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Tuesday, February 6, 2018

Daily update 2/6

Rebound.  The high TRIN from yesterday worked its magic.

Quite the buying spree in the afternoon when the market did not collapse earlier in the day.  The breadth was +69%.  New highs were 9.  Yeah, I had to look at that twice.  New lows were 464.  Lots of volume today.

The futures are testing the 200 SMA from the bottom.  They are still below the lower channel line and in accelerated down move mode. 

Today was a good start at making a bottom.  However, I am pretty sure there will be some margin call selling yet to come in the next day or two.  If today's low is still intact at Thursday's close we are likely to have a short term bottom.  I heard a discussion on CNBC about a possible $200 billion to sell of equities from margin calls from the VIX explosion.  I do not know if those numbers are anywhere near reality, but if they are we might end up going below today's low.  I would expect a gap up tomorrow to get sold into fairly quickly.  On a gap down they might wait a bit to see if there is any follow on buying.  Should the forced selling break today's low the next target would appear to be the 200 DMA.  A close above today's high probably indicates a V bottom and a return trip to the highs.


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