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Futures Lower – Capitulation?

Apparently the market is always right. And, it seems futures are saying “tariffs”  are bad. Though steel stocks were higher, the broader market is taking it on the chin. Is this capitulation? If so, what’s next?

“Not very many. If the market is falling or something like that, that’s opportunity for us. So the stock market has never caused my stomach to churn.” – Warren Buffett

In a recent post we talked about waiting for a capitulation low that we now know happened on Friday, February 9. That post is here: We also talked about the tendency in previous 10% corrections for a retest of the low. The chart that was referenced is the SPX Equal Weight Index. If futures open where they are presently we have an opportunity to print a “W” pattern and bounce. The 200ma is support.


SPXEW 030218 futures

Note SPXA50R in the second panel will once again be in an area of extremes. A washout here would most likely lead to a bounce, so its important not to panic.

Futures – What Next?

If the “W” was anticpated, as outlined above then the follow through bounce is what we anticipate now right? Yes it is. That said, we need to see institutions taking the opportunity to once again buy at a discount at yet another washout low. Here is what the 2016 low looked like several months after the retest.

XII FEB 2016 futures

While the past is no guarantee of the future, it is a good benchmark and a place to look for similar developments. If we see furious buying, we’ll know institutions are supporting the markets and buying the low.

We’ll be LIVE a little earlier than usual this morning. See you then.

Happy Trading,


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