8 Monster Stock Market Predictions - Sunday, March 21

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The week of March 22 will be much more volatile, if nothing more, but than for the fact that options expiration was last week. The week following the major opex of the month always seems to carry more volatility, and that is because the options positioning in the market declines, so sharply, it provides, in a sense, less gravity for prices to center around. Considering the amount of open interest the options market generates compared to the past, the volatility in these “modern times” seems much higher. (Premium content on SA Marketplace -Reading The Markets T.W.A – Past The Point Of No Return?)

You can almost see the peaks and troughs in the S&P 500 when lined up against the open interest dips. Is it perfect? No, but it may be perfect enough that a drawdown this week should not come as a surprise until open interest levels start building again.

S&P 500 

This does, after all, make this region in the S&P 500 (SPY) the perfect candidate for a peak in the index. The chart below is stunning; potentially having completed another 5 wave count, the Fibonacci retracement levels of the March 23, 2020 lows to March 17, 2021 peak are jaw-dropping. All major retracement levels line-up with a significant level of support or a major gap in the index. The 23.5% level of retracement lines up perfectly with 3,560, the 38.2% level lines-up with a gap at 3,290, the 50% level with 3,090, the 61.8% level at 2,870, and the 78.6% level with 2,570. On a linear chart.

And here's a log chart.

If you are a believer in Fibonacci and the Elliot-wave cycle, it makes the S&P 500 current set-up a powerful candidate for a pullback to the 23.5% or 38.2% level of retracement, and dare I say a 62.8% pullback.  A drop to 3,570 would amount to a 9% drop from current levels, a drop to 3,290 would amount to a decline of an additional 15.7%, and a drop to 2,870 would be a drop of 26%.

Nasdaq 

It is probably not by chance; a similar pattern exists in the QQQ ETF, with the ETF already falling to and testing the 23.6% retracement level around $297.

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Disclosure: Mott Capital Management, LLC is a registered investment adviser. Information ...

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