Market Summary:
Current Momentum/Trend Model (MOTR) Signal: NEUTRAL (Day Count = 8)
It’s just a scratch, we could probably buff it right out…….
I wrote in my Aug 23 note that my Momentum/Trend (MOTR) Model had shifted from Positive to Neutral on the close on Aug 22. Additionally, over the past 8 sessions I have noted that near term resistance at 5645 was holding as Spot VIX and VIX Term Structure were beginning to show signs of increasing volatility. Prior to yesterday’s 2.12% drawdown I wrote that “Overall, the SPX remains jammed between a near term support/resistance range of 5562/5645. I am watching for either level to break with a confirming MOTR signal. The odds of that being a break to the downside are increasing. I would remain cautious here”. Yesterday’s move was exactly what I was talking about as the SPX broke the identified 5562 support level with authority, testing the 50dma almost perfectly at 5504. The VIX ran back above 20 and Term Structure slope has now shifted to greater than +10% (risk off). Now what? While the SPX Index (our indicator) remains Neutral for the eighth day as the MOTR Signal continues to degrade back towards outright Negative (as I have continued to write over the past week). Additionally, in the overnight session the S&P 500 Futures completed a MOTR Signal shift to Negative. I fully expect the SPX Index to follow that pattern during today’s regular session. While I expect to see some churning and additional volatility, I would not expect a bounce back rally from current levels. Risk is to the downside for the near term.
Trade Support:
5602: 10dma (BROKEN)
5600: Previous support/resistance (BROKEN)
5562: Jul 8 low (BROKEN)
5504: 50dma
5500: Jun 20 high and Jul 19 low; Base of Aug 15 Gap Up
5450: 38.2% Retracement for the recent trough-to-peak move (Aug 5 – Aug 30)
5400: Previous Support
Trade Resistance:
5645: Previous support/resistance
5669: Jul 16 high
