Market Summary:
Current ICAP Momentum/Trend Model (MOTR) Signal: NEGATIVE (Day Count = 3)
The SPX Index closed the session down 22bps yesterday at 5868. Although that seems like a benign way to start the year, the session was much more interesting than that. The high/low range for the day was a massive 106 points (ref 5935/5829). Additionally, the Index traded most of the session below key support at 5864 (Nov 6 low). There was also a double bottomed at ~5830 (hat-tip Frankie Paisano) which is technically within the Nov5/Nov 6 gap. Market internals continue to fade. Near term trend is broken. Spot VIX and VIX Term Structure (slope) are flashing warning signs. The ICAP Momentum/Trend (MOTR) Model signal remains Negative. My model and data points suggest the Index is set up for a significant move to the downside during Q1/Q2. As I wrote yesterday, “I believe the Index is forming a top in the broader range of 5864/6100 with peak-to-trough downside targets of 5100 (down ~16%) and 4800 (down ~21%). These targets are very reasonable, and I believe they will be achieved by the end of Q2. Let’s see how price and internals progress through January.” We may see some bounce here off the 5830 level. That said, I believe that level will break and the subsequent move down to 5700 and 5100 will be extremely aggressive and efficient.
Trade Support:
5864: Nov 6 Open/Low (BROKEN INTRADAY BASIS)
5830: Dec 20 and Jan 2 Lows
5700: Oct 31 Low/Bottom of Gap
5100: Intermediate Term Downside Target
4800: Intermediate Term Downside Target
Trade Resistance:
6000: Previous Support
6100: Dec 6 High
