Market Summary:
Current ICAP Momentum/Trend Model (MOTR) Signal: NEGATIVE (Day Count = 8)
The SPX Index closed down 1.22% on the day yesterday at 5778. With a low of 5732, the index essentially tested the 200dma (ref 5725) and was within 32 handles of the previously identified downside target at 5700. This low also marked a peak-to-trough move of -6.75% since the Feb 19 all-time high of 6147. Even at that time, I was seeing divergences and identified underlying weakness in price. In fact, on Feb 21 I wrote, “I do not like the current set up. I am positioned relatively flat waiting patiently for a better trade in either direction.” That “better trade” was an SPX short well above the 6000 level. That has worked out very well. While there remains potential for a bounce back towards or above the 5900 level, I remain strategically short. I continue to believe that the index is topping as we are working through the “recognition phase” of the coming bear market. The test of 5700 will be key as a break there could lead to a test of additional downside targets at 5500 and 5000. In short, I have taken down most of my short SPX/long VIX exposure but will continue to be a seller of any bounce (or break) moving forward. I do believe there is a high probability of 5700 getting taken out like Al Green.
Trade Support:
6130: Previous Resistance (BROKEN)
6100: Previous Resistance (BROKEN)
6000: Previous Support (BROKEN)
5850/5900: Jan 14 / Jan 15 Gap (BROKEN)
5725: 200dma (TESTED)
5700: Previous Support Sep/Oct
Trade Resistance:
6250: Measured Move
6400: Measured Move
