The Hurt Locker
Are we about to blow up?
There’s a moment in The Hurt Locker where everything goes quiet.
No music. No dialogue. Just a figure standing in the dust, surrounded by buried explosives, each one wired into the next. Move too fast and you trigger a chain reaction. Stand still too long and the situation gets worse. The only way forward is slow, deliberate, and precise.
That’s this market.
SPX and mega-cap tech are coiled, struggling to break prior highs but holding prior lows. Under the hood, commodities are slipping and crypto is getting dragged lower — the kind of internal stress that triggers panic.
Up here, every level matters. Because once a wire gets pulled, there’s no rewinding the tape.
Key Fibs & Market Indecision
Let’s zoom out for a second and recognize where we are from a purely technical perspective.
Attaching fibs from the 2021 high to the 2022 low, it’s clear where SPX has found sellers during this cycle.
March 2021: ongoing central bank tightening at the 0.786 extension
July 2024: carry trade unwind at the 1.618 extension
February 2025: tariff tantrum at the 2.0 extension
Right now, we can see that SPX is hitting up against the 2.618 extension which has acted as firm resistance for the best part of 14 weeks.
Such a prolonged period of consolidation has triggered furious debate as to what exactly is happening right now.
Are we in a distribution pattern prior to a Q1 2025-type downturn?
Or are we coiling for the next leg higher and a burst above the 7,000 mark?
The short answer is that nobody knows. But if we’re looking to take advantage of the market at these levels, it pays to know exactly what we’re betting against:
From a technical standpoint, it’s clear how price successfully flipped the 2.272 extension from resistance into support over the last few months - with buyers stepping in with force each time SPX dipped towards 6550.
On a shorter term basis, similar pivots have held up remarkably well of late too - see the green bars - especially the lower of the two which sits at ~6750.
What’s significant about the 6750 level in particular is that it sits above the December low of 6720 - a level that bulls will need to defend over the coming weeks and months to lock in the high probabilities forecast by the TOY Barometer. More on that below.
Turn-of-the-year Barometer signals hope for bulls
After running thousands of historical price trends, Wayne Whaley found the most reliable 12-month forward returns for SPX came when gains of 3% were achieved between November 19 and January 19.
When those boxes were checked - as was the case this year - SPX was higher 12 months later 96% of the time, with an average gain of +16.5%.
But here’s why 6720 matters so much:
If SPX closes below the December low (6,719) during Q1 of this year, the TOY framework starts to fail — and historically, the odds of favorable returns over the following three quarters drop below 50%.
Long story short, if bulls continue to hold 6720 over the coming weeks and months, then quants data suggests a strong year. If the same level breaks, then sure - we can start to talk about a bear market.
So you’re bullish?
Gun to my head, yes — I’m still bullish. For now.
That said, I’m not blind to the cross-asset volatility that’s been rippling through markets in recent months.
Crypto looks heavy. And despite their furious run, precious metals are starting to trade more like meme coins than traditional “stores of value.” Just look at what silver has done over the last couple of sessions — not months.
The turbulence isn’t confined to commodities either. FX markets have been whipsawing for weeks. The notable exception? Bonds, which — like equities — have held up surprisingly well.
Looking for clues, not betting the house
Moments like this have a habit of forcing a choice. You can fixate on what might break next — or you can start asking a different question: if this cross asset volatility provides an opportunity, where might we find it?
Rather than talking through each of the following charts individually, I just want to highlight the key pivots that are now in play across a range of beaten-up names and written off tickers.
The great thing about these pivots is that they provide a great entry if managed correctly - with tight stops on breakdown levels, and targets ranging from mid-term moving averages to VWAPs from prior highs.
Ethereum
Bitcoin
COIN
IGV
JPM
What’s the catch?
If any of these tickers are to bounce, sector ETFs likely show us the way.
Here’s what we don’t want to see:
Last month saw big gains for defensive sectors - most notably energy, staples and materials - all whilst ‘risk on’ sectors suffered their worst decline in months. Flip this on its head, and we have a very different story on our hands.
Keep an eye on this chart too, which has bears salivating like pigs at the trough:
If XLY/XLP breaks down here then sure, get bearish - quick. But if price reclaims the purple pivot and holds above the red dotted line, to me that would signal a failed top and increase the odds of further upside, potentially fueling the move in crypto proxies and software that I’ve been keen to communicate over the last few weeks.
Closing thoughts
At the end of The Hurt Locker, survival doesn’t come from bravery alone. It comes from patience. From knowing which wire to touch — and which one to leave alone.
That’s how I’m treating this tape.
Not chasing headlines. Not marrying a narrative. Just respecting the levels, watching the pivots, and letting price tell the story before I commit to the next move.
If 6720 holds, the path higher stays open. If it doesn’t, I step back and reassess.
Because in markets — just like in the dust — the goal isn’t to be heroic.
It’s to make it out in one piece.
Best,
Alex
Disclaimer: This newsletter is for informational and educational purposes only and does not constitute financial, investment, or trading advice. Markets involve risk, and past performance is not indicative of future results. Always do your own research, assess your personal circumstances, and consult a qualified financial professional before making any investment decisions.