Market Summary:
Current Momentum/Trend Model (MOTR) Signal: NEUTRAL (Day Count = 3)
In the Sep 10 note I identified an “inside day” which formed on Sep 6 and Sep 9 (highlighted on chart). I believed the high/low range of the Sep 6 bar would serve as a good guide for a larger breakout or breakdown. In fact, I wrote “The result was a relatively organized “inside day” suggesting a greater move is imminent either through Friday’s high (ref 5522) or low (ref 5402)”. The SPX Index did in fact test support on Sep 11 with a low of 5406 and then rallied (same day) to a high/close of 5560/5554. The Index proceeded to break above the next resistance level (ref 5562) during yesterday’s session, closing +75bps at 5595. Internals have continued to improve. My Momentum/Trend (MOTR) Model has continued to expand away from the recent outright Negative Signal (total return for that signal was +44bps with a max return within the signal of +2.13%) and is entering the third day of the current Neutral Signal. I expect a shift to outright Positive by the end of today’s session. Obviously, with that signal shift risk will be skewed to the upside. I would also note that the VIX Index is now 30% lower than the Sep 6 peak and Term Structure is less of a lion and more of a kitten. All in, the SPX Index seems to be poised to test all-time highs at 5669 in the near term. After a very successful first half of September, the ICAP portfolio is now extremely paired down and mainly holds just core positions. With a model shift to Positive I will take some moderate long S&P 500 Index exposure balancing the MOTR Signal and my gut skepticism that the overall greater move from here is down. Meaning for every additional 100 handles to the upside from here I can see 200-300 handles of risk to the downside. Bottom line, I lean long here but am very cautious.
Have a great weekend!
Trade Support:
5562: Jul 8 low
5531: 10dma
5509: 50dma
5500: Jun 20 high and Jul 19 low; Base of Aug 15 Gap Up
5400: Previous Support
Trade Resistance:
5600: Previous Support/Resistance
5622: Previous Support/Resistance; Sep 3 Open/High
5669: Jul 16 High
