Market Summary:
Current Momentum/Trend Model (MOTR) Signal: POSITIVE (Day Count = 1)
The bearish nature and structure of the Sep 18 bar turned out to be a massive head fake (for yesterday at least). The SPX Index gapped up on the open, hitting an intraday and all-time high of 5733 (+2%) and closing +1.70% at 5716. I try very hard to never talk to any specific headline or event as I run my model and believe that all I need to see is the chart. All inputs lead to price and internals, so I focus on price and internals. That said, this FOMC meeting and 50bp cut was “special” in so many ways. The volatility and action which has followed has confused me quite honestly. As I said in yesterday’s note “I am truly neutral here (MOTR Signal was Neutral) waiting for the next few days of price action”. Yesterday’s move shifted my Momentum/Trend (MOTR) Model back to Positive from Neutral as price and internals exploded to the upside. Spot VIX was pressed hard and settled down 10% at 16.33. Term Structure is just about back to a slope of what I consider to be “risk on”. All that said, I believe that price action yesterday left something to be desired. Fully understanding that I may miss some of the next leg up, I am positioned relatively flat in the ICAP portfolio. Here’s why – I don’t like the reversal we saw out of Sep 18. It doesn’t make sense to me (and that makes me uncomfortable). I also see downside potential based on yesterday’s bar. The bar, in my opinion, ended the day with indecision at all-time highs. The high/low range for the day was 47 handles but the open/close range was just 11. On the gap up, participants took the Index lower, held just about at the Sep 18 high (ref 5689), ran to new highs and then settled just about where they opened. I am not saying we don’t continue to new highs. I am saying, simply, that I am not buying this in any real weight until yesterday’s high is taken out. Additionally, I am watching for yesterday’s lows to break. This would suggest a significant backfill is about to occur. For now, I am using the Sep 19 high/low as my barometer. In here, I am watching.
Trade Support:
5669: Jul 16/Sep 17 High
5645: Previous Resistance; Sep 11 High (ref 5642)
5600: Previous Support/Resistance
5562: Jul 8 low
Trade Resistance:
5878: Projection Level
