The S&P 500 (SPX) dropped by 7% last week and broke through the bottom from late October through early December. That means the whole intermediate-term bottoming process will need to begin again, which means we are likely to see a sharp reflex rally this week and then a retest and possible break of the low. We have tried to be clear that we continue to see this as a market event and not yet a reflection of a coming recession, which means the market should retest its high at some point in 2019. Given the policy mistake by the Fed last week and the unpredictable White House, there is no need to call the bottom is in place until our rally requirement indicators flash the all-clear. It would take an extraordinary move to accomplish that this week.

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