Hey trader,
Friday's market move was one of the top three moves in market history.
Not by percentage. By magnitude. By dollar for dollar move.
At one point, the S&P 500 was up 152 points.
This isn’t a real rally.
How do I know?
Just look at the number of stocks The Genesis COG has identified as short trades:
The Genesis Cog Scanner is particularly useful here because it looks at the short and long-term trends. It knows the difference between a fakeout and a true rally.
This was a pure short squeeze - a technical event completely detached from fundamentals.
Yet, most traders can’t tell the difference between real buying and this flimsy price action
Today, we’re going to change that.
The Double Meaning
There is a day-after effect. The hangover.
When the market sells off 130 points in a panic, you expect follow through the next morning.
The same dynamic works in reverse. A sugar high that keeps pushing shorts out for two or three days before reality sets back in, pushing markets higher.
This pattern repeats every time the market makes an extreme move on no news.
The term hangover has dual meaning here.
First, there is the overhead resistance hangover. The technical reality. We have tremendous hangover at 7,000. The market is trying to escape from a coffin corner. You think the sugar high will last. It will not.
Some shorts got squeezed Friday. They came back in and added to their positions. Now they are getting squeezed again.
This is another hangover from their poor decision to short at the bottom of a broken range instead of waiting for proper resistance.
Second, there is the psychological hangover. The physiological symptoms. You know you are on a sugar high. You know it will end. Both financially and psychologically. The structure of the market will not let this run through.
The Rule You Cannot Break
I have a rule. You do not need to be a 30 year veteran to grasp it. I call it the ultimate rudimentary rule. The basic rule of trading.
- Do not short into parabolic.
- Do not buy into waterfall.
Follow those two rules and you will become a millionaire eventually. Short on the way up and you will not survive a week. Buy dips on the way down and you will not survive either.
Look at the MACD. This is insurable. Three buy signals stacking. If you came here to short this, you do not know what you are doing. You are shorting a parabolic buy signal.
I would not be surprised to see us test 7,031. That would not surprise me in the least. But even though I would not short this on an intraday or daily basis, I would start to scale down as we keep popping higher. Eventually that vol box is going to explode.
What the Daily Chart Reveals
We are back to where we were four or five days ago. We have not made progress. But the RSI has gone lower.
You have gone from a 57 to 59 handle down to a 52 handle. Slowly, slowly. Drip, drip, drip. Like molasses. You are bleeding.
This is going to cycle all the way down. You are right on the throes of that zero line. Technically a two-sided market even here.
The Weekly Tells the Truth
The weekly is more important. Nothing is more important than the weekly indicator. If you do not get this down, you will not survive this business.
We are seeing the same thing here that we saw in February and March of last year. They are the exact same markets. You crawl along just underneath the signal line. You crawl along just above that zero line. You keep buying every dip thinking this is funny.
But what I am telling you is you do not know what catalyst is coming. Nobody can know what is coming. But it will come. This is going to cycle and gain traction to the downside eventually.
It might not be this month. It might not be March. It could be April. But this is the setup for a market that is going to work its way lower. You cannot keep manipulating and locking this in a vol box forever.
The Risk Reward Reality
If you are buying here, think risk reward.
The risk to the upside may be 300 to 400 points. The risk to the downside could be 2,000 to 2,500 points. That is a bad investment. You are making bad choices.
The whole point is to buy low and sell high. Not to buy high and try to sell higher. When you try that without proper stops, you get blown out. Ask everyone who bought Palantir at 250 and Roblox at 180. Their careers are over.
If we go through 6,800, it opens the trap door for hardcore selling by algorithms and institutions who have set their stops across that level. When that breaks, the algorithms do not give you time to react.
Killing Time
This is what I told Brandon Chapman before he took over the broadcast. Today is about killing time.
You cannot short this right now. We are still in that hangover of a follow through to the upside. It usually takes two or three days to wash out the shorts.
You wait. You scale down on pops. You do not fight the parabolic move. But you recognize the hangover for what it is. A temporary condition before the real move begins.
The Genesis COG System tracks exactly when these short-term hangover patterns exhaust themselves and when the weekly momentum finally breaks.
The system caught the weekly MACD rolling over before Friday's move.
It identified the exact same pattern in February and March before those reversals materialized.
This market is not broken yet. But momentum has broken. Momentum breaks first. Then trend follows.
See how the Genesis COG System identifies when the hangover ends and the real move begins →
Professor Jeffrey Bierman
Creator of the Genesis COG System