In the attached chart of the hourly SP 500 the grey box that started mid July is an area where I consider that there are “trapped” long positions. As long as the market stays below the box, two weeks of buyers are underwater. So with CPI in the morning we will get a ‘tell” if the market is unable to get back into the box, especially on a closing basis. 

My bias is that we will not be able to close back in the box. If we do, then I would have to temper my expectation for lower prices. Right now we see short cover rallies that fall on their face, indicating no fresh buyers, and many stocks doing poorly after earnings. The latter is a situation around earnings we have not witnessed in several quarters. 

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It appears there is just a lack of buyers rather than an urgency to sell. How do we find buyers? Well like any commodity for sale, if it’s not moving, the only way is to advertise lower prices. I expect that is what the market will do over the next couple weeks. It may well be jagged, and punctuated by sharp short covering rallies, but in my view there won’t be a renewed demand for equities until they advertise lower prices. 

Still holding shorts from last week in MU and NKE. 

Thanks,

Joe