Saturday, January 9, 2016
Welcome to 2016 - Chain Sawed!
So far is been absolutely brutal for long-side investors. We got a sell-off straight out of the gate on Monday and it hurt, but was not unlike the sell-offs we have have seen previously.
Most stock investors are familiar with the concept of "turn around Tuesday" where we get another round of selling on Tuesday morning then find a bottom and stabilize. That seems to happen on Tuesday where at least the selling took a break.
Wednesday brought another round of nasty selling. That took us down to about the 2000 level on the SPX and not far from the 3rd level fib line support at 2007 which has provided some support in the recent past. At that point, the selling had also reached symmetry with recent sell offs in terms of magnitude so we expected a bounce and some stability.
Did we get it? No. We had some hopes of stability on Thursday when the Chinese market removed their 7% circuit breaker rule which had seemed to inflame the selling and prevent the orderly working of the market. That seemed to help in the morning and we had some hopes of stability.
Next up was Friday's employment report which was actually pretty good as should have been the catalyst to rally. We saw a rally in the morning, but it soon faded and we turned negative and accelerated to the downside into the close. Even Bruce from the BIAS service on Simpler Options threw in the towel and conceded it was a worst case scenario for the markets.
Looking at the larger picture, the next likely level of support is 1880 on the SPX which you can see in the chart above. The NDX fared slightly better and we seem to be at a point of support at the orange line there. We are also found some support at the 261% line on AMZN and the 161% line on AAPL, so I think we have seen the bottom in the Nasdaq for the time being.
As for the FibLines indicator, I am working on some methods to determine, algorithmically, how well the lines work on a given chart. This will open up some objective ways to measure how well they work as well as ways to use them in scans and use them to give trading signals. I'll save the details for another blog post.
That's all for now. Count your blessings and live to trade anther day. And enjoy these low energy prices.
Posted by C. Smith at 6:01 AM