Whenever the market is falling, people want to know whether it’s too late to short. It’s easy to think it’s too late when it’s fallen so much, but in reality, the Nasdaq is only down about 10% year-to-date. In all respects, that’s a pretty minor buy-the-dip pullback and moment in time. I wouldn’t consider a 10% correction “too late to short.”
Of course, this has been a (mostly) news-driven correction, and one that ideally could provide a fantastic buy-the-dip moment if and when the news situation changes. That’s especially true given the high put/call ratio. Whenever the put/call ratio is too elevated, market participants are largely short, and all it takes is one piece of hot news to send them covering, and buyers flying in.
But, even a short covering rally wouldn’t fix so much of the damage that’s been done. Plus, the correction started before the war with Iran. It began when many tickers failed to rally ahead of earnings in January, and it continued when many companies, like Microsoft, tanked post-earnings on solid numbers.
Nasdaq – Weekly Chart
Check out the Nasdaq on a weekly chart below…
One of my favorite levels to buy is at the 50 SMA on the weekly chart. This is typically a fantastic buy point for long-term investments, especially with a weekly squeeze and a consolidation ready to break out. However, in this case, the Nasdaq has broken this level and is still stuck below it, as the squeeze remains firmly red and downward momentum persists. This is a major sign to me that it’s not in fact too late to short.
It’s true that in the long term, I always like buying stocks and ETFs on sale during these kinds of downward moves. Though I can’t say I think this move is finished, especially due to critical level breaks like this. In general, a critical level break like this means that we will likely get an even deeper discount on those long-term buys.
So, what kind of discount are we talking about here?
Using Fibonacci Symmetry to Project Downside Targets
Comparing the current move to both the 2025 Tariff Tanrums move, and the 2022 Bear Market using Fibonacci Symmetry levels (measuring both corrections, and projecting those moves from our October 2025 highs, what you’ll see is that both projections give me a downside price target around 20,000. That’s another 3,000 Nasdaq points lower.
The key to whether we fall another 3,000 Nasdaq points will be the strength of the short squeeze, when it occurs, including how much ground we recover.
That rally, along with the reaction to earnings, will seal the deal. Ideally, we can hold at a higher level, like at the 22,000 price point, which is where we have key price support from the beginning of last summer. But, if and when that level breaks, I’ll continue looking for deeper downside Fibonacci targets at 20,000.
Upcoming Pre-Earnings Momentum
Pre-earnings momentum, or how stocks move in the 21-day time frame before earnings, is a massive tell when it comes to stock market sentiment. And at this point, we are entering another pre-earnings momentum period as we approach April and the earnings season that comes with it. Historically, this is a bullish time in the stock market, but that is not what I’m seeing right now, as even relative strength winners are taking dives.
Last quarter, we saw so many strong companies (like Palantir) shift into downward trends before earnings. This isn’t what bulls like to see! This quarter, I am already seeing a significant number of bearish setups going into earnings. Take a look at this one in Advanced Micro Devices…
So, is it Too Late to Short?
Now, all of this being said, even though I’m trading the downside for now, that doesn’t mean I’ve turned into a forever bear. It’s just for now, and primarily due to the number of signs I’m seeing, such as:
- Breaks of critical levels of support
- Bearish pre-earnings momentum
- Bearish moves post-earnings
- Strong selling in high flying names
- High and rising VIX
- …and more
So no, I don’t think so, and there are many reasons why. This is why I have been focusing on downside momentum. But it’s not going to last forever. Ultimately, this will be a fantastic long-term buying opportunity, and there’s nothing wrong with doing some dollar-cost averaging along the way.
