Let's think clearly just for a second tonight.
We are in the midst of one of the most hated rallies of the past couple decades. A rally that investors are only too eager to sell, liquidate into or not participate in at all due to the gigantic wall of worry that exists.
Now we find ourselves at one of the most obvious resistance points that is outlined thoroughly in every textbook on technical analysis, as well as countless pieces of traditional financial analysis in whatever form they may take.
That is the 200 day moving average, of course. Tonight it's the talk of Wall Street as the S&P was initially repelled at this level today.
Back to the thinking clearly part.
The most hated rally in a very long time meets the most traditional of resistance points that everybody knows and talks about in their analysis. Bearish bias being what it is very simply translates to this level being yet another excuse for investors to sell, which they obviously did initially judging by today's market action.
The probability of the 200 day moving average being the top to a rally this hated is about the same as me waking up tomorrow morning and being able to dunk over Lebron James. In other words, damn near zero. Actually, it's exactly zero to be precise.
Let's say the market decides to get extraordinarily nefarious, feigning respect for this resistance level and moving down. The eventuality over the very short-term is a parabolic move well above it as too many investors would be triggered to sell. We therefore run into the exact same dilemma we faced last week, the week before and the week before that. Everyone that wants to sell already has or will on any move lower.
With that said, the only way to bring those sellers, skeptics and cynics back into the market, whether through covering their shorts or getting long is to blowout well above the 200 day moving average in a parabolic move that causes them to question everything they thought as tangible macro-economic reality in 2022.
And that is what we are setting up to do after today's close. Violently I should add.
Enjoy the ride.
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