The market is EXTREMELY oversold and is not yet in the Trending Mode! Therefore, with NO CONFIRMED Trend and oversold momentum oscillators, the market should bounce back, early this week. The SPX was in a Bollinger Band Squeeze for 5-6 weeks, but finally broke down, last Friday, September 9^th, 2016. Every asset class was down. This is NOT “buy the bounce” situation.

In the medium term, there should be a sizeable decline.

I would not use this bounce back, if one does occur, to establish new long positions. I must view any bounce back, that may occur, as an opportunity to get out of stocks and prepare to go short. The markets’ decline could be a long way to the downside.

However, the Expanding Top Pattern that the SPX has been forming for the past few months, suggests that it could easily test the 1810 area. That low is over 350 points from its’ current levels.

With a presidential election that is scheduled for November 8^th, 2016, it is difficult for me to believe that the Presidents’ “Plunge Protection Team” or the FED will not step in so as to keep the markets from experiencing a dramatic plunge, before the said election. After the election, anything is indeed possible!

Friday, September 9^th’s decline was mostly driven by fear of a potential interest rate increase occurring in September of 2016. As GDP growth is at only 1.1%, I do not believe we will get a rate increase at the time of the next meeting. The FED realizes just how vulnerable the market is which is why there was talk of a rate increase, last Friday. If they have learned anything, after Fridays’ decline, they will almost certainly keep silent, until after the election.

For the past few weeks, I have been speaking about how the upside potential for this market is limited and that the downside appears to be very profitable. I still believe this to be true, regardless if the market does indeed bounce back, this week.

However, I would still be cautious about getting short, too soon, despite Fridays’ strong decline. Therefore, please be patient!

If the market does bounce back, this week, and the momentum oscillators become overbought, that is when I will start looking to put on a few shorts.

Over the next few days, I will carefully monitor the markets and keep a very close watch over them. If I do start to establish short positions, I will do so at higher levels.

If you would like to know exactly what I am trading next follow me at www.TheGoldAndOilGuy.com

Chris Vermeulen

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com. There he shares his highly successful, low-risk trading method. For 7 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets. Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

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