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Thursday, December 27, 2018

Daily updare 12/27

Nothing like a little volatility at the end of Dec.  We have not seen this kind of volatility this time of year since 1931.  Keep that in mind when the pundits are telling you how great things are.  I urge everybody to think for themselves here.  The older one is the more protective of capital one needs to be.

SPX opened well down and stayed down until late in the day.  An afternoon rally took it green.  Breadth was +52%.  That is pretty interesting since it was -83% early in the day.  That is a pretty big swing.  New highs were still very low at 6.  New lows came in at 206.  The oversold bounce looks like it might continue.

The futures ended the day above the 20 SMA.  They still need to confirm a break of that MA.

The guys on TV were feeling pretty good at the end of the day.  Bob Pisani was telling us that this is how bottoms are made.  That is true for short term bottoms in a bear market.  Not in a bull market.  I want to make sure everybody understands the current situation.  We made an oversold bottom back in late Oct. and during the bounce around period the VIX dropped below 20 before SPX crossed the 200 DMA.  The only time in the history of the VIX that failed to indicate we were in a bear market was 2016.  However, this time the market broke down to new lows well below the original oversold low.  That confirms what the VIX was saying about being in a bear market.  We have a confirmed bear market in the most leveraged stock market since 1929.  Leverage is going to get unwound and it won't be pretty.  I have a way of using the ticks to give me a signal a new bull market is likely to be starting.  That would be confirmed by SPX crossing above the 200 DMA with the VIX still above 20.  We will not miss the beginning of the next bull market.  The only thing people should be thinking about right now is capital preservation.

The last leg down in this sell off started after the FED raised rates.  Very often news induced moves get retraced and that is also true of the FED.  When the FED announcement hit SPX was 2578.  That would get the futures up near the 50 SMA which makes for a good target for this rally.  We are in buy the dip and sell the rip mode.  Traders need to be nimble and flexible or on the sidelines.  Targets don't always get hit and overstaying on the long side in a bear market is not good for the trading account. 


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.