Everyone makes mistakes, including me. A few of the numbers towards the end of the newsletter were incorrect.
The SPX should have read 6,400 and 6,800, not 5,400 and 5,800, respectively.
I've updated them and highlighted the changes for you.
Jeff Bierman
Hey trader,
The S&P 500 popped 50 points at the open this morning. I Skyped Blake Young two words: "Day's done."
Sellers showed up within minutes and crushed it. This has happened every session for weeks, and most traders still have no explanation for why.
I do.
I created a framework called the Hourglass Effect.
I looked it up. There is not much written about it.
So ,I built my own theory around 39 years of watching markets flip from supported to trapped.
It explains the one structural problem that prevents this market from sustaining any rally.
By the end of this article, you will understand why every bounce is getting sold and how I am positioning around it right now.
The Genesis COG Scanner detects the algorithmic pressure that enforces the Hourglass Effect before it hits the tape.
It can see momentum shifts before you notice them. And it can put you on the right side of the market when it matters most.
Click Here to See How the Genesis COG Scanner Works.
Now, here is what changed underneath this market and why it matters to every position you hold.
The Sand Flipped
Think of an hourglass. All the sand starts in the top half.
It drips through the middle one grain at a time. Slow and methodical.
That is how bull markets work. All the liquidity sits underneath the market. Every dip gets bought because buyers are defended by supply below.
For two years, that floor held. Even during Liberation Day, supply was underneath.
That is over.
All that supportive liquidity now sits above the market. Every person who bought over the last two years is trapped above current prices.
When we rally, they sell. Tech rallies, they sell. Financials rally, they sell.
You cannot push through that wall.
70% of Buyers Are Underwater
I pulled up the volume profile for my TheoTrade audience this morning. The picture was devastating.
Roughly 70% of all volume transacted above where we sit right now.
Every rally toward 6,800 runs into a wall of sellers desperate to exit at breakeven. The algorithms smell it and accelerate the selling. They feed off weakness like sharks in a pool.
I told my audience 6,800 is a flat-out sell. It will rally there, hit that overhead supply, and retest the lows.
The only way out of the Hourglass Effect is to flip the model again. All that overhead supply needs to work its way below the market.
That means either time or a correction deep enough to clear the decks.
I Am Positioned for This
Six of my nine current holdings in the Genesis COG portfolio are short positions.
I carry heavy negative delta because the overhead supply tells me every rally is a reload opportunity on the short side.
On Friday, I closed my short in Sysco (SYY) for a 7.32% gain. The stock dropped another 13.7% today. That is the Hourglass Effect in practice:
- Overhead supply traps the stock. Every bounce gets sold by participants trying to exit above.
- Algorithms detect the pressure and accelerate it. Stocks do not need bad news to fall. They just need more sellers than buyers, and overhead supply guarantees that.
- Money managers are using every pop to sell cheap stocks and rotate into 52-week-high utilities for window dressing. They need something green on their quarterly statements.
When Wednesday hits and the quarter ends, those utility positions get dumped. The optics trade expires.
We can rally from around 6,400 back toward 6,800. But the selling isn't over. And the next leg down after that will be lethal.
The Hourglass Effect does not resolve in days. It resolves when overhead supply has been fully absorbed. We are nowhere close.
The Genesis COG System tracks overhead supply and algorithmic pressure across daily, weekly, and monthly timeframes.
It shows you when the machines are defending price and when they are attacking it.
See how the Genesis COG System detects overhead supply traps before the machines sell into your position →
Professor Jeffrey Bierman
Creator of the Genesis COG System
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