This recent risk-off move in the equities market was textbook.
It’s no coincidence the S&P 500 sold off at the channel resistance and AVWAP off the highs. We’re more or less seeing a confluence of developments skew risk-off over the last few weeks.
The US Dollar Index is at a logical level to bounce, while cyclicals, which have been leaders in the equity markets, are pausing at their August highs.
Meanwhile, most crypto assets are retesting their June lows from the underside.
Charts like these don’t inspire a great degree of confidence.
I think the most bullish outcome from here is a period of ranging and contracting price action in the indices.
From there, we’d have a little more conviction betting on further upside in equities — and some mean-reversion plays in the crypto space.
But, until then, this was nothing but a textbook rejection from a perfectly logical place.
Let the setups develop.
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