2600+ Sell Zone

"Nature abhors a vacuum."

The market also hates a vacuum. From November 2016 to January 2018, the market took a straight line with almost no dips from 2200 to 2700. Since then, there has been very little volume traded between 2200 and 2600. Now is the time to fill the hole.

And it is happening in an environment of discomfort, as most of the holders of equities are in some level of pain. When investors and traders are in pain, they make more mistakes than when they are comfortable. That is why I've always considered bear markets VIP (Volatility Increases Predictability) markets. For most investors, it is starting to get stressful, but there are still many that are in denial of what is happening, expecting (hoping?) for a quick recovery in the second half, believing that the coronavirus is just a short term blip.

This virus is a monster.  A Chinese lab created monster.  No wonder it lasts so long in the human body, and passes to other without symptoms.  And is selectively deadly, wrecking the body's immune system, causing cytokine storms and ruining a lot of people's lungs permanently even when they survive it.  Those knuckleheads who think its just like the flu are probably the ones who are spreading it to others without even knowing it. 

All you need to look at is crude oil to see how much the economy has been wrecked by this pandemic.  And to those who say that its because governments have been too careful and gone to unnecessary lockdowns, the alternative is much worse.  Blatant neglect would lead to catastrophic numbers of cases and hospital visits, with hospitals filled beyond capacity, having to turn away coronavirus patients.  That case would force all but the hardest headed corporations to force their workers to stay at home, and work from there, if possible.

So no, lockdowns are not a cure that is worse than the disease.  Neglect and hoping it goes away is the worst strategy, and it is something that many governments tried before giving up when the number of cases started to skyrocket and hospitals became swamped with virus patients.

Let's not forget that just 5 short weeks ago, the SPX was trading at 3390, with rampant speculation in stocks like TSLA and SPCE.  It was a full blown bubble.  So you can't compare this to 2008 in that sense, because in 2008, stocks were already in a downtrend and valuations had come down to reasonable levels.  That is not the current situation.  Valuations do not support the current treacherous environment where many firms will be on life support unless the government gives direct cash injections.  And while that may happen, it is no guarantee.  And usually the conditions for receiving government cash are not favorable for the current shareholders.

We have rallied for 5 trading days since last Monday's bottom.  That is usually the extent of the oversold bounce before you get another sell wave come up.  With month end rebalance of pension funds ending today, the demand for stocks should drop starting in April.  I am a seller here.