent out on Tuesday, following Monday’s close at 1,573 – just barely in the support zone.

It’s still too early to call the re-emergence of a risk-on environment. But for now, the markets have cleared the first hurdle of 1,600… 1,650 is the next make-it-or-break-it level.

With the market clearly at a pivotal turning point, my advice is to stick to your plan… basically, sit on your hands. Know that I’m watching these important levels closely and if you want to hear from me as soon as there’s a move to make, join me.

For now, stay the course. And if it helps, cover your eyes with one hand.

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Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.