This bear market rally has extended which means we are in a higher degree retracement. Which also means that whatever comes next will be even nastier than even I expect. On a percentage basis the SnP has rallied 13% plus from the 3639 low, exceeding the 12.8% rally back in March. I gave up some of gains from my highest point a month or so ago, however I am still up around 70%. So good luck to the Perma bulls who were down 60% but now only down 45%. lol. To their credit sentiment has clearly shifted in favor of the Bulls, which paradoxically, is required before a nasty plunge can begin anew.
It’s hard to say where this rally ends up. Wave “2” rallies like this can retrace anywhere from about 38.2% to 78.6% of the previous drop using Fibonacci levels. We could easily collapse Monday or can extend a few percent higher over the next week or two. If I knew I wouldn’t be sitting here, lol. My way of managing this is to layer in new shorts as we go higher, just like I take off shorts when we have a big dip. For example, when we dipped to 3639, I took off about 20% of my position. I have since re-added and am currently shorter now than I have ever been, but I didn’t re-add all at once. Some at 3850, 4000, 4100 etc.
You get the point. Let’s see what happens next week. Have a good weekend!