Midday Update: 2023-02-21

Expect a choppy bounce in the equity indices this afternoon

We had a gap down today with follow-through lower throughout the morning. I’m marking this down as a wave [III] move that could have terminated near noon. SPX support at 4008 and 3994. If nursing a short from early this morning, lower stops. If flat, I think a long is probably the next trade, the question is if we get a tiny higher low before pushing up to 4026 and more. Over 4026 is confirmation that a wave [IV] bounce has started. I’m thinking the market consolidates into the FOMC minutes tomorrow afternoon. Pattern would look best with one more push down after that to complete the first impulse down from a truncated high on the 14th.

Late in wave [III]

Taking a look at the VIX ETN VXX, the next cycle inflection is March 13th so could be facing a few weeks of net lower in the equity indices.

Positive for equity bears for the next several weeks

A similar story told by the chart of S&P 500 components under the 20-day moving average though the next cycle inflection is a little earlier here on March 3rd.

Next inflection is on March 3rd