Are you not entertained? After more than a year of nearly non-stop (bur boring) up, volatility has returned with a vengeance in the last week. Long term investors may be experiencing a level of fear not experienced in 2 years, or perhaps significantly longer, as bonds are not cushioning this blow.
Skilled traders had the opportunity to make a fortune in the first 6 weeks of the year, if they were on the right side of the markets. The Pivotal Perspective *has* been on the right side of markets, expecting a strong start from late December, then turning decisively defensive on the YR1 rejections 1/29 and expecting further downside on 2/1. (Please see Featured Posts if you doubt this.) And tweets have played the market like a song this week, expecting a furious bounce as of 2/6 open that would then fail and drop into 2/9 key low. Ding ding ding!
Now what? Many indexes reached critical levels. You hear this a lot in some technical analysis, like 'major support at 2750, then 2725, 2715, 2700, 2695' etc. But in this system the most critical level of all is the yearly pivot - the average of last year's high, low and close. Above this and the market is generally trending up. Below and it isn't. Simple.
The virtues of a simple system were quite evident on days like today, where it is likely than some people panicked and bailed just before before a massive 100 SPX point rally.
Let's assess:
+s
SPX YP hold; plus D200MA hold, weekly and daily both in RSI buy areas; massive daily hammer candle
NDX Q1P hold, plus D100MA and most of the other technicals
INDU Q1P hold, plus D100MA recovery and etc
RUT YP slight recovery, plus D200MA hold
NYA YP and D200MA hold
These are major levels and markets had a major league response today midday with serious institutional buying.
However, not in the clear!
-s
SPX Q1P resistance, plus no real divergence lows on RSI or BBs on daily chart with 4 of 5 day lows outside daily Bollinger band; D100MA resistance
INDU also 4 out of 5 days lows outside BB and no real RSI divergence
NDX similar other technical concerns
RUT bang on YP level - still could go either way
VTI like SPX, YP hold but under Q1P; NYA same
VIX still above YR3
SVXY under YS2
Simply stated while this was an impressive bounce from major levels, and certainly worth taking a shot on whatever held Q1Ps, it would be more convincing with SPX above Q1P and VIX lower. Bullish scenario would be SPX above Q1P next week and VIX decently lower. Bearish would be Q1P resistance and another move down, which could threaten break of YPs on SPX, NYA/VTI, and likely RUT/IWM that has already had one day's close below the YP.
