Where Are We Going, Where Have We Been?

The title of this post is a variation of the title of a short story by Joyce Carol Oates, “Where Are You Going, Where Have You Been?," featuring one of the most evil, cunning characters in modern American literature, Arnold Friend.

Ironically, many literary critics have argued that Friend was not even a real character in the story, but rather one imagined by the story’s protagonist, a teenage girl who may or may not have been murdered by him.

In the stock market, traders also battle villains every day. Often times, however, that antagonist is looking back at them in the mirror, or is even just a figment of the imagination. Your money is made in the markets by punishing other traders for making mistakes. Thus, it follows that you had better contain your mistakes as well. Whoever wins the battle of mistakes gets the money.

In a market such as the one in which we currently reside, many traders have a tendency to fight the change in character that is occurring. be it the diminished upside returns from buying every dip and/or chasing upside 0DTE call options, even seeing the mega cap tech monsters finally cool off, too. We also have an increase in rally fades, random price swings, and a general selling of what would previously be seen as can't-miss bullish headlines. 

Thus, if you agree with my thinking, the issue then becomes at what point we see a kind of acquiescence to this new market regime by the previous dip-buyers, where they cease their brazen gambles and instead actually focus on return OF capital, perhaps before it vanishes to money heaven. 

This morning we have rates and the Dollar backing down, but only a touch as I write this. Oil and gasoline are down much harder. 

However, the small caps are suddenly below $170 in the IWM ETF, which is a level we highlighted both here and with Members for a significant period of time. To lose this level would be my trigger to usher in a major, not minor, breakdown for a few thousand stocks. 

And it would be doing so on a day where stocks *should* be bouncing with rates and the Dollar opening lower...