Remember this Wall Street adage

What a rollercoasting week! You must have felt the firework I was talking about, especially on Tue of this week when S&P tanked to almost touch 2800 with VIX jumping 30% within the day. I honestly believe it could plummet to below 2800 but then bottom fishing came in to float the market up for now. If you look at the chart, S&P has clearly in an uptrend since Apr. As I said, S&P will likely touch new highs this year and its weekly momentum is indeed quite healthy to support this trend. Having said that, its near term (next few weeks in Aug/Sep) could be challenging and may be even struggling for a while. With today’s closing high at 2850, it is showing a bearish H&S on the daily chart with a clear negative divergence for the MACD. Considering Aug/Sep is typically the weakest season for the market, don’t be surprised to see S&P tank again in the next few weeks and plunge below 2800. It will line up well with its 50 DMA around 2790 or the lower channel band around 2775.

If you are wondering why I’m keep warning you for the potential downside risk, just remember this famous Wall Street adage,  “The market loves to do what hurts the most people the most”! Don’t be one of those victims and always remember, when you feel great, it is usually a dangerous time, at least from the short term trading perspective!