S&P 500 Sell-Off: Is the Current Pullback Still Just a Trading Range?

The markets are selling off, and that started yesterday.

Was this completely unexpected?

Well, no, not at all.

I had said before in the video and written to my Patreon members that there was a 50% chance we were going to go all the way back to the middle of the range.

I didn’t expect this extreme selling strength, but that has to do with the rising bond yields. The recent move in Treasury yields has indeed coincided with renewed pressure on U.S. stocks.

The S&P 500 Is Still in a Trading Range

At this point, I don’t think the sell-off is changing anything.

We are just in a trading range.

A move back to the middle is something you very often see in a trading range, and that is what we are seeing now.

My base case still is that at some point in the next couple of weeks, we are going to make a new all-time high before we roll over.

So this sell-off doesn’t change anything yet.

Rising Bond Yields Are the Main Risk

The thing I am watching is the US 10-year yield.

At some point, the bond yield will be so high that money will be flowing out of the stock market and into bonds.

It could also be happening already.

That could be one of the reasons why we are seeing this selling.

The recent Treasury sell-off has pushed the 10-year yield to levels not seen in many years, adding pressure to stocks.

But right now, I don’t think it is enough to change the bigger picture.

If the US 10-year is going to 5.5% or 6% very soon, then things may change.

But right now, I think we are just in a trading range.

The First Bull Attempt Could Fail

I do think this first bull attempt is going to fail because they usually do.

Then we are going to get back to the middle and to the highs of the range.

Right now, we are just waiting for a bottom.

I don’t think the bottom is in yet.

I think this bull attempt will fail.

I don’t know how deep this is going to go, but I do think we are nearing the end.

So possibly we are going up from here, but I don’t think we’re going all the way up to the highs immediately.

Maybe this low could be a support.

So probably some more selling, then find the bottom, go to the midpoint, go to the high of the range, and then we’ll see it from there.

What I’m Watching Next

The main thing is to find the bottom.

I don’t think this move down was unexpected. I’ve said it before.

The market was in a trading range, and a move back toward the middle was always a possibility.

The selling is stronger than I expected, but for now I am not making any changes.

The market will already feel a lot different once we get back toward the midpoint and eventually toward the high of the range.

So, not changing anything yet.

I think it’s just relatively normal price action.

If something happens that changes the structure, I will do another update.

Educational content only. Trading involves substantial risk. The setup grade and outcome described here are specific to my plan, sizing, and risk tolerance. Do your own work.