I very rarely do this and I’m certain I’ll regret it, but I’m going to go out on a limb and call a tactical bottom today. To be clear, I am not saying this is the bottom. Far from it. But my call for the past couple of weeks has been for what I’ve dubbed a “faux correction.”

What I mean by faux correction is an interim correction that people later think was the correction which allows them to get bulled up again when stocks start rallying and actually sustain it over a period of several weeks allowing them to get trapped for the real bear market, the assumption being that with the correction being so close in the rear view mirror, no way we will go back down again and that the fed news and such has been more than discounted.

There are a few reasons I’m calling this the bottom in the faux correction.

  • The S&P hit my faux correction target level of 4470 today
  • Sentiment seemed to hit a real short-term flush today, especially on the back of the Peloton news
  • Earnings are starting and I suspect there will be a rush of money back into the market to position for them
  • Even though the absolute level of the selloff didn’t seem like capitulation, peak to trough the NQ dropped more than 500 points!


Consequently I bought a handful of 5% OTM SPY calls towards the close. I think we could get a strong rally maybe tomorrow or early next week. I’d expect that rally to be both enormous and not believed (the hallmarks of a strong interim rally) and I’d look to pitch these after a day or two.

I believe the S&P could carry itself back up towards an ATH but stop just shy of it, maybe 2-3% below. I’m calling for a ~5% rally back, but not the vertical sort we got in December, more like a strong 2% pop (at which point I’d pitch my calls) then a more gradual ascent over the course of a few weeks which would peter out. It would really help sentiment get offsides if we get some strong earnings beats along the way. I think this would be necessary actually to get sentiment positioned very long stocks just in time for the real correction.