Market playing out per tweet from Tuesday 2/6 7:35 EST: Since vol extended past 2/2, think instability in general through 2/15, & 2/9 looking like key date. With YPs along with D200MAs testing and holding on both ES and YM near term move most likely furious bounce that then fails and sets up lower or divergence lows into 2/9.
And here we are. If you have been following recommendations you are comfortably in significant amounts of cash or hedged from 1/29 exit and further reduction 2/1-2, and now the question becomes when to add back longs or lift hedges.
But perhaps some buy and hold types may be wondering - what do I do now? If you are tempted to sell after a 10% drop (as market approaches key support fyi) and buy back on new highs then you might want to run a backtest on that - likely severe underperformance.
That said, let's look at the key levels that 'should' hold to keep the overall bull market alive. Very simple:
SPX, INDU, NDX, NYA/VTI YPs that are conveniently very near the D200MAs on most of these.
Personally I think we are near a low. Smart money knows that -20% declines without a recession are rare. We have already seen 10%. But whether the low is today or next week a bit lower is a tough call. Taking it day by day.
The damage:
SPX / SPY 1HP slight break (ES1 and ESH both holding though)
NDX / QQQ Q1P test - still holding so far
INDU / DIA Q1P slight break - 1HP and YP very key levels to watch if lower
NYA YP test, VTI 1HP slight break
RUT / IWM - YP break!
VIX push above YR3 outside Bollinger band - not reversing
SVXY / XIV below YS2s - not bounce
If market lower, then it will set up YP tests on SPX, INDU and VTI, and likely 1HP on NDX. So far NDX is holding up best which is a consideration on buys.
Lastly, as of the open the sector that had the best chance of recovering above all pivots today was XBI - and that was destroyed today -5%.
SPX, NDX, INDU, NYA and IWM below (RUT chart not cooperating tonight) - all pivots only for clarity along with moving averages and Bollinger bands. It would be nice to see divergence lows on RSI & BBs along with MCO for a real low as well.
SPX - arrows at 1HP and YP
NDX - arrow at Q1P
INDU - arrow at Q1P
NYA - arrow at YP
IWM - arrow at YP
