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Thursday, February 27, 2020

Update 2/27

Another smack down.

SPX is getting close to the gap fill line at 2948.  I thought the volume was big the other day.  Today was even more massive.  New lows jumped up to 691.  Breadth was -90%.  Down volume was well over 90% on the downside. 

After the gap down the market sold off further, staged a big rally back above the 200 SMA.  That rally generated a tick accumulation signal.  I had to leave early and missed the big smack down late in the day.  That move generated a tick distribution signal.  It is rare to get both signals in the same day.  It last happened in Feb. 2018 as SPX hit the 200 SMA.  That was the big VIX pop that messed with the VIX ETFs so bad.  The time before that was in Jan. 2016 and then 2014.  It is better to get the accumulation signal after the distribution signal, but that did not happen this time.

I suspect this move down from all time highs is probably historic.  Take a look at the monthly chart. 

Even if there was a huge rally tomorrow we would still have a massive reversal looking pattern.  It did all that in just over a week.  Amazing.

What now?  Most market panics turn out to be short lived.  However, it really is different this time.  This virus is not the flu or like any of the other recent viruses we have had to deal with.  How this plays out is truly unknowable.  This is the proverbial falling knife at the moment.  Even though the daily chart shows a possible volume climax it might not be so.  It is possible the market has a legitimate reason to panic this time.  We could be at the start of an 87 or 29 type of crash.  I really don't know.  If we don't bounce strongly soon I think we really are in serious trouble.

Peace and good health to all.


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