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Searching for Support

After another ugly week of down-side, reports all over the internet insist the futures are indicating a drop for the US stock markets today. Will it happen? Maybe.

Over the weekend stocks dropped in Europe, China, Japan and the like. US Futures were also down about 1% or so from Friday’s close. But futures have climbed back to about even overnight. This puts the markets in an interesting spot.

The 2630ish level was a big one as it markets the October and November low points for the SPX. The index has now visited this level 4 times. The prior three times markets found support and rallied. The fourth time was last Friday – and the markets closed at this level.

So, does the market rally from this point? Trade sideways? Or is there more downside?

From a technical perspective, it’s difficult to call. The short-term signal is for a bounce higher from here. Markets appear over-sold, and the news driving things down appears to be more about rumors than it does about economic data. If one wrong utterance about China and trade can take the markets down 100 SPX points, one has to wonder what a right utterance could do.

Longer term, the technical picture is concerning. It’s a tale of two big-picture events. Does the bull market regroup can go higher, or are we in for a more significant big-picture pull back (aka bear market)? And IF it were a bear, how far does it drop from here? On one hand, there’s a figure of about 27% decline. On the other, more than 40%.

The thing is, the economic data doesn’t support a 40% pull-back. It just doesn’t tell this story. Even if you can squiggle some lines on charts and talk about how this could happen, what economic reality must come to pass in order to generate such a mess?

Answer: who knows? We can all speculate. Perhaps it’s the failure of a major state pension plan. Perhaps it’s a full-blown trade war with China. Perhaps it’s a nuclear missile launch from North Korea. Whatever the black swan event, it’s not ‘known’ by the markets. So it’s tough to call it priced in.

At this point, the markets have priced in a lot of bad news. Multiples have fallen. Many stocks are in bear market territory. And, in many cases, if it weren’t for the cap-weighted nature of the indexes, you’d see that many of the non-mega-cap stocks have already gone through bear-like corrections.

This week should be interesting. If 2630 or so holds, it’s a good sign. If not, there’s little indication where the next level of support is. We will likely re-visit the February lows for the market. For the SPX, that’s another 100 points of downside from here (or just under 4%).

Get your Santa rally caps on. This market may need it.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Market Macro Fails

For the first time since 2016 the BigFoot Market Macro Signal has gone negative. And we’re already set up for a potential whipsaw, as futures are pointing to a higher open that would put the SPX above the threshhold to flip the Macro back into buy territory.

Over the weekend the big announcement was a temporary truce between the US and China. The details are a little fuzzy, but basically, no new tariffs, and some rollbacks on a few – at least for the next 90 days.

This doesn’t mean the trade war is over. But it is positive progress. So we should be good to go, right?

Woah, woah… slow your roll. Just because we have a deferral of action doesn’t mean everything is okay. And technically, things are still unclear. In fact, if the futures pop higher today as expected, there’s good chance a pricing gap will materialize.

We’ve spoken many times on conference calls about how the markets abhor pricing gaps. And in this case, unless the market managed to push above 2825 or so, it’s likely we’ll dip back down to 2760 some time this week first to fill that price gap.

From a Macro perspective, we just want to see the markets finish the year above 2754. This should be enough to flip the signal back to a buy. Which is interesting, because last Friday’s close would have done it. But, alas, that’s not how the signal works.

We’re in a bit of technical no man’s land. There markets have had a double-dip this year, but the fundamental news is pretty optimistic. Jay Powell and the Fed gave the market the gift it was looking for (a more dovish stance), and Trump has softened on the trade war. Pricing multiples have fallen to essentially their low-point for the year. So there’s room for the markets to go up, but the mixed pricing signals also mean there’s room for the markets to dip a bit yet.

Given we’re already into December, and most of the earnings for the year area already over, it’s difficult to see a rationale for why the markets should push to all-time highs before the end of the year. In fact, given the mixed Macro signal from the software – and the anemic 40% long positions ratio – it’s difficult to see much more than a sideways market from here – even with the ‘big news’ about the deferral of the trade war with China.

Make no mistake, Monday is shaping up to a be a positive day for the markets, with the SPX likely to push above 2800 intra-day. But Monday may not be enough to shake off the bear-market chatter just yet… Tis the season for miracles, sure. And perhaps Santa is bringing more than coal for the year. But it doesn’t look like yuge breakout to finish the year at this point.

Interestingly enough, the ‘bear market’ may have already silently happened in the form of asset rotation. Many of the high-flying tech names have already had over 20% corrections in pricing. We just haven’t seen the entire market dip simultaneously. A move like that may be reserved for our next recessionary environment. When that actually occurs is still a subject of much debate.

For the week – enjoy the reprieve. Just don’t let a few days in the market head-fake you into thinking everything is all clear. Plenty of up days happen in bear markets. Better to keep your cool and play this one by the numbers IMO.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

How Does Italian Uncertainty Affect US Equities?

The 10-year treasury yield is dropping again — in spite of the Fed’s rate hike campaign.  Presumably this is because many European bond traders are seeking safety in the US while Italy shakes out some issues.  Italian bonds tanked and yields spiked as talk is shifting to the possibility of a post-election exit from the EU.

We’ll skip the (most of) the politics and finger pointing because that’s not what this blog is about.  We want to talk technical shop.  What does all this mean for the equity markets?

In the very short-term, it means a pull-back in equities.  But after a few days of digesting things, a recovery may be in the cards.  When you strip away all of the other noise, here are some key things to keep in mind:

  • US economic data remains pretty solid
  • Earnings season was great
  • Borrowing rates remain low
  • Credit spreads, while widening slightly, are still pretty narrow

Given the macro picture — and the unknown issues in Italy (which is not a huge contributor to the EU economic output) — it seems like this data isn’t enough to derail the bulls just yet.

When looking at the technical picture, the number to watch Tuesday today is 2700 on the SPX.  For the week, keep an eye on the 50-day moving average at 2673 as well.

Resistance is likely to be around 2750 or so.  A close above this level on Friday would be a positive sign for this market.

The reality is that unless Italy is a sign of more significant global contagion, this is likely to remain contained.  It’s not a significant impact on global GDP.  So life probably goes on.

Given the shortened trading week and end of the month, it’s both possible and likely we’ll see higher volatility this week.  S&P futures dipped down to 2690.25 overnight.  It’s possible there will be a move down at the open to test this level.  If so, it is important the equity markets find a support at the 50-day moving average.  Ideally, a reversal with a close above 2700 would confirm support at these levels.  That would indicate the markets have consolidated around the 2700 price and traders are looking for justification to push things higher.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Will the 200-day Moving Average Hold Support for the SPX?

Last Friday’s market fail was technically disappointing as a the week ended lower.  The 200-day moving average (currently at 2593) barely held up.  In fact, it was breached intraday last week.

The technical set-up is now in messy territory.  On a day-over-day basis, it looks like the 200-day moving average is holding up as support.  However, on a week-over-week basis, the data is less conclusive.

It appears a significant area of support is setting up at the 2585 level.  That was the previous low mark in the current pull-back.  It is also barely above the 2582, which is the current tipping point for the Market Macro Indicator.

While the futures markets have been higher over the weekend, the talk about trade wars continues to escalate.  It seems unlikely both China and the US would cut their noses off (economically speaking) to spite their face.  So this is likely more about rhetoric and negotiation posturing.  But it’s certainly got the markets spooked.

More importantly, the futures markets seem to do little to point out the future these days.  Other than confirming the immediate trend in the markets — and perhaps providing some insight into the extreme highs and lows in the trading day — there seems to be less correlation between the futures and the market than in prior months.  So take the data with a grain of salt.

The 200-day moving average appears to be the place to watch.  If that holds, it looks like a trading range between 2600 or so on the downside, and 2700 on the upside until earnings season gets rockin’ in another week or two.  If earnings continue to shine, the uptrend can resume (as long as tariff talks moderate).  If not…   well, let’s not borrow trouble just yet.

For now, the algo database has shaved another point off, dropping to 28% long.  The marcro’s are holding steady and remain long.  One thing’s for sure, it ain’t boring!

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Is it Finally Bad Enough?

Q1-2018 is officially in the books — and what a frustration.  January came in like a bull, but February and March went out like bears.  In the end, there was a lot more volatility, but investors haven’t moved the needle much in terms of account values.

The theme has been a mixed bag of good and bad…  the economic data looks so good that the Fed has to tighten monetary policy.  Taxes are going down, but tariffs are going up.  It’s like each piece of good data has a corresponding bad piece.  You know what they call that?  A market!

While the talking heads sort out the news stories of the day, the underlying technical data has its own story to tell.  Last week the 200-day moving average appears to have held support — in the final week of the quarter — in a shortened trading week.  The S&P500 also touched it’s 10% pull-back mark again.

Early indications are that the consolidation trend may be finding a base at these levels.  If so, we could be looking at another leg higher in equities.  Consider that markets appear technically oversold, and that corporate earnings continue to climb, and the underlying data doesn’t appear things are going to collapse.  Corporate balance sheets — and mega-bank balance sheets, for that matter — look nothing like they did in 2008.

This may sound optimistic.  And, admittedly, it’s too early to call this one.  But it seems wise to bias toward the strong underlying economic data over the shorter-term headlines risks of this market.  Plus, a look at the Sigma/BigFoot database shows we’re at a very low-point in terms of the percent-long for overall positions, but the macro-indicators are all positive.  This is yet another sign we may be reaching a point where the volatility and turnover in the equity market is going to start swinging the other direction.

This Thursday’s conference call should be a fun one!

So far this year…

For the week…

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

50-dma Fail

If the futures markets are any indicator, then it looks like the 50-day moving average for the SPX is going to fail on Monday morning.  While this is not in and of itself a catastrophic sign, it’s disappointing as the recovery wave of this trend may be failing.  Intra-day the SPX managed to publish both a higher high and higher low for last week.  Still, the Monday open appears to be pretty sloppy.  It looks like about a 0.5% drop out of the gate.  And, if history is any indicator of how things will go, we could see follow-through on the trend that moves the trend even lower.

With the open dropping below the 50-day moving average (at 2748), the nest line in the sand will be 2700 — or the 100-day moving average at 2685.

Even if the markets test the 2685-support range this week, it does not mean the bull market is officially ‘dead’ or anything drastic.  The speed and aggressiveness of how the market seeks this level could come into play though.  A very aggressive drop this week could spook investors.  If so, we may be looking at a re-test of the market lows, and a more material correction period.

More likely, the markets will continue to be volatile, and we’ll trade in a sideways pattern with a point range between 1700 and 1850 for a while until some kind of shift in economic data gives investors a reason to commit more seriously to a direction.  Until then, it’s the an obnoxious Goldilocks market — neither too hot nor too cold to break out of a sideways trend.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

March Madness

Here’s the summary of what seems to matter:

Trade wars are bad, but so far we’re not in a trade war.

We have a a mixed bag of technical signals, but the underlying fundamentals appear pretty solid.

Yields are rising, but apparently they’re still not enough to draw yield seekers away from the stock market.

The BigFoot database of long positions has declined to the lowest point it’s been in over two years, but it appears to be stabilizing at these levels.  The DJIA, S&P500, and NASDAQ Indexes all have sell signals, but the the Macro Indicators remain long.

Last week the 100-day moving average provided support for the S&P500, and the 50-day moving average was blown through after Friday’s strong jobs number.  So the 50-day now gets to potentially change rolls, providing support for the index.  That puts the number to watch at 2742 for Monday — though it may rise through the week toward 2750.

On the upside, we’re looking at 2800 as the first line in the sand, with 2825 next on the chart.  From there, we’ll start talking about taking out the highs for the year…  but one step at a time.

The futures are indicating a positive start to the week.  Given the talk of trade wars, tariffs will likely be the key news narrative.  The set-up is for a move over 2800.  If a pull-back comes, look at the 50-day moving average as the first line of defense.  The 100-day is second.  A move below that and we should examine the news cycle — things would have to be pretty ugly at that point as we’re talking about a short-term technical fail at that point.  Otherwise, 2800 is the number to watch — and we could break through that early Monday morning and spend the rest of the week inching higher from there.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

 

 

 

A New Wrinkle

Last week introduced a new variable into the analysis:  trade wars.

Not surprisingly, the markets declined.  The bigger question is, now what?

Futures are forecasting another drop this morning.  The question is, will the 100-day moving average hold support again?  If not, we’re looking at the 200-day moving average.  That’s a decline on the SP500 of over 4% from current levels.

Unfortunately, there’s little technical indication which scenario is going to play out.  Given the continued shift in sentiment with ever-increasing anti-globalist policies out of the White House, the probability of a bigger sell-off is rising — even with decent overall fundamental economic data.

Look for a negative open today, with a lot of price volatility around the 100-day moving average.  Should it hold, markets will likely reverse course and head toward 2775.  Otherwise, we could be looking at another 150-point drop today.

Flip a coin as to which outcome we get…  either way, this week should be a pretty good tell.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Watch the FOMC

Markets have been on a v-shaped recovery ever since the sell-off started a few weeks ago.  Since bottoming on February 9th there’s been an aggressive recovery.  But there’s also been an interesting shift in sentiment.  Has good news become bad news again?  (Meaning the markets think good economic data could force the Fed into raising interest rates?)

Wednesday will be the release of FOMC notes at 2pm Eastern.  That will be where we get a better sense of what’s going on.  Provided the message remains consistent — that the Fed isn’t going to pull the rug out from under anyone, and they’ll continue providing transparent forward guidance — everything should move forward business-as-usual.

For the week, 2800/2825 are the upside resistance areas, but a technical retest of 1700 appears likely, with a more extreme re-test of 2650 or so (the 200-day moving average).  A pull-back to these levels would not be viewed as a trend failure or recovery failure unless there is a shift in macro-economic data.

The BigFoot database has stabilized and macro’s remain long.  Expect some mid-day volatility on Wednesday as the market sorts out a direction.  This shortened week may end up being a decision point for whether or not this market can regroup and move higher.  Based on how the technical patterns have emerged so far, it appears the short-term damage is mostly done, and the longer-term bull market is resuming.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Is the Carnage Over?

Last week equity markets officially hit correction territory before bouncing off the lows of the week to finish up on Friday.

So, is the carnage over?  Are markets done selling off?

From a technical analysis story, the jury is still out.

What was significant in the pricing action is the 200-day moving average for most of the major indexes.  This seemed to be the line in the sand where buyers stepped in and turned things around.  From there, the markets moved sharply higher.  Over the weekend the futures markets are indicating a continuation of this trend.  So — good sign.

Before we call the ‘all clear’ signal, we need to look at some of the bigger-picture issues though.

First off, the bigger picture has been a series of lower highs and lower lows.  So this trend has been one with big volatility and stair-steps down.  Even while futures are pointing to a gap higher at the open — and a push toward as high as 2650 perhaps — the level on the futures to watch is 2686.  That was the last peak in the futures that would need to be passed in order to break the pattern of lower highs.  We see that, maybe we can start getting excited that buyers are stepping back into this market.

Overall, market conditions appear to be oversold.  Still, caution is the word of the day.  There was significant sentiment damage last week.  And a case can be made that the markets are going through a re-evaluation period to determine the next regime of analysis.  With the Fed ‘normalizing’ rates, the ‘Fed Put’ may be over.  What will be the next key element to watch that drives things higher or lower?

On top of that, we had easily the largest single-weekend shift in the BigFoot database in over two years.  The database slipped from 68% long all the way down to 48.66% long.  That means roughly 20% of the database got sell signals — or nearly one third of every long position in the system.  A move of that significance shouldn’t be ignored.

Granted, the BigFoot algorithms are built around volatility as a key component of the decision factor.  And the volatility spike has been huge.  It’s possible to get a false signal if volatility were to somehow wash back out of the system as quickly as it appeared a couple weeks ago.  It’s difficult to find a scenario where such conditions would manifest in real life though.

So caution is the deal.

The Macro indicators are still long in the system.  They’ve slipped some – but nothing like the algo database.  The Macro’s still paint a picture of an overall healthy market and economy at this time.

So what we have is a mixed bag.  The markets are over-sold, and the volatility algo’s have lit up like Christmas.  But the Macro’s are still long, and haven’t shifted much.  So…  caution…  wait and see.

Since the major indexes all found support at the 200-day moving average last week, this is the key area to watch for support right now.  Alas, indexes also fell below their 50-day and 100-day moving averages.  So these will be resistance – with the 50-day being the number to watch, as the S&P500 is sitting close to the 100-day already.

Hang onto your hats gang.  We may be in for another volatile week.  We’ll see if the S&P500 can re-take the 1700 level.  It looks promising – and if it happens – good technical sign.  We’re re-evaluate from there.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.