Tooting a bit but also explaining why I wrote that early January in this post. Seems like a simple statement, and several weeks later the answer seems obvious, but wasn't then. Here's the original idea from the blog on 1/7 about NDX and its yearly pivot:
"Since 7/14/2009, only 3 trading days have closed below the NDX yearly pivot: 8/19/2011, 8/22/2011, 1/7/2016. Is this a key low or is the bear for real? Bear for real below the 2016 YP at 4373."
Both 8/19/2011 and 8/22/2011 closed fractionally below the level, but not enough to look like resistance.
Compare that to 2016:
So, with all this in mind:
1. NDX has been the major leader in this bull market from 2009. OK sure, biotechs did even better but I'm viewing that as a sector within NDX. In 2009 NDX made a clear double bottom while SPX, INDU and RTY all made lower lows. COMPQ made a fractionally lower low. NDX was also the first to reclaim any longer term pivot (1HP) in June 2009; other indexes cleared HPs in July. More important, NDX was the first to reclaim its YP, also in June 2009. SPX did not clear its YP until September 2009, and INDU not until November 2009.
2. NDX has saved the market at several other crisis points by holding pivots. 2011 as noted above, 2 days of slight break then recovery; October 2014 by holding 2HP exact; then August 2015, NDX appears like a break but in fact not one hourly bar closed below the YP! At the time I considered the NDX yearly pivot of 3999 the bull market do or die line, and it held.
3. Years that start with a break or rejection of the YPs in the first week, after being above for years, can be major trouble - like 2001 & 2008. I know this because I've looked at major pivot structures on all the indexes, for the INDU going back to 1925! If the year starts below the YP after a big drop, like 2009, well then that is a different situation. Of course, by 1/6 SPY and DIA had also broken their YPs.
I concluded that if the NDX pivot caved this time, selling was for real, not a dip, and serious trouble for the market. As I type NQ futures have dropped -18% from the 12/2/2014 high peak to trough. Maybe some people will quibble - not %20 yet. Bear market assessment was made with NDX down -9.1% from highs, and today it will be about double that. So what was the right thing to do? Hold on believing in correction (correct in August)? Or sell, reduce, hedge, short. Whether the market stops at -18% or -25% or more, I believe the answer is now obvious. It wasn't then, unless you were using pivots and the history as outlined above.