30% Drop?This "rally" we have been experiencing in the SPY I think is largely a bounce from the previous legs lows. If this turns I suggest a base case for a 30% drop from current levels bringing us to about 293.50 or so. Not necessarily straight down but that will be my target.
Getting concerned that complacency is starting to return as well as some risk appetite. It's almost as if participants are saying the worst is over and look the fed was successful! But the fact of the matter is, the party is just getting started.
Forward rates, manufacturing, employment dates, PMIs, currency markets, and collateral constraints are all pointing in this direction.
Given we don't know what is going to happen I am personally not taking a short position. If I were to I would consider only after clearing 400 sustainably. I would be really hesistant to remain in the short term bear crew if we clear 430 sustainably. Should go without saying, but if we breach 340 on good volume one would be safer in considering a position. For me, I'm waiting for abundantly clear opportunities for good moves - which I think will abound in the coming chaos. So my strategy will remain sit on hands and buy when blood is on the street so to speak.
