Iran is not the cause of this weakness. Iran is the snowflake that caused the avalanche.
Look at the consolidation that was happening at the top of this market before the war started. That was the real problem.
The market was trying to break out and could not do it. The fragility was already there. Iran just revealed it.
That matters because it means a ceasefire does not fix it. The thing that actually fixes it is a sweep of real bullish economic data. Tech, economy, rates moving in the right direction. Without that we rally to the 200-day moving average and stall there. The private credit issue does not go away because Iran made a deal.
So where are we right now on the chart?
The downward channel is still intact. This morning we were sitting about 4-5 points above the upper perimeter of that channel. That is not a breakout. That is a wick.
I have two scenarios from here.
Scenario one: we wick back into the channel. Price hits the end of the trend line and the path of least resistance stays lower.
Scenario two: we hold above the channel for two days. If that happens, we get a rally back toward the 200-day moving average. And then we roll over again.
Both scenarios end in the same place. Capitulation. And here is the part I want you to sit with.
Capitulation does not happen at the bottom of the channel. It happens at the top. When you are on a super green day. When everyone forgot what a bear even is.
When it feels like the whole thing is finally turning around. That is when you get the gap down that ends it.
I am not trying to be negative. I am reading the chart. The chart has been right. The channel has worked like a game of ping pong for weeks now.
Right now the market is coiling. The wicks are everywhere. Something big is coming. Whether that is up or down, we need to break symmetry to find out.
If capitulation happens I will use Fibonacci, volume profile, and price participation to find the levels. But we are not there. Why think about it before it is there?
For now, I am watching two things. Whether price holds above the channel or wicks back in.
Until then, we trade the channel.
And if you want the specific zones I trade then check out Game Plan.
Rock On,
Voz
P.S. Something that made me smile this morning. On X, people are using the words tacos and burritos to describe the market going up and down. That is an inside joke from Trade To Close that apparently leaked. Tacos when it goes up. Burritos when it goes down. Right now we are having tacos. Enjoy them while they last.
P.P.S. You can follow me on X here. And on Instagram here.