http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=6&dy=0&id=p97142210271&a=214966864

We warned you about October 19.  The market is clearly spooked.  And of course, no one knows why.  Well, we know why.  It’s because a lot of heavy selling took place.  Why’s that?  Who knows?  There is a major sun flare around this time.  But basically all those sellers sold before the music stopped and they couldn’t find a chair.  There, that explains it.

Well, what do you do about it?  We already did something about it.  We computed the stops illustrated above.   The equity drawdown is not pleasant but as soon as the market gets this out of its system, and as soon as the body politic gets the election out of its system the bull will  rocket upward.  In the meantime some cash in the portfolio would be nice, as we will want to measurably increase the bet when this is over.

In the meantime if you want to try to ameliorate the pain there are the short index ETFs –SPXU, DOG and DXD.  The first two leveraged.  There are also puts, or longs the VIX.

We are studying the charts now to attempt to determine the likely extent of this event.

Technically the break of trendline 1 was of negligible importance as evidenced by the little drift that followed.  The break of trendline 2 was a more significant warning, and the break of trendline 3, from June is to be taken seriously.  We pointed out these events when  they occurred.  These particular trendlines are beautifully illustrative of of minor, medium and serious trendline breaks.

It is a perfect indicator.  When long term