ES Morning Update April 11th 2024

The CPI didn’t disappoint as we got a quick spike up on the QQQ to hit the FP and then reversed back down hard by the open. We spent the day down near the low but we didn’t breakdown on the Nasdaq by making a lower low then the 4/4 low, and on SPX we pierced that prior bottom but closed up higher.

The DOW did close below it and so did the Russell, but overall the bulls have held the most important support zone. If they continue to hold then odds are good that the pullback is over with and the 5-10% correction is delayed for sometime in the future. I did several posts on Twitter throughout the day yesterday with my thoughts, and the one below is super important.

If the bears can close below the April 4th today or tomorrow then we are likely back on for the 5-10%, but if they don’t then I expect to see new highs in the coming days… possibly this Friday? But that might be asking for to much in just 2 days. Next week though I do expect the bulls to rip it up again and I’ll start looking for the next short term FET, which is at 5435.93.

This again, assumes the current low holds, and think there are good odds that it will. In fact, I posted in the chatroom yesterday my reasons for thinking that…

“For the record, I did not short this. I couldn’t as it happened when the cash market wasn’t open. But if I would have shorted it I would have already closed it at the double bottom opening area. This entire multi-week pullback has been a disaster for the bears. A real correction would have NOT had all the big squeezes every day after a fast drop. It would have started slowly on the downside (NO fast mini-crash like drops) and would have very small bounce.

It would have done this for 3-5 days and then accelerated into the last 6-9 days with non-stop drops. After about 8-11 days the bottom would be in… at least for the first big wave. Then a strong 50-61.8% retrace over 3-5 days would follow. We’ve NOT seen any of that. This smells of a bear trap… and if that NDX Seasonality Chart is right we’ll see new highs very soon. “

As you can see my thoughts are based on my past experience with seeing real corrections start and finish. History will show you that most correction do NOT start off like what we’ve seen in the past several weeks. The current pullback we’ve had is not normal for a real correction.

All of the fast drops were done to wake up the bears in my opinion so they can be used as fuel to squeeze in the near futures. Like I said, most real corrections start slow and don’t have many good bounces. They don’t wake up the bears until the bottom when it capitulates. It’s the idea of putting a frog in boiling water as he will surely jump out. That’s what we’ve had recently with these fast drops.

Real corrections start slow, meaning you put the frog in cold water and slowly raise the temperature until it boils. By the time the frog realizes that the water is hot it’s too late as he’s already cooked. Same thing happens in the market as the bulls will keep buying the slow pullbacks thinking it’s going to bounce soon, but after 9-11 days the market could be down 10% and the bulls will then throw in the towel and go short. That’s when the low will be in and a strong bounce will follow.

In conclusion, I think we are going up today, tomorrow and next week, similar to the prior correction back in early January of this year.  The weakness should be reversed back up by the close.

Have a blessed day.