A 5–7% SPY Pullback Wouldn’t Be the End of the World
A 5–7% Pullback Wouldn’t Be the End of the World $SPDR S&P 500 ETF Trust(SPY)$ 🩸
Historically, August and September are two of the worst-performing months for the $S&P 500(.SPX)$ , and I think this year will be no different.
In the worst-case scenario, I’m expecting another 5% to 7% pullback, which would simply bring us back to levels from earlier this year.
That’s not a crash. That’s a discount.
On Friday, the S&P 500 sold off aggressively, and while the weekly BX Trender still shows strength, this could mark a short-term top.
We’ve been waiting for a pullback. Markets don’t move in a straight line. After a 30% rally from the April lows into last week’s highs, this kind of move was overdue.
Despite that, our thesis hasn’t changed. As long as our criteria are met, we’ll continue trading our weekly watchlist, regardless of what the broader market is doing.
Here’s what matters now:
Fair Value Bands are flashing warning signs. We reject at this first band 90% of the time.
Critical support levels:
$620: Ideal bounce level (unlikely).
$600: Most likely landing zone (~3.5% pullback).
$570: Worst case, fills the May gap (~7.5% pullback).
Even a drop to $570 would only take us back to levels from when the trade war headlines kicked off. It’s not far-fetched, and I believe buyers would step in there. I don’t expect us to revisit the April lows.
So what now?
I’m not shorting the market.
I’m not buying puts.
I’ll continue trading setups that meet our criteria.
If criteria fail, I’ll reduce long exposure. That’s it.
Pullbacks happen. There will be rough months. But reacting emotionally, especially by fighting the trend is usually a mistake.
Often the best move is simply to reduce aggression, wait for discounts, and strike when the odds shift back in our favor.
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