Market Summary:
Current ICAP Momentum/Trend Model (MOTR) Signal: NEGATIVE (Day Count = 7)
Oh Magoo, You’ve Done It Again!!!!
For almost two weeks I have been writing (and positioning) that risk was skewed to the downside and that volatility was poised to spike aggressively higher in the near term. In fact, on Dec 11 I wrote, “Internals have faded and Spot VIX looks poised to spike. The ICAP Momentum/Trend (MOTR) Model signal has shifted to Negative. I continue to believe that there is more room for the Index to fade heading into year end. Risk is skewed to the downside and could potentially accelerate in Q1.” On Dec 16 I wrote, “Spot VIX and Term Structure remain in a “risk on” posture but I see a high probability of that changing aggressively over the near term.” I am happy to say that the MOTR signal was spot on, the VIX call was so pretty, and the expected drawdown rolled in with vengeance. The SPX Index dropped almost 3% to close at 5872, just above my previously identified support level (ref 5864). Additionally, Spot VIX spiked 73% (yes, 73%) on the day to close at 27.62 and VIX Term Structure swung to “risk off” in hyperbolic fashion. The ICAP Momentum/Trend (MOTR) Model signal remains Negative and has now returned +2.70% (closing basis). So now what? I continue to see risk as heavily skewed to the downside with potential to fill the Nov 5/Nov 6 gap (5783/5864) and test 5700. That said, I could see a push back towards the 6000 level to close out the year. To be very clear, I would be a seller of any such rally as I believe this move has additional downside to come.
Trade Support:
6000: Even Target (BROKEN)
5976: Nov 9 Open/Low (BROKEN)
5947: Nov 7 Open/Low (BROKEN)
5864: Nov 6 Open/Low
Trade Resistance:
6100: Dec 6 High
6150: Measured Move
