Taking A Punch

The markets are hostile.

Bulls and bears are trading blows with price action as our scorecard.

This week, the bears landed one.

The long-awaited punch finally connected.

That’s a good thing.

Now we find out what the bulls are really made of.

Can it get up off the mat and keep fighting or does it roll over?

Let’s get into it.

Fighters train for 10 to 16 weeks for a single opponent.

They build a plan tailored to the matchup.

They study strengths, weaknesses, tendencies.

The saying goes: “The harder the training camp, the easier the fight.”

Why? Because you’ve already taken the worst punches in practice.

You know what to expect. You’ve rehearsed how to respond.

Investing’s the same.

We’ve trained for this moment.

We’ve built a gameplan on the way up that prepared us for a punch on the way down.

Now’s not the time to panic.

It’s time to act on the plan.

“Remember your training.”

1️⃣ Zoom Out

When markets sell off, the media smells blood. The headlines pile on.

Panic becomes the product. But that panic is for the unprepared.

Take a breath. Zoom out.

Trend structure remains intact.

So far, this looks like a hot market catching its breath.

You can actually see during our last “V” shaped recovery there was a similar post breakout “chop” that took place.

A key for me here is whether this pullback causes the percentage of stocks above their 200-day to fall back below 50% because once that happens, the majority of trends are fighting uphill, and sustaining momentum gets a lot harder.

It’s Week 1 of a pullback. Not time to throw in the towel.

2️⃣ Look Within

The internals of the market always leave clues.

In fact, I put on a hedge Tuesday as some of those clues began flashing.

The goal now is to assess where the damage is coming from.

• Was the selling broad-based?

• Was it profit-taking in extended leaders?

• Or was there a clear rotation into defense?

These answers help us determine the real story.

Is this risk-off… or just a tactical reset?

If cyclical leaders held up while defensives caught a bid, that’s likely just rotation.

Overall, the sell-off has been broad-based.

Only Utilities finished the week green.

Everything else, from cyclicals to defensives, took hits.

That’s not classic sector rotation. That’s more like a market-wide de-risking.

This is a bit concerning and something we’ll want to monitor closely.

For the primary trend to resume, offensive sectors need to take back the ball.

3️⃣ Wait for Strength

You don’t rush in after getting hit.

You reset. You watch. You look for your setup.

Same thing here.

Let the tape show its hand. Let buyers step back in. Let setups rebuild.

No need to guess the bottom. Wait for the opening.

Pullbacks are part of the game.

You can’t avoid them, only prepare for them.

And let’s be honest: nobody knows what comes next.

Not the talking heads. Not the algorithms. Not the guy with the most screens.

Stay sharp, stick to your plan and let’s see what the bull does next.

🎥 Check out the latest episode of Thompson Two Cents Live!

I go live every Friday at 5 PM EST.

This week I break down:
✅ The Clues For A Pullback (I actually wrote about it Tuesday)
✅ An area of the Market NO ONE owns benefiting from the AI Boom

🚀 Throw it on 1.5x speed and let it rip.

👍 Give it a like. It’s the easiest way to show me some support.

Be on the lookout this Sunday for the next edition of my newest research column.

The Sunday Stalk List

I’ll be breaking down setups I like right now.

If you like clean charts, clear setups, and tactical insights — this one’s for you.

The early feedback has been 🔥 and we’ve already tagged some big winners.

It’ll hit your inbox every Sunday.

I’m loving getting Larry Thompson’s Sunday Stalk List @HostileCharts. Nice clean delivery every week with great content. Amazing work all around @StockMktTV h/t Thompson’s Two Cents

— J.C. Parets (@JC_ParetsX)
7:48 PM • Jul 20, 2025

Cheers,

Larry Thompson, CMT CPA

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