The stock market is making me nervous about a deeper pullback. It is trading over a percent below the Lower Boundary of its Probable Range, indicating it wants to at least break down to neutral from the perspective of our Volatility-Adjusted Momentum Signal (VAMS).
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THREAD 1/
That said, the last time we saw such a deep downside deviation w/r/t the S&P 500’s Probable Range was on 5/12/21. At the risk of anchoring on an n-size of 1, investors can breathe a sigh of relief b/c that was not a sell signal on either a one-week or one-month forward basis.
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I watch Micro Caps $IWC and Frontier Markets $FM as ancillary signals of broader "risk off" conditions -- which our primary risk tools are disconfirming. Both are bearish VAMS, but neither has broken to new lows. That is a good thing for broader risk appetite until it isn’t.
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That is a carefully constructed way of saying, "The time to #BTD is now -- especially if $IWC confirms we have not entered into a broader period of liquidity reduction." If we're wrong on that view, we'll be wrong. At least we'll know why. $IWC is hanging on by a thread, btw. 4/4
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