SPX 2450-2630 Range

Let the cows graze for a bit, no need to go for the kill right here.  Shorts: don't get too greedy just yet. 

This week has defined the supply and demand levels that will likely prevail until April options expiration (April 17).  Based on the trading action since the bottom on Monday, March 23, the panic zone is SPX 2200-2400.  The post oversold reflex rally range now seems to be roughly 2450 to 2630.  That means that we are close to the bottom of this range, and aggressive traders can either go long here, or for those more conservative and bearish leaning, cover shorts and wait for stocks to bounce again before putting on shorts again. 

For the next 2 weeks, based on the price action, it should be two sided trade without a big up or down trend.  You can thank (or curse) the Fed for bailing out the longs and extending the bounce for longer than it normally should last.  That is why I don't see another big thrust lower until you rebuild the complacency in the market. 

But the fundamentals will come to bear on this market.  The coronavirus has wrecked a lot of corporate balance sheets, future cash flows, and lowered the risk tolerance of institutions.  This is like 2000, 2007/2008, where institutions rethink the proper amount of long term risk that they will take and that long term positioning has yet to be purged to more realistic levels. 

The next thrust lower should be a realization of the new fundamentals of this market and a repricing of equities to a more reasonable valuation.  Let's not get ahead of ourselves, we need to chop some wood and create the potential energy for the next move lower.  Right now, it seems like most of the bear fuel was exhausted in the big down move over the last 2 days.  Neutral here, and recommend bears to cover their shorts to reload higher next week.