Looking for some clarity on the S&P action. This should help. (February 08, 2018)


Today I just want to talk about the market ( NYSEARCA: SPY ) a little bit in this free video. We get a big massive sell-off here, we know this. A similar setup that I see, anyway, from 1998 where we on such a steep setup trend, steep and then we got a pullback. Yes, we have seen other pullbacks on the way down; this was a big one, well, we were already moving down.

This was the one I that really identified with and feel like there is kind of a correlation here. As I look at that we have got kind of the “hope” trade where it just continues to go up, right? Okay, fine. Well, this is different; I mean it is the same but it is different. What I mean is, history doesn’t really change, the events are a little bit different but market psychology is market psychology.

The idea was that this had really created a feedback loop to the upside. And now with the volatility spike here the VIX ( NYSEARCA: VXX ) versus the S&P ( INDEXCBOE: .INX ), with this big volatility spike, which we haven’t seen, this was going short volatility is the easiest game in town until, of course, it turns like this and then it is horrible. So we get this kind of move higher. This is again, it is different, right? By the way, we are back to the daily chart ( NYSEARCA: VXX ); you think it is good here to short volatility on Tuesday because of the big spike and that worked, it worked just fine. Wednesday it is confirmed but then today we are up even at a new closing high.

So this is totally different ( INDEXCBOE: .INX ), totally different than we have had for a while. This is not a buying opportunity; this is actually an indication that there is more to come. Also, keep something in mind, this 200-day moving average, it is a moving average it is not a floor it is a moving average of prices. The reason it is moving up so much is because all the prices have been above the 200-day moving average so it is a math thing.

Well at some point this is going to fall BELOW the 200-day moving average and then it is a whole different ballgame. So I want you to respect this. If the S&P ( INDEXCBOE: .INX ) tests the 200-day moving average I will still say this is not a real buying opportunity unless you are an active trader. But if you are just looking at the market, when something falls this steep and deep any little rebound is just that, a little rebound.

There is a lot of psychological damage in this market right now. And the psychological damage is due to the financial damage. When you have got a lot of people who have had a lot of their money taken away from them their nerves are shattered, they are walking around lost and in darkness, that type thing. So because of that, there is going to be a real reluctance to buy. In fact, you are likely to see, for a while, a lot of selling into strength.

If we just look at this on the intraday chart ( NYSEARCA: SPY ), we know where this was yesterday, it was a little kind of a doji pattern. When we look at it this morning the S&P ( INDEXCBOE: .INX ) opens up and then it starts trading a little bit lower. So we will look at 267.00, 268.00. Where does that show us on the daily chart? Okay, 267.00, 268.00, that’s right about here. With this kind of 2-day move, this is the bottom, this is the top and now on this third day, it should have been expected if you understand how to look at charts, this would continue lower. So your sell signal was when this undercut the low, which was 267.58. So we will go back to the 5-minute chart. Boom! Right out of the gate. So you know when this falls below this, we’ll say 267.58, whatever it is, this is the market going into implosion mode.

So you have got to be looking at there types of things if you want to stay on the right side of the market. Now tomorrow what would you expect? I would expect some kind of a rebound, just an oversold rebound. I wouldn’t buy it. Stay away; let the market do what it is going to do tomorrow. You will thank me over the weekend because you are not going to be wondering, “Why did I do this? Why did I take this position? And then you will come into the market fresh on Monday. You won’t have any positions to protect. You won’t be uneasy. You are just looking at this saying, “Okay, I wonder what I am going to do now?”

That puts you in a position of strength because you can EXPLOIT what opportunities the market gives you; as opposed to feeling like you are using the “hope” strategy; that the ill-advised trades that you made yesterday or in that case on Friday, that those ill-advised trades will work out on Monday. I think, to my knowledge anyway, the only Black Friday I know of is the day after Thanksgiving when everybody is out trying to buy their new TVs. I don’t know why they call it Black Friday but they do. I have heard of black Mondays and Tuesdays and this and that in the market but not Black Friday.

What I am telling you is, tomorrow, even if we get a bounce this is not really done. We are going to go lower and your job right now is NOT to try to make money. Your job is to save the money, protect the money that you have. If you do that then you will be adhering to Fitzpatrick’s first rule of trading, which is, altogether now, don’t lose your dough.

Free Chart

Leave a Comment