Wednesday, January 20, 2016

Jan 20 - SPX support broken

Selling is strong and steady.  The one wrinkle is that $VXO/ $VIX while up aren't presenting big moves.  So either there's a lot more downside ahead or the market is poised to bounce.  My SPY puts have almost doubled and seeking to hold until end of week depending on which levels are hit and nature of the sell off.  First level seeking to take profits is 177-178 SPY if we get there.

We've fallen into the orange box and below support which has held the previous 2 days.

The down vs up volume ratio in the NYSE is in the 30's which is same as the Aug low from 2015 (lower yellow bar) but not as extreme as the mini crash from 2011 (upper yellow bar)

SPY is overshooting to the downside from its channel
 The 60 min frame likewise
 Seeking support around 177-178
 Based on weekly, there is more room to fall
 VIX/ VXO strangely enough aren't spiking like one would think.  This is something to monitor carefully.

1 comment:

Doug said...

Scary that "fear" hasn't soared. I'm afraid of what we'll see at the capitulation point!!

Despite much lower interest rates, my closed end muni funds are down pretty hard for the first time. I was afraid that this day would come. It means that even fairly safe CREDIT (other than Treasuries) is being disgorged. Preferred funds, which I sold in December, are also down pretty hard. I'm afraid we're looking at a credit crisis, meaning that I should sell anything other than Treasuries.

As of the day after Christmas, I hold about 15% in equities: REITs and Utilities -- and both are down pretty hard. REITs especially down hard, ie., down 4 to 5% today alone. I'm not selling them.

Only my TLT is up hard.

Maybe I've mentioned, but when I say that we're headed for a credit crunch, it's based on my understanding of the eurodollar and it's associated derivatives which have become the entire basis of world trade. It's unstable because in times of panic, there's not many dollars at all backing it. It's essentially "short" dollars at all times. So, banks are stepping away from positions, but this means world trade and economic activity is crumbling or even stopping as we speak. It happened in 2008 too and only QE halted it temporarily. But it's crumbling again.

Worse, economists everywhere don't know anything about the kind of wholesale finance that I'm alluding to above. This includes the Fed Reserve and all the CBs. The only exception may be the Chinese CB.

Since no one knows what is happening, there won't be any addressing the problem until the economic damage is done. It's really a nightmare scenario.

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