Whether we’re talking about sports or we’re talking about the stock market, it’s Defense that wins championships. Rather than focus so much on how high my long positions can go or how low my short positions can fall, I prefer to spend my time formulating counterarguments to my thesis. I’m always trying to protect my principal. To me, there is nothing more important.
The weight-of-the-evidence has been signaling to me that a more bullish approach to U.S. equities is more the likely the best way to be positioned. So I am. But I have to say that this chart of the S&P500 still makes me nervous. We’re looking at weekly candlesticks of the S&P500 Index showing the 161.8% Fibonacci extension of the entire 2007-2009 decline just overhead:
The markets have an uncanny ability to respect these levels time and time again. They are constantly serving as key support and resistance levels, particularly on larger timeframes like this. We see this so often that it would be irresponsible of us as market participants to simply ignore them.
What do you guys think? Will it matter? Or will S&Ps just rip right through it like it’s not even there?
I don’t know the answer. Obviously. But I think it’s worth pointing out and discussing.
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Tags: $ES_F $SPX $SPY