Down or Up, Crash Now or Later

Bonds were very strong today, but crude rebounded. I expect bonds up and crude down for a sustained bear rally.

Since I expect lower prices for stocks eventually, the question is crash now or later? There are comparisons to 2008 going around. I don't see a crash as likely because there is support around 3400 on the S&P 500, the target from the topping pattern and also the pre-lockdown level. That is a drop of of about 7 percent from here, which most people would consider a crash if it happened in a day or so, but which isn't much in percentage terms. If that happens, I expect it'll happen tomorrow and carry into Tuesday morning, with the low hit then. You will not want to be short anything at that moment it bottoms because a snap down will be followed by a snap back.

The other scenario is the market is already in a bottoming process. Assets like ARKK and BTC that should be driving the market lower aren't. Instead of this being the "next phase" of the bear, it's actually a complex bottom for a sizable rally. It seems to me that most professionals have turned bearish. Instead of retail and slow institutions (pensions funds, college endowments) capitulating, there is one more rally. Bulls are sucked back into assets such as BTC. People who are thinking of selling here, forget about it this summer. Then comes new lows in the traditional season for spectacular bear moves: September and October.

My plan for the next couple of trading days:

I have energy puts and even some doom puts in energy in case the market does crash. That'll offset any losses I have on outstanding bullish positions. I accumulated more biotech calls today. I also have cash, and plan to buy if the market starts going into a V-shaped low. If instead the market rallies, I'll probably sell my energy shorts quickly because I suspect it'll bounce with the first move up, but I will be immediately watching for re-entry points.