Three Scenarios for Monday’s Trading

There are three scenarios I see for Monday and the short-term.

1 – Stocks open sharply lower and then spend the morning stabilizing and closing at least okay. From there, a sharp, snapback rally develops for 1-2 weeks before rolling over again to the downside. The final low is seen next month at lower levels.

2 – Stocks open sharply lower and see one or two feeble and failing rallies during the morning before a full-fledged crash in the afternoon. The Dow closes down at least 1000 points. Stocks remain volatile the rest of the week, but establish a low, just not the ultimate one.

3 – Stocks open higher and rally all the way to the close. The advance continues for a few days before rolling over again to the downside with another leg lower to come.

The bottoming process begins this week. The length of the process will be determined by how stocks act during the week.

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Comments

  1. Hi Paul,

    Would you say today’s trading was scenario 1 or 2? It seemed like it was sort of in between.. Also, why do you feel that no matter what this is not the ultimate low? Is there a scenario under which there doesn’t need to be a retest of current levels?

    Thanks! I really enjoy the Sunday webinars by the way. I have learned a lot from them!

    Aron

    • Thanks Aron.

      On Twitter, I called the scenario as you described, somewhere in the middle. Stocks should rally tomorrow.

      There is no hard and fast rule that these levels must be retested. They really weren’t in 1997 after the October Asian Contagion mini-crash. However, given the severe damage done, lack of leadership and plethora of historical precedents, I do think there will be a retest or more downside this quarter.

  2. Thank you for the reply.

    Aron

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