The stock market had a very rough end to the week, falling more than 5% from Thursday’s high to Friday’s close, ending with a 2.5% down day on Friday. That’s significant. Let’s unpack each number a little. Thursday to Friday collapses usually lead to one more big decline on Monday. There have only been a few instances to the contrary. However, down 2.5% Friday usually lead to a rally above Friday’s close with in the next week.
The S&P 500 is coming dangerously close to the levels that would severely injure the bull case, if not destroy it. Given the depth of the decline to close last week, the most likely, but not the only scenario, is to see stocks down on Monday with the bull stepping up between late day Monday and Tuesday around lunch. If that happens, a rally should recoup all that was lost on Friday at a minimum.
Last Wednesday we bought levered inverse Russell 2000 and NDX and more NOV. We sold levered inverse S&P 500 and levered Russell 2000 and NDX. On Thursday we sold levered inverse Russell 2000 and some levered inverse NDX. On Friday we sold KBE and some IVW.
