Sunday, January 17, 2016

Markets on the Brink

Welcome back loyal blog readers.

Recall from last week's post Welcome to 2016 - Chain Sawed that I expected the market to find support at the next orange line on the FibLines indicator at about 1880.

Looking at the chart, the orange level was 1880.42 and we closed the week at 1880.33 just 11 cents from that value! I think that's pretty amazing but I'm not surprised given the accuracy that I have observed with the FibLines indicator in the past.

Of course you could have come to a similar conclusion by observing that the SPX found support at this level when we had sell-offs back in August and September of 2015.

So what happens next?  I think we have seen the majority of the selling for now and we are overdue for a rip-the-shorts-face-off rally back up to about 1958 on the SPX or even up to the breakdown point at about 2007.  Of course is also possible we could plunge another 50 points to the 1830 level to inflict maximum pain on the longs and force some mass capitulation.

As for now, I have a fairly high cash position.  I also have on an SPX March 1175/1170 Put Credit Spread. This was a trade from BIAS that I held off on and ended up getting a better fill than Bruce. After an easy start with BIAS back in late 2015, its been a rocky start to 2016 but I'm going to hold on and learn as much as I can in the process.

Enjoy your Monday holiday off from the markets and keep your powder dry.


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