Why even bulls should expect lower prices. Plus what the market is trying to tell Elon.

Free After-Hours Analysis: 

Bad gets worse for the S&P 500 as Monday’s rebound gives up the ghost and the index tumbles under 4,200 support.

While not quite the lowest levels of the year, we are not far away and the market rarely gets this close without shattering such widely watched levels.

I’m still looking for a buyable bounce, but this one is quickly shaping up as a double bottom, meaning the second bottom undercuts the previous low, usually by a meaningful amount. It’s gotta be shocking enough to convince all the fence-sitters to sell.

But not to despair, once those weak holders abandon ship, supply dries up and prices bounce. Hence why double bottoms are such reliable trading patterns.

(Or you know, the market could fall another 2,000 points in the biggest bloodbath since 2008. Either way, my trading plan is ready. Is yours?)

As I wrote yesterday, I bought the beautiful bounce off of 4,200 support. Obviously, that bounce didn’t work, but since I got in early, I was able to move my stops up to my entry points and that meant I didn’t lose anything when prices retreated Tuesday.

Free lottery tickets? Only a fool would turn his nose up at those and that is why I don’t mind buying failed bounces. For every two or three failed ones, I catch something spectacular, like March’s 10% surge, which produced some truly eye-popping profits when traded in a 3x ETF like I do.

But yeah, Monday’s buy failed, I got out at my entry points, and now I’m looking for the next bounce. Maybe it arrives Wednesday. Or maybe Thursday, Friday, or even next week. It doesn’t really matter to me. All I know is I will be standing in the right place at the right time when this thing finally pops and those profits will taste oh so sweet.

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TSLA got murdered when it was revealed Elon plans on using his TSLA stock as collateral to buy TWTR. For anyone that’s been doing this for a while, they know collateral means margin calls. If TSLA falls into a slump, that gives the banks the right to dump Elon’s stock, adding fuel to an already falling stock price. That’s a recipe for disaster and is why TSLA fell 12% Tuesday. Luckily, my subscribers pulled the plug when the stock couldn’t hold $1k support.

If there is a silver lining to this story, it’s that TSLA’s tumble puts the entire TWTR deal in jeopardy. Hence why TWTR is trading so far underneath Elon’s offer prices. That tells us the market doesn’t believe this deal is going to happen.

Maybe the situation will change over the next few days, but at this point, neither stock is in favor of this deal. Maybe Musk will get the hint.

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