Hey Trader,
Does it feel like we are about to fall off a cliff?
Yep, and the technicals back it up.
We’ve been on the brink of collapse before. Yet, nobody knows when the break actually comes, and that includes me.
So when things finally go South, traders freeze at the exact moment support gives way underneath them.
The S&P 500 is living that problem right now.
The gap at 7635 in the ES marks the end of this run, and the RSI is barely holding 50.
I stacked on the S&P 500 this morning. Now, I’m going to show them to you.
I call this market a cliffhanger.
You prepare for a cliffhanger by mapping the levels in advance, then reacting when they break.
The map does the work that prediction never could.
What A Cliffhanger Actually Means Here
Back in 1993 there was a fun film called “Cliffhanger,” starring Sylvester Stallone. He spends the opening hanging by a thread off the side of a mountain.
The idiomatic meaning matters more than the movie. A cliffhanger is an ending to an episode of a serial drama that leaves the audience in suspense.
That describes this bull run. It is coming close to an end, and the suspense has not resolved yet.
Stallone has not fallen off the cliff. The market has not fallen off the cliff either.
I am not one to stick my neck out and tell you it breaks tomorrow. I have no idea, so do not send me an email asking.
I work setups instead. Inside the burn signal we call them footprints, or we call them thumbprints.
When the footprint shows up, the probability elevates. It never tells you the day.
What The Cliffhanger Looks Like On A Chart
You map a cliffhanger by stacking readings that each measure a different thing.
Four of them lined up on the S&P 500 this morning.
- The price structure sits in a descending channel, and the algos have taken over that slope.
- The RSI is barely holding 50, and the algos defend it only down to that line.
- The MACD has crossed underneath the signal line, so momentum turned bearish first.
- The money flow shows lost liquidity support, and the money flow never lies.
Momentum turns before trend does. That order is why the MACD cross carries weight while the trend still looks intact.
The candle on the chart right now is a hammer. A hammer is not a sell signal, and I want to point that out clearly.
Citadel and BlackRock will defend this tape as long as they can. They stop defending at the point where slope integrity changes.
How The S&P 500 Is Living It Right Now
The gap at 7635 marks the end of this run. Support and slippage below it are already gone.
Watch that RSI closely. If it goes through 50 and drops toward 40, then 7,600 disappears fast.
The algos defend the RSI at 50. They walk it down once it reaches 45 and 40.
The level that ends the suspense sits at 7,500. Break that and this stops being a cliffhanger and becomes a fait accompli.
From there the model points to 7,300. We probably work down to 7325, and anything lower comes from margin calls.
It will not go down in a straight line. This market is defended, and I have watched the algos slow every decline like this.
The weekly chart is now in a topping process and starting to curl over. If the weekly takes out the 50, loses the signal line, and pivots, you get the first correction in roughly a year and a half.
How You Use This Map Tomorrow
I take this market day by day. I never take it minute by minute.
That posture works because the levels are already drawn before the session opens. The decision gets made in advance, not during the panic.
When a mapped level breaks, you have three choices and nothing more:
- Get rid of all of it.
- Get rid of some of it.
- Buy a put option to hedge the position.
Adding to the position is not on that list. Dollar cost averaging into losers is how accounts disappear in a few months.
Plot the loss while you are in the trade. Decide the point where you can absorb the pain, then mark it.
Remember what these markets do at the break. They escalator up and they escalator down.
You cannot control when the cliff gives way. You can control whether your exits are already on the chart when it does.
The suspense here resolves in one direction or the other. My job is making sure you are not the last one hanging.
Professor Jeffrey Bierman
Creator of the Genesis COG System
