Brexit Bad For Market – 2nd Shoe Will Drop When SPY $202 Is Breached

Posted 9:30 AM ET - Brexit is going to weigh on the market for quite a while. The momentum has been established and this was a surprise outcome. That means there will be a risk adjustment phase I still believe SPY $190 is possible, but that would be a major buying opportunity. If we get there, we won't be there long. The SPY is sitting right at major support levels. We will be below the 100-Day MA and the 200-Day MA on the open this morning. SPY $202 is also a major horizontal support level. In my comments Wednesday I suggested buying puts if England left the EU and I hope you did. The market will try to hold this level, but many traders were caught off guard. If we close below $202, add to short positions. The news is pretty light this week so Brexit will drive the action The market will not rally until we probe for support and it is established Asset Managers are not anxious to buy after Friday's bloodbath. They will evaluate the selling and they will pull bids Keep in mind that almost everyone was expecting a "Stay" outcome Some longs sold positions on Friday. Others hoped that this was a one day event and they decided to try and weather the storm. Those remaining longs will be hitting the panic button if we close below the 200-day MA I will trade from the short side, but I need a bounce. I want to short financials and emerging market stocks. I am long BZQ overnight and I bought it at $31 Friday. This is one of my favorite shorts. I will use SPY $202 as my guide. If we rally above it, I will cover my shorts. If we move back below $202, I will get short. My trading system has been targeting great shorts so it is easy picking. The last hour of trading is critical. Bears want to see late day selling Credit is the ONLY thing that can produce a sustained market decline. I don't see that happening right now. The market will correct and bounce. England will still be in the EU for a long time. Central banks will flood the financial system with liquidity and the market will like it. We should see nice follow through selling this week. After that, I expect to see a nice buying opportunity setting up. The closer we get to $190, the more interested I am as a buyer. Use SPY $202 as your guide. That is a major, major support level. . .

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