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10/29 Total market view: "SPY Q4P rejection move 10/27 was accompanied by VIX moving above its Q4P. Hence, "official trouble alert" on 10/27 Daily SPY comment. Perhaps we will see another bounce, but technically a move like 10/27 with clear rejection of quarterly pivots, resistance from falling MAs (moving averages) and VIX confirming is fairly rare and ought to be respected with reduction of longs and/or putting on hedges. Sometimes you may have frustration of seeing market come right back, but just as often you have the relief of avoiding a significant drop like last summer in oil and global stocks, 1/6/2016+ in USA stocks, and most recently 10/3+ in TLT and GLD, etc. More important it completely avoids the "hope it bounces so I can sell" mindset that takes over when one should have sold already."
And
"Bottom line - SPY & VIX "trouble alert" issued 10/27 via SPY clear rejection of Q4P and VIX move above its Q4P. Consider previous incidences this year: 1/4-6, 1/29-2/2, 6/24, 10/11. 10/11 not much damage before the next alert issued, and 6/24 turned out quick buy 6/27+, but that was not the case on the first two. Until we see lower levels on stock indexes (ie SPY Q4S1) or recovery and end of alarm I think cautious positioning warranted. This means reduction of longs, more cash, perhaps short hedges though as mentioned DIA shorts have been frustrating."
So if you heeded this advice you have skirted this drop by being hedged, have more cash and less long exposure, or more shorts, depending on your trading / investing style. Now what?
I don't have a crystal ball but these are the kinds of days that can be the key lows. Of course the market could plunge right through levels and keep dropping but when you have multiple USA mains on various kinds of support, VIX higher but holding under long term resistance, and several RSIs near extremes, this is where these turns happen. Although if i had to guess, i'd say small bounce that fails, then lower for the turn.
Here the key levels to watch from here:
SPX Q4S1 2096 tested and held, along with NovS1 2104
SPY Q4S1 209.04 not quite yet, along with NovS1 210.27
ESZ Q4S1 2084 not yet, along with NovS1 2097
You will notice that the cash version tagged, while the Q4S1 on the ETF and futures are a bit lower.
NDX Q4P 4715 *very key level for market* USA leader still holding Q4P!
QQQ Q4P 114.83 also very near tag
NQZ Q4P 4706 near tag
INDU NovS1 only only right now, 17934
DIA NovS1 179.11
RUT YP 1170 *very key level for market*
IWM 116.23 so far .05 from the low
NYA Q4S1 10364, then YP 10302
VTI Q4S1 107.21, along with NovS1 107.76
Got all that? We have SPX set Q4S1s, Tech set Q4Ps, INDU NovS1s only, RUT YP (!), and Q4S1s on both NYA and VTI. You can count these kinds of critical days in most years on two hands. Ding ding ding! This is a turn, or things are about to get very ugly.
Last but not least, VIX 2HP 20.07 - very very key as above that means real panic not just heavy selling! And with XIV QP too at 34.17.
Simply stated if you see markets below some of these levels and VIX higher (& XIV lower), that is bearish and you should hold on to hedges and don't buy anything yet. But if levels are holding and VIX dropping, this could be a decent buy.
Right now the things that are holding Q4Ps are most of what I have been pointing out the last several weeks: Tech, Financials, global indexes, XIV.
SPY, QQQ, DIA, IWM, VTI, VIX and XIV all below.