Market Summary:
Current ICAP Momentum/Trend Model (MOTR) Signal: NEGATIVE (Day Count = 9)
The SPX Index broke previously identified support at 5864 very early in the session, hitting a low of 5832. The Index then rallied over 2.5% to hit a high of 5982 and closed up 1.09% on the day at 5930. Overall, the breakdown on Dec 18 was drastic and did some real damage to the Index. Price, momentum and trend all broke/confirmed. I had identified the possibility of that break along with the aggressive spike in Spot VIX in the week(s) prior (all Morning Notes are archived at www.islandcapitalinvestments.com) and was very well positioned to take advantage. I also noted in the Dec 19 note that although risk remains skewed to the downside there could be a year end rally as high as 6000. I remain confident in this overall view. The Dec 18 selloff was the beginning of a larger move to the downside which I believe will accelerate in Q1. Any rally higher from current should be strategically sold, not chased. The ICAP Momentum/Trend (MOTR) Model signal remains Negative. The recent peak-to-trough move in the SPX of -4.39% was not a blip. I believe the Index is set up to test 5100 and potentially 4800 over the coming months. For a clean view, the chart below is on a Weekly count and simplifies the current trading range as well as highlights the current intermediate term downside targets.
Trade Support:
6000: Even Target (BROKEN)
5976: Nov 9 Open/Low (BROKEN)
5947: Nov 7 Open/Low (BROKEN)
5864: Nov 6 Open/Low (BROKEN – INTRADAY)
5100: Intermediate Term Downside Target
4800: Intermediate Term Downside Target
Trade Resistance:
6100: Dec 6 High
