As we discussed in yesterday’s post, we would be scaling out of shorts. The bears have been capitalizing on this ‘trade talk blackout period’ due to the Chinese being off on a one week holiday and the recent reaction to the Manufacturing PMIs.
As far as shorter-term action is concerned, don’t make it harder than it should be > it’s all about the ISM Non-Manufacturing PMI release later on today. If we get another disappointment like we saw on Tuesday, then things could get ugly quick. However, keep in mind that anything that is mildly positive will likely see a decent bounce attempt.
Our base-case assumption is that this is a scale out of shorts / build long zone. As discussed on our RTY trade, we pretty much consider the ‘ sell FOMC and Q3 OpEx ramp into seasonally weakest week of the year’ done.
Unless something really horrible hits the wires today or tomorrow, we expect the market to stabilize and put in some kind of bottom. We are wrong on a weekly close below the 2800 mark.
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