Broken Trend line

So we got the shift and the line break I spoke about in the last two issues. So whats next? 

Do you remember this trend line from my last post?

Well, this is what it looks like now:

The trend line broke and took out some major levels last week but now the downside is looking a little oversold.

The S&P is down 8.9% from the highs so we may still have a little way to go to complete the 10% pull back in order to call it a correction. Take a look at the $BPSPX & the $NYMO:


So what does this all mean?

These breadth tools are telling us what the context is and pointing to a possible relief rally soon. Of course, I do expect that any bounce we get will probably be sold into simply because the sentiment has shifted.

I think what we are seeing may turn out to be more than just a standard 10% pullback and that is because the coming interest rate increases are forcing a re-pricing of risk assets and I think we are probably in the first half of that repricing. I will roll out some data to back this up in another post.

The Opportunities 

I took a long play on $SPY last week and it got hosed when the trend line broke.

We will get the FOMC rate decision this week so I expect things will probably chop around until post FED.

Whatever the case, as i mentioned above, we should get a playable bounce so I am looking at a few plays for that scenario if it plays out in addition to the following set ups on the watchlist. 

Here is the link: