By Avi Gilburt
While there is some religious significance in Roman culture, the Ides of March is best known as the date on which Julius Caesar was assassinated in 44 BC at a meeting of the Roman Senate.
At the time, a seer named Plutarch (some claim that the seer was named Spurinna) had warned that something would happen to Caesar by that date. For those that know their Shakespeare, on his way to the Theatre of Pompey, where he would be assassinated, Caesar supposedly passes the seer and joked “The Ideas of March are come,” implying that the prophecy had not been fulfilled, to which the seer replied “Aye, Caesar; but not gone.”
Caesar's death on the 15th of March led to a civil war in Rome, which ultimately led to the execution of 300 senators and knights to avenge Caesar's death, as Rome was thrown into a period of upheaval.
As I now look at the chart of the SPX, I am coming to the same conclusion: Beware the Ides of March.
The last several months have been quite challenging for most investors. While most did not see the decline coming at the end of 2018, I warned that a break down below 2880SPX would open the door to a 20-30% correction in the market. Yet, many did not heed my warning.
Rather, those that held their positions all the way down and all the way up are now patting themselves on the back for “outsmarting” the market. Yet, there was a tremendous opportunity cost to holding during a 20% decline. But, as Foghorn Leghorn would often say: “Don’t bother me with the facts, boy; I've already made up my mind.”
In fact, during the decline and further rally, we were able to earn hundreds of points on the short and long side during various segments of that price action. While I was looking for more of a corrective pullback before we broke back out over 2700, I was expecting a market bottom in the 2250-2335SPX region (the futures struck a low of 2316 when we called for a bottoming that night), with a rally to take us at least back to the 2800SPX region. So, clearly, I was not perfect in my smaller degree tracking of the market, our larger perspective has fulfilled quite well when most did not even expect anything of the sort.
So now I am back warning again. You see, my ideal structure was pointing to the 2250-2335SPX region as only the initial leg in a larger degree correction. And, my expectation was that we would drop back down to the 2100-2200 region after we rallied back over the 2800SPX region. And, I still think that potential still exists today.
However, there are some data points that suggest the next decline may find support between 2500-2640SPX and set us up for that rally over 3200SPX that I am expecting into the 2022/23 time frame to complete this long term bull market off the 2009 lows. However, the market is going to have to prove to me that 2500-2640 will indeed be all the decline we get in the coming months.
Meanwhile, I still see the potential that the market can push a bit higher in the coming two weeks. As long as we hold over the 2750SPX region, we can still continue to grind higher before this rally off the December lows completes. But, should we break 2750 (a support I will raise should we continue higher in the coming week - which will be communicated to the members of my Market Pinball Wizard members), then that is a strong indication we are dropping to the 2500-2640SPX region.
The manner in which we drop to that initial region will give me indications as to whether that region will hold, or if we will attain my ideal targets in the 2100-2200SPX region.
But, for anyone who raises cash and is looking for another buying opportunity, recognize that the long term pattern is still likely pointing us higher into the 2022/23 time frame. In fact, if we drop down to the 2100-2200 region, I think we have strong potential to see that final 5th wave off the 2009 lows pointing us as high as the 4000/4100 region, whereas if the bottom has been struck already, I think we will fall short of that higher target.
So, as I started this article, please recognize that risks have risen significantly. We are now approaching the target I set up on my charts well before we even bottomed. And, this target will likely send us down again. The manner in which we decline into April will tell me what I need to know about how soon and from where that rally over 3200SPX will begin.