Toto released Hold the Line in 1978.
Jeff Porcaro on drums. Steve Lukather on guitar. The song that put them on the map before Africa ever existed.
I picked that title Thursday morning for a reason. We are holding a line right now.
The market sits at 6,900 on the S&P. One percent from all-time highs. And traders are already panicking.
I watched it happen all week. People are asking why this is dropping…
…why we cannot break through…
…why the market feels so heavy when we are this close to new records.
Here is what I told my members on Thursday - you are within 1% of an all-time high, and you are already crapping the bed.
Get the Fed out. You could fall 30% easy from here and it could happen tomorrow.
The weekly S&P 500 RSI just hit a 59 handle. Next week it will be a 57. Then a 56.
This is a slow bleed. A drip in your faucet that you ignore until one day the bathtub comes through the ceiling.
The Genesis Cog Scanner tracks these setups before the breakdown happens.
It identifies when the weekly cycles are rolling over while the daily charts still look fine.
That is the edge.
Because if you are bearish short term like I am, you need to understand one thing: How to hold the line without getting destroyed in the process.
The Tsunami You Cannot See
Most of you are looking at daily charts.
That is the equivalent of lying on the beach watching shore break. You see little waves and think there is nothing out there.
But if you stood on a ladder 10 stories high and looked out, you would see a tsunami coming.
You would not be sitting there on the beach saying do not worry, it is a little wave. If you saw that tsunami, you would be running.
That is what the weekly timeframe shows you. I can see from a distance.
I have been doing this forever. We are at a 59 handle. Eventually, we will be at 57. Then 56.
It is this slow, slow bleed.
It is like drip, drip, drip in the faucet in your house.
Then, finally, the house just caves in from the drip in your roof, and the bathtub comes down.
This will test your patience. That is what makes it dangerous.
How To Actually Hold The Line
If you are bearish, you need rules. I am bearish short term. I am not bearish long term.
But I am really bearish right now.
I think the market is in a massive fundamental bubble. It is in a liquidity bubble.
You have broken gold. You have broken Bitcoin. You have broken silver.
You have not broken the retailers yet. But you will. They get them all eventually.
Here is what I told members this week about holding bearish positions:
- Get short and hedge it. Do not get too position sized.
- Build your position gradually. As we start breaking down, keep adding into it.
- Add into strength. Do not add into weakness. Wait for the bounces.
- Do not short into flag formations. Algos rig those to trap you.
I am at 55% cash right now. I have a few longs. I have shorts to hedge.
I took gains yesterday on oil stocks to protect myself.
When my shorts come around, it is going to be a good day. But I am not breaking a sweat because my position sizing protects me.
The Setup Nobody Wants To See
The scary part is this. You are within 1% of an all-time high right now.
No Fed is going to cut rates. You are still within 1%.
The market could fall 30% tomorrow. Do not look at it from a minute-by-minute action unless you are intraday trading.
The five-minute chart shows you what is happening. I saw a gamma squeeze early Thursday.
Institutional selling because they used that to sell off their hedge. Then it just lollygagged in an overbought condition.
Does that make me want to sell? No.
I do not short into a flag formation. Flag formations are rigged by algorithms.
The BlackRocks are manipulating it into a flag formation. Jamming it higher. Forcing it higher. Drawing in more capital.
If you want to short this, go for it. But on a day like Thursday, it was not in your favor.
The advance decline was absolutely horrific.
Today does not change my thesis. We dropped 100. We came back 100.
Come back Monday we drop 100 again. It means nothing to me. I look way over the horizon.
What My Students Miss
I teach graduate students at Loyola. PhD candidates.
Kids who work at Goldman. Morgan Stanley. Drexel House Capital Management.
They are building hedge fund prospectuses. Learning corporate finance. Capital budgeting. Degree of operating leverage.
But here is what the textbooks do not teach them. How to hold a position when you know you are right but the market keeps grinding against you.
How to size positions so one bad week does not blow you out. How to distinguish between daily noise and weekly structure.
That only comes from experience. From 39 years of watching traders panic at the wrong time.
From understanding that being early and being wrong look exactly the same until they do not.
The Line Will Break
Right now you can buy this market. The technicals support it on shorter timeframes.
I am adding long positions in specific names.
But if we go through 6,500 on the S&P, you are going to rue the day you did not listen. That level is a game changer.
A widow maker.
The more times you approach that line and fail, the more likely you are to break it. We have tested it multiple times now.
Each test weakens the structure.
When it breaks, it will not ring a bell. It will gap and go.
They will take out 6,800 and then the machines will just start doing all their dirty work like they did on Bitcoin. That is what I think is going to happen.
The Genesis COG System tracks exactly when these inflection points arrive. When the weekly cycles complete. Not just on the indexes…but individual stocks as well.
When the slow drip becomes a flood. When holding the line shifts from patience to stubbornness.
Most traders will not see this until their accounts drop 10% in three days. The system detected it weeks earlier.
That is how you hold bearish positions without getting destroyed. You know what the structure looks like before it breaks.
Have a good weekend. Hold the line if you must. Just know when to let go.
Professor Jeffrey Bierman
Creator of the Genesis COG System