The market broke down through support this week. $SPX retraced all the way to 1810, the January intraday lows. The $SPX chart remains negative, with a downtrend in place and heavy overhead resistance.
Conversely, the put-call ratios are becoming bullish. The computer analysis is calling these buy signals, and with the naked eye, one would have to agree.
Market breadth continues to be a problem. Both breadth oscillators remain on sell signals, but they are in oversold territory.
The current year started off in a very similar manner to 2008, with the market dropping sharply through the Martin Luther King holiday. The year 2008 surely conjures up some unpleasant memories for most investors and traders (unless you happened to be short at the time – or long volatility calls, as this newsletter was). In this article, we’ll look at similarities in price action as well as the Volatility Index ($VIX) between 2008 and 2016.
Stocks continue to have trouble rallying, but at least support has shown up in the 1870 area of $SPX. If that level is broken on a closing basis, it would mark the end of any short-term rally attempts.
Even though both equity-only put-call ratios are on sell signals and pressing against new highs, they are in deeply oversold territory.
Market breadth has improved this week. As a result, both breadth oscillators are now on buy signals.
A “modified Bollinger Band” (mBB) buy signal is nearly upon us. It almost occurred today (Thursday, January 13th), but missed by a couple of points. We began to wonder how past sharp market declines lined up with the eventual mBB buy signal. Was the first signal successful, or did it take a number of probes before the market eventually bottomed. Was the mBB buy signal the bottom of the market, or did it continue on downward at a later time?
The market has finally stabilized to some extent. Even though $SPX had wide swings in the past week, there was a net gain over the past five trading days.
There is strong support at 1820 (see Figure 1), because that is where this January's decline halted, and where the declines of April and October 2014 also halted. A breach of that area would be quite negative.
Stocks remain under extreme pressure, but it finally looks like the oversold conditions are starting to have some effect. An oversold rally is now underway.
The fall in the price of $SPX has continued, adding to the worst start of any year -- ever. As a result, there are severe oversold conditions, and buy signals are pending on many fronts. But few buy signals have been confirmed, and markets can continue to decline precipitously while they are oversold.
The stock market has taken a real beating in the new year. Massive oversold conditions have arisen, and a sharp, but short-lived rally is possible at any time. The larger picture, though, is an intermediate-term bearish one.
$SPX has been down-trending since early December, when the first pattern of lower highs was established. The current pattern of lower highs and lower lows remains intact, and that is bearish.
Usually we make this the topic of a longer article at year-end, but frankly we are not holding positions for anywhere near a year, so this is just a mental exercise – not having a lot to do with our style of trading.
The stock market had been muddling its way through the Santa Claus rally period, and this now looks like it will put the final, negative touches on this seasonally important period.
At this time, the chart of $SPX is bearish, with lower highs and lower lows (see Figure 1). There is support near 2000, where $SPX appears to be headed for a retest very early in the new year.
