Markets Rhyme
Two weeks ago, I joked that if this market refused to pick a direction, I’d soon be reduced to writing short stories for these newsletters—since nothing would be changing. Well, here we are. Still stuck in the chop zone.
After some reflection, I realized I’m not very good at short stories. I’m much better at poems. So here you go:
We are stuck in this sideways market
That won’t quite reach its downside target.
It bobs around but won’t break out,
Leaving momentum traders stuck in a drought.
The thesis has yet to change,
And won’t until we break this range.
Each time we’ve seen price action this thrashed,
Eventually it led to at least a small crash.
Perhaps we go higher and get a quick pop,
Before the bottom falls out and everything drops.
Either way you look at it, the edge is diminished,
When you study this bull move, it looks nearly finished.
It’s a midterm year, which means chop and fear,
Before the market once again shifts into gear.
I’m not a perma bear, I promise, I swear,
Just reading the data and trying to prepare.
Thursday’s SPY candle pretty much summed up the last three months: a classic bearish indecision candle perched right on key support, sporting large upper and lower wicks. Indecision at critical levels has been the defining story of 2026 so far.
SPY Daily Chart
Under normal conditions, I’d say a decisive break above or below that candle’s range would set next week’s direction. But in this news-driven, sideways grind, I’m not so confident that rule holds. I’ll still treat the candle’s high and low as short-term levels for trades, but I’ll be laser-focused on closes rather than wicks.
Right now, momentum feels lower. Yet every time it looks like we’re finally breaking down, the bulls stage a miracle rally to save the day. Tuesday’s candle was a textbook example.
When trading a market like this, it’s important to keep searching for pockets of strength or weakness that look different from the broader market. That is how you continue to find an edge and areas to trade.
Markets rarely top all at the same time. We saw QQQ top back in October, SPY top in late January, and SMH top in late February. Meanwhile XLI (industrials) and XLE (energy) only topped four days ago. On the individual stock side, MSFT, one of the largest companies in the world, topped back in July of 2025, more than seven months ago.
When different sectors and stocks top at different times, they also bottom at different times. That creates opportunities to buy names near their lows, even if those lows are only short term. This is one of the reasons I have been focused on MSFT. I still like the trade even though it has done a whole lot of nothing for the past month.
Whether it sees one more low or not, I think it is fairly close to the end of a major correction and should see a decent bounce, at least into the underside of the 100 week SMA before any further weakness comes in, perhaps back toward the $350 region or lower. We have seen this play out recently in some of the cybersecurity names like PANW and CRWD, and even PLTR, which have all had substantial moves off their lows in recent weeks after we highlighted them.
MSFT Daily Chart
I also believe JNJ is very close to (or already in) a meaningful correction. It closed below $242 key support and traded down into the anchored VWAP from the earnings pivot. If it retests higher, forms a lower high, and then breaks that anchored VWAP, I think we could see a sizable retracement over time—back toward the earnings candle body.
I added short exposure on Thursday after the gap down below the February 27th candle. Given how strong the prior trend has been, my plan is to keep scaling in on rallies, shorting as high as possible while building the position. The DIA short I detailed earlier took 22 days to fully play out—I expect something similar here with JNJ.
JNJ Daily Chart
Now everyone is probably wondering what is happening with Bitcoin and why I made you read an entire paragraph about JNJ before getting to it. Good question. Right now I think there are two most likely outcomes on the Bitcoin chart, and both of them eventually lead lower. I know, don’t hate the messenger.
Although if you have been following along since August of 2025, it is possible you, like me, became quite cautious and took profits while BTC was still in six figure territory. If that is the case, you may actually be hoping for new lows so you can buy that nice dip ahead of the next bull run.
If BTC breaks above $75,000, it is likely in a B wave higher in my red count. That B wave could be a sizable bear market bounce pushing up into the $80,000 to $90,000 region. From the recent lows that would be roughly a 45 percent move if price rejects near the 100 week SMA around $87,000.
During the prior bear market, both sustained bounces reached roughly the 42 percent level, so this would not be out of the realm of possibility. Those corrections took about two months each, and we are currently about one month into this correction. If this scenario is playing out, we could see a fairly decent March followed by a much weaker summer.
The other scenario assumes that price cannot break through the $75,000 resistance level. In that case, we would likely see another flush lower that breaks below the 200 week SMA before starting the larger B wave bounce.
There is also a third count I am watching that would involve a more complex correction, similar to what we saw in 2021. It could turn into a double three or even a triple three structure. But the end result is so similar that there is no reason to complicate things right now with X’s, Y’s, and possibly Z’s if things get wild.
For now, the key levels are fairly simple.
If BTC breaks above $75,000, it is likely following the red count or possibly the more complex correction and could push toward the $80,000 to $90,000 region.
If it fails at $75,000 and then breaks below $65,000, it is likely following the blue count and could find a low somewhere in the $50,000 region before beginning a more sustained B wave move higher.
BTC Daily Chart
